I always assumed that since the pension is not recognized, its just treated as employer compensation. I was planning to include the contribution as compensation each year listed under "other foreign income" (where you also write what kind of income). That way when i cash in my pension, I would not have to pay (US) tax on it because i could point to my X years of 1040 forms where I reported the income (the plus being that i was able to exclude it as foreign income)
Are you sure that's allowed? I just assumed I'd have to keep filing US taxes when I receive my pension during retirement. Do you have to save all your tax records forever then to prove that the money you get from 65 onward has already been taxed in the US?
I suppose it sounds nice to report the taxes now, but as soon as one goes over that bloody FEIE threshold, you've got to pay US taxes on it now and then later the Swiss ones. I really thought that was just the case with the 3rd pillar.
I'm already getting that sinking feeling in my stomach this year about filling out US taxes. I probably do it wrong every year.
When you take your pension here...you generally take it all at a time and move it to your private bank accounts. At that time it is taxed here. Its not the case that you can withdraw from it over 20+ years
Dont see why you are taxed by the USA on the pillar 3. Are you using the FEIE?
I haven't been taxed on anything yet because I've never gone over the FEIE, but if I include everything, 2nd and 3rd pillar and all, then I'm dangerously close of going over because of the exchange rates. 2012 might be my lucky (unlucky) tax year.
I am also trying to plan for years ahead when I am probably (hopefully) earning over the limit.
But as far as I know, you have the option to take your pension in lump or in installments. I had thought taking it in installments can reduce the Swiss taxes on it.
Third pillar is paid out of take home pay and is tax deductible for Swiss taxes, however, those funds are not tax deductible for US tax purposes. Essentially it's the same scenario as with 2nd pillar if your income exceeds your exemptions/deductions. You pay tax to the US now instead of later, however, later you pay tax to Switzerland and in the end, you are taxed twice.
OK. So we really are taxed twice just more than I thought. In theory can I exclude my 2nd pillar in my taxes now and just plan to pay it during retirement when I receive the money? Maybe in 50 years they'll have sorted out some nicer foreign tax agreements....
Don't forget you can also put money into a traditional IRA which you can exclude up to $5500 per year. Then you also have the standard deduction, personal exemption, housing exemptions ands you can easily not pay tax on about $120,000 income....over that and yea it will start to hurt
As for the pension, yes some people stagger the withdrawals over a couple of years, but as you can see, several cantons have a flat tax on the distribution or a slightly accelerating rate.
Yeah, I've been interested in starting an IRA but have to research it and sort out how to do it from overseas since lots of US banks don't like to deal with non-US addresses. (Maybe could use my mum's address...)
I think I'm about to screw up the housing exemption too because as I understand that is only for people renting and not people buying? And we are buying this year, so next year I'll be running to a tax advisor for professional help.
edit: Forgot to mention I'm aways off from that lovely 120k... but I can dream about it. Then maybe I could start a thread here asking if it's enough to live on.
Im in a similar position as you. This year I am right on the border because of luck. My employer liquidated a long dormant insurance fund (instituted before the 2nd pillar law) and each current and former employee got a pension distribution of between 5,000-20,000 CHF.
Are you married...if so you can double up that FEIE....unless you dont want to expose your spouse to your creepy Uncle Sam. It is true that you cant claim the housing exemption if you own a house...however, you can deduct interest and home repairs, taxes just as you could in the USA
Ok, so we always need to tell them all about all our pillars now. But in 50 years when we retire and they notice income from the pension on our FBAR that I'm sure we will still be filling out, will they question why we aren't filling out US taxes anymore?
Because once I stop working and earning money, if I've paid all my US taxes I would hope they stop bothering me. But if FBAR is required for whatever reason and they notice I'm still getting money but not reporting it for taxes, do you think they'll get suspicious and ask for my tax records?
Oh yeah, DH earns WAY more than me so no way are we filing joint and exposing his assets to the US. Together we would definitely go over limits for couples. We split up our bank accounts again after I found out I had to report his money on FBARs if I had access to it. He's not touching a green card with a ten foot pole either. :P
Isn't the FEIE on an individual basis? So you can't claim double the FEIE unless the partner is also working, and earning the amount you exclude.
I worked part time first two years here and was below the threshold. The returns prepared by Big4 excluded my income but did not use the balance of the FEIE to exclude any more of my wife`s income. This is where I draw my conclusion from. Although they ballsed up some pretty basic stuff I`m assuming they got this right?
I didn't work 2012 so assume we have one FEIE only.
But you will still be earning money (from a pension). So I would assume you will still be lodging tax returns. This is where you will need to potentially prove that the income you are earning was already taxed.
You could keep a spreadsheet of year, contributions of different pillars, where reported in tax forms.
you dont need to tell them about pillar 3, you have already reported it to the US in reporting your gross salary, from which it came.
With pillar two, you attach a basis statement to the returns to track your and your employers contributions. Then the IRS and you know what you have already paid tax on. Then when you receive it, you are taxed only on the differential i.e. growth or contributions pre time you were reporting on US returns.