# IRS & Tax on Foreign Soc Sec



## Buzzcut (Sep 14, 2016)

I live in Japan, and I have a few questions about tax -- especially US tax -- on my foreign social security pension.

This November I'll turn 63 and qualify to start receiving a Japanese Social Security-like national pension. For ease of illustration, let's say it converts to exactly US$10,000/year. I'm now trying to figure out how much of that annual foreign social security will be taxable by both the US and Japan.

According to the IRS, _"foreign social security pensions are generally taxed as if they were foreign pensions or foreign annuities."_ Nothing in the US-Japan Tax Treaty seems to apply directly and give me a waiver, so it seems that I need to report the income to both countries. But, assuming I pay tax on it to the US, at least Japan should give me a tax credit.

Anyway, for starters, I've put together a list of all of my contributions into the Japanese system and converted them to US$ using the US Treasury exchange rates for each year. That gives me a US$ total. Again, to keep things simple, let's just say I've paid in a total of US$50,000 in "premiums".

Next, I want to divide my total US$ by the number of years I have left from age 63. The actuarial table on page 14 of IRS Pub 939 (General Rule for Pensions and Annuities) shows males age 63 with a multiple of 16.2 I assume if I divide my total US$50,000 by 16.2, that should give me the amount I can exclude each year (roughly $3,000). 

Question #1: Is that correct? (If it's incorrect, someone please explain why.)

Assuming that's OK, I understand how it would work for *a full calendar year* (eg: 2021 and beyond): $10,000 gross - $3,000 excludable = $7,000 taxable. 

Question #2: But what about 2020, *a partial-year* (Nov/Dec only)? Since Japanese pension payments are every two months, I'll receive just the one payment (1/6 of the annual pension total, or $1,666) in 2020. How much of that $1,666 can I exclude in 2020? What's the calculation?


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## Moulard (Feb 3, 2017)

deleting my post. made a mistake


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## Bevdeforges (Nov 16, 2007)

I don't know the US-Japan tax treaty at all, however most of the treaties I am familiar with usually give taxing rights to one country or the other (i.e. country of residence or the country of source) for pensions.

If you can't find that provision in the tax treaty (usually somewhere around Article 18 or so) then the "default" provision is that you first pay whatever tax is due in your country of residence (i.e. Japan) and then claim that back against any tax generated by the pension on your US tax return.

Or, as many expats do with no particular repercussions, just don't report the "foreign" pension at all on your US return. They really have no way of checking on that, and in the current chaos over there, will probably never notice.


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## Nononymous (Jul 12, 2011)

Yes, no earthly reason to report your Japanese pension to the IRS if you live in Japan and intend to stay there.


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## Buzzcut (Sep 14, 2016)

*Thanks*

I sleep better at night when I've done my best to file correctly in both countries.

If anyone is interested, here's a short summary of the U.S.-Japan Tax Treaty situation. 



> Bevdeforges: ... the "default" provision is that you first pay whatever tax is due in your country of residence (i.e. Japan) and then claim that back against any tax generated by the pension on your US tax return.


Right. (I got the country names reversed in my earlier post.) Anyway, I think my overall approach is correct, so my questions stand, especially those in #2: How do I handle reporting for 2020, a partial-year (Nov/Dec only)? Since Japanese pension payments are every two months, *I'll receive just the one payment (1/6 of the annual pension total, or $1,666) in 2020. How much of that $1,666 can I exclude in 2020? What's the calculation? *


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## Bevdeforges (Nov 16, 2007)

If by "exclude" you mean taking the FEIE (form 2555) the simple answer is that you can't take the FEIE for pensions. 

Will you be working up until your retirement date (assume October 31st)? In that case, you'd just declare your salary income for 10 months like always - and take the FEIE on that.

Your pension gets declared as a pension, NOT as salary and you figure the tax due, taking the standard deduction like always. With the new standard deductions, there's a reasonable chance you won't owe any US income tax on the pension anyhow unless you have other "unearned" (or "passive") income.


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## Buzzcut (Sep 14, 2016)

*Follow-up*

I thought I explained things clearly in my original post, but perhaps I used the wrong tax terms. This is a new tax topic for me. 

Anyway, this morning I decided to give the same question an airing on a different tax-related forum, and I just got this reply over there:



> *Employee Tax Expert:* On a yearly basis, 70% of your pension plan distributions are taxable (7,000 taxable amount divided by $10,000 gross amount.) So, 70% of the $1,666 amount received in 2020 would be taxable, or 30% would be excluded ($500).


That makes sense to me, so I'll go with that. 



> *Bevdeforges:* If by "exclude" you mean taking the FEIE (form 2555) the simple answer is that you can't take the FEIE for pensions.


I'm clear on that subject. 



> *Bevdeforges:* With the new standard deductions, there's a reasonable chance you won't owe any US income tax on the pension anyhow unless you have other "unearned" (or "passive") income.


That's what I hope, at least for 2020. 

Thanks, again!


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