Taxes on foreign endowment and retirement plans

[ms_bobdog 501]

I am still waiting to start my NVC stage but I would like to get all my information and start reorganising my finances a little. I have some questions regarding endowment plans and retirement plans. 

 

1) I currently am paying into 4 endowment plans (bought at various stages in my life). How will these be taxed when I get my green card? Would taxes be based on the cash value accumulated after I become a LPR, and would it have to be reported annually, or can it be deferred till I actually receive the payout upon maturity? These plans are with Prudential, if that information helps, since I had also read about how some of these plans can fall under PFIC.

2) All working adults in Singapore contribute to a government-backed savings account for retirement purposes. The money cannot be withdrawn until retirement or upon surrendering of citizenship, but whatever is in it gets between 2.5 to 5% interest annually. Do I have to declare and pay taxes on the monies in this account annually or is it tax-deferred?

 

Hoping someone has answers because this has been bugging me for a while. 

[Crazy Cat 41,790]

Taxes are based on income received, not on assets.  However, in some cases, bank accounts and assets must be reported to the US government.    It can get complicated.  When you become a legal permanent resident suggest that you do what I did this year.....Hire an accountant...

[ms_bobdog 501]

10 minutes ago, missileman said:

Taxes are based on income received, not on assets.  However, in some cases, bank accounts and assets must be reported to the US government.    It can get complicated.  When you become a legal permanent resident suggest that you do what I did this year.....Hire an accountant...

I plan on doing that, except that the few that my husband has talked to don't seem to have a clue what's going on. I have just come to know of one who seems to know, but cross verification of information would help. That whole thing about what constitutes 'income' is really complicated, especially for assets that generate 'income' over the course of many years!

[Crazy Cat 41,790]

Just now, ms_bobdog said:

I plan on doing that, except that the few that my husband has talked to don't seem to have a clue what's going on. I have just come to know of one who seems to know, but cross verification of information would help. That whole thing about what constitutes 'income' is really complicated, especially for assets that generate 'income' over the course of many years!

I have always done my own taxes...until this year.  The reporting requirements, calculating non-resident vs LPR income, and FBAR, etc. is overwhelming.   So, I just found a good accountant here in Dallas.  She seems to be very knowledgeable.

It is great that you are looking ahead at these matters.....good luck.

[ms_bobdog 501]

2 minutes ago, missileman said:

I have always done my own taxes...until this year.  The reporting requirements, calculating non-resident vs LPR income, and FBAR, etc. is overwhelming.   So, I just found a good accountant here in Dallas.  She seems to be very knowledgeable.

It is great that you are looking ahead at these matters.....good luck.

Thanks loads! It will get even more complex because I will be a dual-status alien this year! 

[Wuozopo 4,293]

1 hour ago, ms_bobdog said:

The money cannot be withdrawn until retirement or upon surrendering of citizenship, but whatever is in it gets between 2.5 to 5% interest annually. Do I have to declare and pay taxes on the monies in this account annually or is it tax-deferred?

You will be taxed when you withdraw money if it is similar to an IRA. We report only the amount paid to us during the tax year, nothing on the balance left in the account.  When you withdraw, you may have to make some quarterly  estimated tax payments yourself since no US tax will be held out of the check you receive.

 

Separate from income tax are two reports that are filed when there are foreign financial accounts. FBAR when you exceed $10,000 held in foreign accounts. FATCA (Form 8938)  when you exceed $100,000 in foreign accounts.

These are only reports....no tax.

[ms_bobdog 501]

8 hours ago, Wuozopo said:

You will be taxed when you withdraw money if it is similar to an IRA. We report only the amount paid to us during the tax year, nothing on the balance left in the account.  When you withdraw, you may have to make some quarterly  estimated tax payments yourself since no US tax will be held out of the check you receive.

 

Separate from income tax are two reports that are filed when there are foreign financial accounts. FBAR when you exceed $10,000 held in foreign accounts. FATCA (Form 8938)  when you exceed $100,000 in foreign accounts.

These are only reports....no tax.

Thanks for this! It has made the maze slightly less... 'mazey'

[Wuozopo 4,293]

45 minutes ago, ms_bobdog said:

Thanks for this! It has made the maze slightly less... 'mazey'

 

I was mostly commenting on your government savings for retirement sounds similar to an IRA which is tax deferred meaning no tax was paid on that money you earned because you put it in an Individual Retirement Account. The concept is that you reduce your taxable income now and will pay tax on it later when retired and likely in a lower income tax bracket. It might tax you 25% at your current income level and only 10% later when you're a poor retiree taking it out. If your government thing is not tax deferred, then it would be more like a regular savings or investment account rather than an IRA.

 

The other accounts, I am not sure of the exact nature of the accounts.   But  for an American example,  if you hold investments in stocks, bonds, mutual funds, or just a wad of cash,  the only thing reported on the tax return is what the account earned during the tax year. If you earn dividends and interest, even if they are plowed back into the account and not taken as spending money, the earnings for that tax year are taxable income. Your basic balance in the account when you move over is not subject to tax. But if that account earns $2000 interest and $5000 dividends in say 2018, then $7000 is reported on the appropriate form of the tax return. They call that "unearned income" in IRS terms, as opposed to "earned income" which is from working at a job. 

 

Here's a 1040 to kinda show you the income section.  Oops. Won't let me upload the picture.  So look at this

https://www.irs.gov/pub/irs-pdf/f1040.pdf

 

Line 7 is your job

Line 8 is interest earned that year (Jan-Dec)

Line 9 is dividends stock paid for example

Line 15 is when you start drawing money out of an IRA

and the rest is other possible income one might receive. 

 

 

Edited February 22, 2018 by Wuozopo

[ms_bobdog 501]

@Wuozopo Very grateful for the details! I understand that the interest I will be earning on my savings accounts will be taxed. The part that is kind of hazy would be my endowment plans. I will consult a tax preparer based in Singapore for that  

[ms_bobdog 501]

Hi all, I got in touch with a couple of accountants and the one who has been responsive is quoting $2500 to file 1040 and 1040NR (I will be filing dual status for 2018) and $500 each for form 8938 and for FBAR. I know professional fees aren't cheap but this sounds a little too steep to me. What do you think?

[Wuozopo 4,293]

8 minutes ago, ms_bobdog said:

Hi all, I got in touch with a couple of accountants and the one who has been responsive is quoting $2500 to file 1040 and 1040NR (I will be filing dual status for 2018) and $500 each for form 8938 and for FBAR. I know professional fees aren't cheap but this sounds a little too steep to me. What do you think?

Steep for me because my wife spends $29.99 for the desktop version of TurboTax. We do FBAR and 8938. There's two tax prep people in this forum that probably can say if that sounds right. With complicated cases maybe that's the going rate. Pm your email address to that guy named something with Italian and New York. Maybe he is available and can discuss off this website. 

[ms_bobdog 501]

@Wuozopo I am thinking that this person is trying to indulge in some fearmongering... Thanks for the suggestion. I will PM.