# How do I know if my foreign pension plan is an employees trust?



## Ben5676 (Apr 9, 2020)

What are the requirements?


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## Moulard (Feb 3, 2017)

An employee's trust is not defined anywhere in the IRC.

But the broadly accepted definition is that if an employer establishes a trust fund that is set up for the benefit of the employees, then it can be considered an employee's trust and employer contributions and distributions taxed accordingly.

In this case, the company is considered to be the grantor and the beneficiaries are the employees. There is also a trustee that has the responsibility of managing the employee trust or the trust assets.

Of course, foreign pension funds have to comply with local legislative requirements and so these things can be a bit blurred.

I would suggest that if...

More than 50% of the contributions have been made by the employer 
You did not set up the trust and do not have the power of a trustee in terms of the funds in the trust

Then it is reasonable to consider it an employee's trust.


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## Ben5676 (Apr 9, 2020)

Moulard said:


> An employee's trust is not defined anywhere in the IRC.
> 
> But the broadly accepted definition is that if an employer establishes a trust fund that is set up for the benefit of the employees, then it can be considered an employee's trust and employer contributions and distributions taxed accordingly.
> 
> ...



Thanks for the answer! 

My employer matches my contributions dollar for dollar so I guess that counts as an employees trust and I dont have to report it or pay taxes am I correct?


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## Moulard (Feb 3, 2017)

According to the letter of the rules, employer contributions would be treated as taxable income in the year that the contribution was made. Growth of the fund (less the contributions already treated as taxable income) would be taxable on distribution.

Its worth noting that if you are using the Foreign Earned Income exclusion, these contributions are not considered earned income and would not be excludable. So you would need to rely on the standard deduction, or alternatively foreign tax credits as a way of offsetting any US tax liability on it.

That said, from your other posts, which I read after I wrote the above, I understand you are in or from Canada.

I recall reading some time back that US treasury regulations had been promulgated that recognized Canadian pension plans. As such it could well be possible that your plans may be treated as qualifying plan... hopefully some of the Canadians on the Forum will jump in with sound advice.


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## Cousin Jack (Feb 6, 2016)

Ben5676 said:


> What are the requirements?



This was recently posted by GREENBACK here

https://www.expatforum.com/expats/e...ax-services-ask-me-anything.html#post15064992

and referred to this document


https://www.irs.gov/pub/irs-drop/rp-20-17.pdf


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## NickZ (Jun 26, 2009)

https://www.irs.gov/pub/irs-irbs/irb97-25.pdf

That seems to only deal with RRSP (basically a Canadian version of a 401K). While in part at least the OP seems to be asking about the CPP. A Canadian version of social security.


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## Ben5676 (Apr 9, 2020)

This is my first time doing my US taxes and the 1040 was super easy but this is really giving me a headache. I dont want to be slapped with a fine for non compliance or incorrect info but I cant find this information anywhere. How is anybody supposed to know? 

I contribute to CPP as well as RPP according to my T4 slip. Both are government pensions I believe as I work for the government


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## Nononymous (Jul 12, 2011)

Ben5676 said:


> This is my first time doing my US taxes and the 1040 was super easy but this is really giving me a headache. I dont want to be slapped with a fine for non compliance or incorrect info but I cant find this information anywhere. How is anybody supposed to know?
> 
> I contribute to CPP as well as RPP according to my T4 slip. Both are government pensions I believe as I work for the government


So, why exactly are you filing a US tax return? If you are a Canadian citizen (i.e. dual) with no US assets or income, STOP and ask yourself if this is a smart move. There's really no reason to become compliant - the IRS has no ability to penalize you north of the border.

If you are simply filing to score the free $1200 cheque this year, nothing wrong with that, but don't plan to continue in future years and don't worry about the pension, just leave it off, all you need is a rough income number.

As a general rule, the IRS gets very little information from Canada - only some account balances under FATCA if you've disclosed US person status to financial institutions, and supposedly RRSP/RESP/TFSA accounts are excluded from reporting. So you're essentially free to tell them as little as you want, as they have no means to verify what you've reported.


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## Ben5676 (Apr 9, 2020)

Nononymous said:


> Ben5676 said:
> 
> 
> > This is my first time doing my US taxes and the 1040 was super easy but this is really giving me a headache. I dont want to be slapped with a fine for non compliance or incorrect info but I cant find this information anywhere. How is anybody supposed to know?
> ...


Yes I do want the stimulus check, but also, according to my calculations without this whole pension stuff, the IRS actually owes me a refund. That's why I am wanting to confirm so that I can safely get my refund plus the stimulus check. I do want to continue filing taxes each year I am owed a refund due to child tax credit. 

I havent done my US taxes for years but I dont believe I owed anything due to the FEIE but I hope this doesnt trigger anything.


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## Nononymous (Jul 12, 2011)

Ben5676 said:


> Yes I do want the stimulus check, but also, according to my calculations without this whole pension stuff, the IRS actually owes me a refund. That's why I am wanting to confirm so that I can safely get my refund plus the stimulus check. I do want to continue filing taxes each year I am owed a refund due to child tax credit.
> 
> I havent done my US taxes for years but I dont believe I owed anything due to the FEIE but I hope this doesnt trigger anything.


Well, that is the question, isn't it? You can safely stay off the radar, happily live your life without filing US taxes, no risk whatsoever, but suddenly the lure of free money means you might want to take some chances.

