US tax: deferred income relief in streamlined procedue

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US tax: deferred income relief in streamlined procedue


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Old 30th June 2020, 09:49 PM
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Default US tax: deferred income relief in streamlined procedue

I'll move this to it's own thread cause it's kind of independent. The 6th item in the streamlined offshore procedure (http://www.irs.gov/individuals/inter...-united-states) says:

Quote:
6. If you seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by an applicable treaty, submit:
-- a statement requesting an extension of time to make an election to defer income tax and identifying the applicable treaty provision;
Does anyone have experience with this? Is it commonly used?

It turns out I have taxes due from previous years I didn't think I had. If I had filed on time I would have contributed to an IRA to reduce these taxes. I am trying to figure out if that is what this item is designed for or if it relates to something else.

I can't find any discussion of deferred income in the treaty (US/Swiss). The only thing that even looks close is Article 28 (Miscellaneous) which says that it doesn't restrict any exclusion, exemptions, deductions, credit, or allowance by the laws of the contracting states.

thanks!
michael

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Old 1st July 2020, 11:21 PM
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Quote:
Originally Posted by boxmiks View Post
I'll move this to it's own thread cause it's kind of independent. The 6th item in the streamlined offshore procedure (http://www.irs.gov/individuals/inter...-united-states) says:



Does anyone have experience with this? Is it commonly used?

It turns out I have taxes due from previous years I didn't think I had. If I had filed on time I would have contributed to an IRA to reduce these taxes. I am trying to figure out if that is what this item is designed for or if it relates to something else.

I can't find any discussion of deferred income in the treaty (US/Swiss). The only thing that even looks close is Article 28 (Miscellaneous) which says that it doesn't restrict any exclusion, exemptions, deductions, credit, or allowance by the laws of the contracting states.

thanks!
michael
I think that clause is intended to deal with not reporting growth in foreign pensions as taxable income. Some treaties allow US citizens residing in other countries to get the benefits of certain foreign retirement or savings plans, and in the past there have been revenue procedures outlining how the growth in certain plans should be reported ("taking an election"). The clause is explaining that the streamlined procedures allow you to fix not taking the election.

I'm not familiar with the US-Switzerland treaty, but from memory, there isn't anything in there that would allow you to defer Swiss pension growth or income, so this won't help you, I'm afraid. I would also be very surprised if you can use the streamlined procedures to make late contributions to an IRA. You do have a couple weeks left to make an IRA contribution for 2019 if your income is in the right range.

Why do you owe US tax for previous years? Are you sure you're using the Foreign Earned Income Exclusion and Foreign Tax Credit correctly? Do you have any choice over which exchange rates you can legitimately use?


Last edited by Jca1; 1st July 2020 at 11:25 PM.
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Old 4th July 2020, 04:00 PM
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Thanks Jca1 that makes sense with the "income from" wording.

The tax is for my employer's Swiss pillar 2 contributions -which seem to be considered funded and vested non-qualified deferred compensation by the IRS. This is apparently not excludable. Nobody at work ever told me about it and they aren't reported on income slips or year end tax. I had to ask to find if and how much they contributed.

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