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U.S. tax treatment of ސE ?

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  • U.S. tax treatment of ސE ?

    I've got some years until that payout, but wonder (worry) about how this lump-sum payout is taxed by the U.S. Does anyone know?

    It will be equal to about 4 yrs of salary, and while I now don't ever go over the foreign earned income exclusion, that amount will put me well over that threshold.

    I haven't asked, but I've wondered if my employer would consider paying this over two years (or three?) rather than as a single lump sum. Does anyone know if this is ever done? (and maybe how such a request would be viewed by an employer) Alternatively, on the U.S. side, is there any way to carry this payout over into successive years? (since my post-retirement income will be much lower)

    The money would almost certainly be direct deposited in an account (or a check that would then have to be deposited), so on the yearly FBAR form that goes to the treasury dept. I would be recording a big jump in account value.

    I do have info pamphlets from the NTA, and am aware of how ސE is taxed here. But to circle back to my first sentence, above, I wouldn't want to be double-taxed. E.g., if the payout is $200,000 and Japan takes 12% of that, I would hope that any U.S. assessment would start at $176,000, and not the full amount--that one country or the other would recognize that a portion of the total had been lost to taxes.

    Thanks,

    johnnyG

  • #2
    Originally posted by johnnyG View Post
    I've got some years until that payout, but wonder (worry) about how this lump-sum payout is taxed by the U.S. Does anyone know?

    It will be equal to about 4 yrs of salary, and while I now don't ever go over the foreign earned income exclusion, that amount will put me well over that threshold.

    I haven't asked, but I've wondered if my employer would consider paying this over two years (or three?) rather than as a single lump sum. Does anyone know if this is ever done? (and maybe how such a request would be viewed by an employer) Alternatively, on the U.S. side, is there any way to carry this payout over into successive years? (since my post-retirement income will be much lower)

    The money would almost certainly be direct deposited in an account (or a check that would then have to be deposited), so on the yearly FBAR form that goes to the treasury dept. I would be recording a big jump in account value.

    I do have info pamphlets from the NTA, and am aware of how ސE is taxed here. But to circle back to my first sentence, above, I wouldn't want to be double-taxed. E.g., if the payout is = to $200,000 and Japan takes 12% of that, I would hope that any U.S. assessment would start at $176,000, and not the full amount--that one country or the other would recognize that a portion of the total had been lost to taxes.

    Thanks,

    johnnyG
    It is taxable as ordinary income under current US tax law. You can take foreign tax credits and the foreign income exclusion as you would with any other ordinary income.

    Just be aware that Japan's tax rate on this income is very low (comparatively), so the foreign tax credit by itself may not eliminate your US tax liability.

    Fiscally,
    A.

    Comment


    • #3
      Originally posted by Agitator View Post
      It is taxable as ordinary income under current US tax law. You can take foreign tax credits and the foreign income exclusion as you would with any other ordinary income.

      Just be aware that Japan's tax rate on this income is very low (comparatively), so the foreign tax credit by itself may not eliminate your US tax liability.

      Fiscally,
      A.
      Yes, I am aware of the rates in Japan--I only wish the US had some similar consideration.

      I'm in the early stage of grasping at straws, and of course, I see it as unfortunate that the US sees this as ordinary income.

      But is there any way to even out the possible US tax 'burden' by somehow spreading such a single payment over the following 2-3 years?

      johnnyG

      Comment

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