pension fund (MPF) before landing in US

[Sofitalian 134]

In Hong Kong, we have this Mandatory Provident Fund (MPF) which is for retirement, sort of like pension scheme. If someone leaves Hong Kong permanently, he/she can apply to withdraw it. If I'm able to take this lump sum out and bring it to US before /when I land the first time (either bringing a band draft, or wiring the money to my husband's US bank account), will this amount be treated as my foreign-earned income and be taxable?

 

Edited September 3, 2020 by mave

[JoJoJoJo 170]

MPF contributions and your salary made in Hong Kong in a year should be foreign earned income, but the income made from the MPF, e.g., capital gains, interest, dividends, should not be earned income.

 

If you choose to be treated as a US tax resident in the first year, also have a look at Forms 3520 and 8621 and their instructions, because an MPF account might be a foreign trust and a Passive Foreign Investment Company.

 

This is not tax or legal advice

 

[Sofitalian 134]

11 hours ago, JoJoJoJo said:

MPF contributions and your salary made in Hong Kong in a year should be foreign earned income, but the income made from the MPF, e.g., capital gains, interest, dividends, should not be earned income.

 

If you choose to be treated as a US tax resident in the first year, also have a look at Forms 3520 and 8621 and their instructions, because an MPF account might be a foreign trust and a Passive Foreign Investment Company.

 

This is not tax or legal advice

 

Thanks. I'm only planning to take out the MPF that has been turned to personal account (no more contributions). I read from other places that if I don't take the MPF with me before I become a US resident, later on if I withdraw the MPF, the money will be treated as my income of that year.

 

Do you mean that even though I will land in US in 2020, I can choose not to be treated as a US tax resident in 2020?

 

Not seeking tax or legal advice

[JoJoJoJo 170]

14 hours ago, mave said:

Thanks. I'm only planning to take out the MPF that has been turned to personal account (no more contributions). I read from other places that if I don't take the MPF with me before I become a US resident, later on if I withdraw the MPF, the money will be treated as my income of that year.

 

Do you mean that even though I will land in US in 2020, I can choose not to be treated as a US tax resident in 2020?

 

Not seeking tax or legal advice

If you arrive as a permanent resident, you can have a look at this link: https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens

So no: you can either choose to be treated as full year resident in 2020, or dual resident (part non-resident and part resident) in 2020.

 

If you don't take out the MPF before you become a US resident, there will be a lot of paper work when you file tax return every year in the future. As for whether you have to pay tax on the MPF, that is a different issue:

 

I don't think MPF withdrawal is income (therefore, you do not owe tax on it) if you are the owner of the account. (It is different from a traditional 401(k) or a traditional IRA.) Have a look at Part III of Form 3520, assuming you treat MPF as a foreign trust. As long as you are an owner of the MPF, you just have to file 3520 and probably 3520-A every year.

However, if your MPF's mutual funds made or lost money (e.g., capital gains, interest, dividends) in a year, you need to pay tax on that, probably on Form 8621. (You probably need to file this every year whether you actually made money or owe tax)

 

Form 3520: https://www.irs.gov/forms-pubs/about-form-3520

Form 3520A: https://www.irs.gov/forms-pubs/about-form-3520-a

Form 8621: https://www.irs.gov/forms-pubs/about-form-8621

Edited September 4, 2020 by JoJoJoJo

[JoJoJoJo 170]

BTW, depending on how much assets you have in your foreign accounts, you may also need to  file the following two:

https://www.irs.gov/forms-pubs/about-form-8938

https://www.fincen.gov/report-foreign-bank-and-financial-accounts

[Sofitalian 134]

23 hours ago, JoJoJoJo said:

BTW, depending on how much assets you have in your foreign accounts, you may also need to  file the following two:

https://www.irs.gov/forms-pubs/about-form-8938

https://www.fincen.gov/report-foreign-bank-and-financial-accounts

Thanks again for sharing and I really appreciate it. Ya, I believe it will take some time for me to get through all those paper work and filing!