As for the child tax credit - the other great source of free money - be aware that by claiming it you are putting your child on the IRS radar, since you need to cough up their name and SSN. I would say this is not necessarily a bad thing to do IF you put the money aside for the child to use later - an RESP in a spouse's name that isn't declared so no US taxes are paid on it, particularly - and offer to cover the cost of renunciation at 18. (Ratting your kid out to Uncle Sam for beer money is pretty low, however.) Note also that a child born outside the US will have no obvious taint of US citizenship, so there's no reason for them to disclose US person status to banks, travel on a US passport, or otherwise worry about having to file US taxes as an adult. 

If you do want to file, after all that, be aware that the system relies on voluntary compliance and with the exception of FATCA reporting, the IRS knows only what you tell it, and cannot collect from you if it decides to penalize.


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## Ben5676 (Apr 9, 2020)

Nononymous said:


> Ben5676 said:
> 
> 
> > Yes I do want the stimulus check, but also, according to my calculations without this whole pension stuff, the IRS actually owes me a refund. That's why I am wanting to confirm so that I can safely get my refund plus the stimulus check. I do want to continue filing taxes each year I am owed a refund due to child tax credit.
> ...


I think the IRS can give the penalties to the CRA, no?

I'm hoping that by the time my child is 18yrs that thry would of outlawed this whole reporting while living abroad crap. Otherwise yes of course renounce


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## Bevdeforges (Nov 16, 2007)

Ben5676 said:


> I'm hoping that by the time my child is 18yrs that thry would of outlawed this whole reporting while living abroad crap. Otherwise yes of course renounce


Don't hold your breath on that one. The citizenship based taxation has been around a very long time, though it wasn't terribly well enforced until about the 1990s. But I wouldn't bet on anything changing in the next 18 years or so.


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## Nononymous (Jul 12, 2011)

Ben5676 said:


> I think the IRS can give the penalties to the CRA, no?
> 
> I'm hoping that by the time my child is 18yrs that thry would of outlawed this whole reporting while living abroad crap. Otherwise yes of course renounce


No. If you are a Canadian citizen, per Article 26 of the US-Canada tax treaty, CRA will provide no assistance to the IRS in collecting any taxes or penalties or FBAR fines. You are completely safe if they suddenly decide you did something wrong.

Better not to enter the system than risk it, in my view, but there's a case to be made for collecting Uncle Sam's free money. 

Having been born in Canada means your kid can basically ignore all future US obligations without having to renounce.


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## Nononymous (Jul 12, 2011)

Bevdeforges said:


> Don't hold your breath on that one. The citizenship based taxation has been around a very long time, though it wasn't terribly well enforced until about the 1990s. But I wouldn't bet on anything changing in the next 18 years or so.


It's still not enforced, but they did come up with FATCA ten years ago to make some folks' lives miserable, mostly in Europe.


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## Ben5676 (Apr 9, 2020)

Nononymous said:


> Ben5676 said:
> 
> 
> > I think the IRS can give the penalties to the CRA, no?
> ...


What about canadian permanent resident lol?


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## Nononymous (Jul 12, 2011)

Ben5676 said:


> What about canadian permanent resident lol?


If you are a US citizen without Canadian citizenship, then you most definitely need to tread more carefully. Google "Dewees" to learn more. The IRS can request collection assistance in this case.

In this case, either stay well off the radar, or make sure you do everything correctly.


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## Ben5676 (Apr 9, 2020)

Nononymous said:


> Ben5676 said:
> 
> 
> > What about canadian permanent resident lol?
> ...


I know that's why I'm so hesitant it's just so frustrating when I filled out all the tax forms and am just missing this information about pensions.

I wonder if I could still claim the stimulus checks if I file my 2019 return next year instead?


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## Nononymous (Jul 12, 2011)

Ben5676 said:


> I know that's why I'm so hesitant it's just so frustrating when I filled out all the tax forms and am just missing this information about pensions.
> 
> I wonder if I could still claim the stimulus checks if I file my 2019 return next year instead?


Either do it correctly or stay off the radar - you might not want the free $1200 after all.

All that being said, Dewees (and his idiot lawyer) went to pretty extreme lengths to mess things up with the IRS.


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## Ben5676 (Apr 9, 2020)

Nononymous said:


> Ben5676 said:
> 
> 
> > I know that's why I'm so hesitant it's just so frustrating when I filled out all the tax forms and am just missing this information about pensions.
> ...


Who's Dewees?


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## Ben5676 (Apr 9, 2020)

Nononymous said:


> Ben5676 said:
> 
> 
> > I know that's why I'm so hesitant it's just so frustrating when I filled out all the tax forms and am just missing this information about pensions.
> ...


Plus my US passport is due for renewal, I wonder if they check if I've done my taxes or not. The travel is essential


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## Nononymous (Jul 12, 2011)

Ben5676 said:


> Plus my US passport is due for renewal, I wonder if they check if I've done my taxes or not. The travel is essential


They do not check. You can renew your passport without being compliant. If you somehow manage to run up a debt over $51,000 (which won't happen if you don't file) they can revoke your passport, however.

Long-term your best strategy is to become a Canadian citizen.

Dewees is this poor guy. He made a lot of mistakes, so don't panic.


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## byline (Dec 5, 2011)

Nononymous said:


> If you are a US citizen without Canadian citizenship, then you most definitely need to tread more carefully. Google "Dewees" to learn more. The IRS can request collection assistance in this case.
> 
> In this case, either stay well off the radar, or make sure you do everything correctly.


This is one reason I got my Canadian citizenship. I'd lived here long enough that I wanted to do it, anyway. But this gave me an extra incentive.


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