Income Accruing in Foreign Retirement Plans
U.S. citizens that live and work outside the U.S. often participate in foreign retirement plans. Similarly, non-U.S. citizens that move to the U.S. and become U.S. tax residents, after working outside the U.S., have often participated in foreign retirement plans.
A question that sometimes arises is whether the income accruing annually in the foreign retirement plans must be included on the individual’s U.S. tax return. The rule for this situation was concisely stated in Rev. Proc 2002-23:
Under the domestic law of the United States, an individual who is a citizen or resident of the United States and a beneficiary of a [foreign] retirement plan will be subject to current United States income taxation on income accrued in the [foreign retirement] plan even though the income is not currently distributed to the beneficiary, unless the plan is an employees’ trust within the meaning of section 402(b) of the Internal Revenue Code and the individual is not a highly compensated employee subject to the rule of section 402(b)(4)(A).
Thus, as long as the foreign retirement plan is an employees’ trust and the individual is not a highly compensated employee, then no inclusion is required. On t
Recent Comments