It is not clear to me after the Sept 2009 tax agreement between US and Switzerland that the 3rd pillar is taxable in the USA.

The text of the tax agreement signed in September 2009 can be seen at:
http://www.pwc.ch/user_content/edito...mending_us.pdf


From my reading of this, it will mean that 3a pillar will no longer need to be reported to the IRS for tax purposes. The account, will need to be declared per requirements that US citizens report all accounts whose total balance is above $10,000.

The Protocol contains a new version of Article 10(3) that expands the scope of beneficial owners entitled to the zero rate of withholding tax to include individual retirement savings plans that are set up in, and owned by a resident of, the other Contracting State. Dividends received from a controlled payor remain ineligible for the elimination of withholding tax under the Protocol. In addition, in order to be eligible for the zero rate of withholding under the Protocol's new version of Article 10(3), the competent authorities of the Contracting States must agree that the pension or other retirement arrangement, or individual retirement savings plan, would generally be recognized as such for tax purposes in the other Contracting State. Although the Protocol does not contain details as to how taxpayers are to substantiate their satisfaction of this requirement, it is likely that a Memorandum of Understanding or Exchange of Notes accompanying the Protocol will provide the necessary guidance.

Does anyone know if additional memorandum of understanding has been issued regarding the dividends from pension accounts and the fact that they no longer will need to be reported to IRS?'

I also read the article that was posted from ACA web site. There is says that keep a record of 2nd Pillar pension contributions reported to IRS to avoid
double taxation. What do I make a record of? The amount of the contribution is US dollars that is made each month?

so on the education topic: language schools here, do they qualify for the Lifetime Learning Credit?

If you are doing your taxes yourself, I would suggest using TaxAct rather than TurboTax. When I last looked at TurboTax, they did not deal very well with foreign income and income exclusions. Two forms.. the 11XX and the 25XX, were easy to use on TaxAct. And TurboTax won't let you pay with a foreign credit card... at least they couldn't last year. Maybe they've changed.

Hello
I just moved to Neuchatel from the US (California). I was also told by tax advisors at Deloitte that I will have no US federal tax liability. I will get full exemption for the same as I would have paid the Swiss federal taxes (in my case the US and Swiss federal taxes amount to the same). However, since I have a house in California and my assignment in Swiss is only about a year, I will still have domicile status in California. In essence, I will be taxed state taxes in California on my salary and also have to pay canton taxes here in swiss. If only I lived in another state like Nevada or Illinois , I will get full exemption for both federal and state.
You have more experience than me as you have already lived here last year. I may have to refer to you next year while I file.
Take care

Comment from a Brit:

My sympathies to American forum members:
I find it hard work doing 1 Tax Return a year, never mind two .

I'm curious: do the US Tax Authorities actually recover any revenue when they tax ordinary working people who live overseas and pay local country taxes?

In my case I called the UK Tax Office, told them I lived abroad now and that was it. No more Tax returns. End of story.
Addendum: this was AFTER I'd sold our house in England.

Thanks for the sympathy.

To your question, it depends what you consider "ordinary working people" and where they live overseas. If they live somewhere with a very high income tax or fairly low wages, then no, the government won't wind up collecting. However, I consider myself a fairly ordinary working person (albiet higher paid than average) and I owe taxes to the US.

Thanks Oldmanc

Like Corbets, I consider myself an ordinary working person. Unlike him, however, I've not hit the income limits which would cause me to owe US taxes. But I still have to file and let them nose into my bank accounts...

I found where it tell syou the base a,ount but nothing on the ceiling amount you mention

Found it: All cities other than Bern, Geneva and Zurich. 90.14 per day or 32,900 per year limit

The California (Safe Harbor) rule is here: http://www.ftb.ca.gov/forms/2009/09_1031.pdf -- you have to be away 546 days. From the standpoint of Switzerland, state income tax is dealt with the same as US federal and can affect Swiss taxation of your US income at least. (The reverse is not true: California does not generally accept as binding US tax treaty provisions: our London letter carrier retired to California and while his UK Government pension is free of US federal tax (under the Treaty) he has to pay California state tax on it. But a California state employee who retires to the UK would not pay UK tax on his pension from CALPERS.)

In real life, and depending on circumstances, highly-paid individuals going abroad for a year often change their domicile to, say, New York (i.e., a high-tax state, but one that exempts from taxation most persons remaining outside the state for 11 months of the year). But that won't work if you return to California after working abroad, even if part-year tax returns are filed, unless you actually do pay substantial tax to that other state and have some genuine connection with it.

Without being too nosy, is that driven more by having a high income, or the relatively low tax rates in Zurich? Eg, would this problem disappear if you lived in a higher-tax canton, or is it likely to hit all higher-earners regardless of canton?

I need to get out my spreadsheets and do my sums to see whether I'll owe or not (BL).

The housing deduction is based on a complex formula http://www.irs.gov/publications/p54/...blink100047520 and at least originally was intended to compensate for housing costs overseas that exceeded Washington levels.

The pension rules will be changed when the new tax protocol is ratified.

Sometimes charitable deductions can be claimed as business expenses. Whether medical insurance and expenses can be deducted depends on AGI.

TurboTax does it all automatically, with a few tweaks (as for charitable outlays and for the self-employed, SET exemption under the totalization agreement). Unless an employer is paying, for many there is no real need for an accountant.

ANdy02
I just saw this on WRS. Does this mean that the pension clause I talked about earlier is now ratified? What does that mean for 3a pilliar?

Senate ratifies double tax agreements


The Senate has approved five new double-tax agreements to make Switzerland conform to international standards on transparency.
The new treaties will make it easier for foreign tax authorities to get information on money in Swiss banks.
The five texts get rid of the distinction between tax fraud and tax evasion.
That distinction was not well understood or appreciated abroad—and earned Switzerland a spot on the OECD gray list of tax havens.
The new treaties with France, the U.S., the UK, Denmark and Mexico are the first of dozens of revised treaties that will come parliament’s way.
For this first batch, Senators required that any administrative assistance be refused to foreign tax authorities if they use information stolen from Swiss banks.
It’s a reaction to the stolen data apparently purchased by France and Germany in recent months. Each treaty can be subject to a referendum.
It’s expected the Swiss people’s Party may challenge one or several of them at the ballot box.

Thanks for that. If ratified by Switzerland (I haven't found a reference on the Internet and I don't know how quickly it gets reflected online at http://www.admin.ch/ch/f/rs/0_672_933_61/index.html but Switzerland doesn't have to legislate treaties the way the UK does; nor does the US, the Senate just has to ratify. http://www.swissnetwork.com/?page=ViewArticle&id=54 )

I explained that experts are still uncertain about how far the UK treaty goes, and that's after some years. While I think all pension-related funds are included in the new text I would like to see what others say. The Big 4 accounting firms will certainly opine on that in their newsletters. You have the right to take a (reasonable) position based on the treaty as long as you declare it with your tax return on IRS form 8833 (Treaty-Based Return Position Disclosure).

The start date for Article 1 of the Protocol seems to be 1 January 2011. But bear in mind it only covers the exemption from tax of dividends (accretions) earned by pension funds (presumably including Third Pillar). It changes nothing about the deductibility of Third Pillar contributions from income for US tax purposes. That is covered if at all elsewhere in the Treaty.

Given US citizen tax liabilities, I came across a update regarding US citizens who wish to expatriate and their tax obligations.
It is worth reading, and also to consider for people with children who have dual citizenship from birth


Text of full article is here:
http://www.lexology.com/library/deta...7-0d2f826a9cad

It's always interesting to look at the expatriation lists and to try to guess what is behind the individual names: http://tinyurl.com/yju3hen

At one time there were many Korean names, evidently persons who wanted to claim or reclaim Rep. of Korea nationality for business or investment purposes. I met a British defense attaché, born to British parents in the USA, who divested himself of US nationality in connection with his acceptance of a military commission. (Britain, but only very rare circumstances the U.S., impedes dual nationality for certain officers and diplomats.)

Obvious tax expatriates like Marc Rich and Norman F. Dacey appear from time to time, and many of the others listed are deemed in law to be tax expatriates regardless of the real motivation. But most just count on staying beneath the radar. Children who may in fact be U.S. citizens by jus sanguinis are not registered as such, often little thought is given to the problem of American citizen children of nonresident aliens -- as to whom horrendous tax problem can be created by inadvertence.

With respect to many -- American citizen or not -- who have only a peripheral or technical connection to the United States, the U.S. appears like the bully on the block. There is, however, for the politically well-connected a workaround: to get a foreign diplomatic appointment to the United States. Some or most U.S. investment income may be taxable to diplomats but so long as a foreigner is granted diplomatic privileges and immunities many of the other liabilities fall away.

As a matter of practice, the Department of State does not accredit U.S. citizens as diplomatic or consular officers of foreign countries (does not give them immunity and tax privileges) and an American spouse of a foreign diplomat will not get such privileges. And any children born in the U.S. to a foreign diplomat with an American spouse will have U.S. nationality.

Another issue common among Americans abroad is that of nonpayment (or non-preparation for) estate duty. Few are prepared, or can construct under local law, a QDOT (Switzerland does not have the requisite trust laws and even if it did a US-based trust could not take possession of Swiss land, which would pass as a matter Swiss inheritance law); and many will not have passed US citizenship to children because of lack of qualifying residence in the USA. The reporting requirements are mind-boggling and unmanageable for, say, a Swiss-American earning only the average Swiss household income of 60,000 CHF a year. (Of course there is no federal estate duty in 2010, and the $1 million exemption in 2011 may be enough to protect most middle-class Americans from liability. But then $1 million is not what it once was and in many European cities, London and Paris notably, you don't get much house for $1 million.)

Thanks for this. I just wonder what are opinions on H & R Block's online filing option. I have history and experience with them for when I was living in the US. How is their service though when you file from abroad as an expat?