Last week while I was visiting the US, I was informed that someone had tried to call me. Upon returning the call, I spoke with a technician working for the IRS who was unable to send me an email. The problem was that my email address, last name and phone number were all entered incorrectly in the system. This is partially understandable since my last name is not English and since my phone number is in a State that I have never lived in. So, we corrected my records but the email still didn’t arrive. So, I called back today and learned that the system had had some technical difficulties. This time, the email arrived with this response:
When reporting worldwide income, you must include any income that is received. Since the income is deferred from your pay until a future date, you would not include that amount in your gross income for the year. The money that you are contributing to the pension plan funded solely by you and not your employer would not be deducted from your tax return. Instead, any contributions to that plan would be included in income and treated as cost basis when distributions are made from the plan at a later date.
So, the foreign pension plan is excluded as I had assumed and done so far, contrary to some claims made on the internet. Yet, I’m not sure if I understand the last part. It seems to suggest that retirement savings could be taxed twice by the US government and once by foreign governments. This could mean that my personal retirement savings might be triple-taxed. Let’s double-check with Social Security to see if my monthly retirement “benefit” will be $247.5 after the expat penalty, as estimated. Well, Social security said that my benefit would not be hit with the expat penalty, leaving me with $613/month upon retirement. Yet, since some financial experts argue that expat social security does get hit with the expat penalty, so I guess that I have yet to learn if my possibly triple-taxed retirement savings may be assisted with a possibly expat-penalized social security and double-taxed foreign pension plan.