Hi T.Sue
With regards to whats taxable in the US, your best bet is to get hold of the Lohnkonto, i..e the breakdown to the Lohnausweis.

You will find many items on there that either group into the bonus line, or are broken down on the 2nd page of the Lohnausweis, the Annexe.

Virtually all comp, or benefit is taxable. family allowance most certainly is. