Reporting your Unearned Foreign Income
So you want to do the right thing and pay your taxes on your Unearned Foreign Income (Retirement, Pension, or Social Security Income) but the IRS has no answers. The Social Security Administration at least knows what it is: https://www.ssa.gov/OP_Home%2Fhandbook/handbook.21/handbook-2136.html
My wife is getting Social Security Pension benefits from her home country but she is a Resident in the USA, and now a citizen. So how do you do it? I pulled my hair out for 5 years and I could never get a straight answer.
For the past 10 years, I was reporting my Foreign Retirement Income on a 1099-R but you have to have a "PAYER’S federal identification number" or it will get rejected. Five years ago, I was told to put in 11-1111111 and it worked for Federal but never worked electronically for State! This year, however, the IRS rejected the submission and I have searched the internet and the IRS site with no answers.
So, I am not a Tax Expert, I just found the answer to my problem and I wanted to share it with you. If you got a 1099-R from someone, you must use that. I was getting Retirement Benefits from a Foreign Country... they simply don't have a "PAYER’S federal identification number" and you can't make them get one!
Instead of using a 1099-R to report your Retirement Income that you know you are going to pay full taxes on anyway, you will want to list the foreign income on Line 21 of the 1040, called 'Other Income'. You will have to describe the income, so don't put in more than 38 characters or they will disappear. If the money is from a Pension, at least use the word 'Pension' so the IRS will understand what you are doing. Don't make them hold up your return and send you a Letter to figure it out.
Please note that if you decide to call this 'Other Income', you are getting taxed on this amount, baby! I knew I was fully liable to pay taxes on this Unearned Foreign Pension, that's why I chose to do it. If you actually got a 1099-R, Don't Do This! If you think you don't owe taxes on this income, don't do this! If this is Foreign Earned Income, don't do this! No matter what, do your own research, call the IRS, or talk to your Tax Attorney. Don't blame me but I am happy right now, that I found a way to push this through!
My rant continues: The 1099-R clearly asks for a "PAYER’S name, street address, city or town, state or province, country, and ZIP or foreign postal code;" however, all the big Tax Software people do not support a foreign address. To add insult to injury, the IRS wants you to write in the "PAYER’S federal identification number" in the form XX-XXXXXXX but the IRS will not provide a pseudo number for you to put in there if the Payer is a foreign country! I searched the Internet for years and just got sent round and round. I hope this helps someone!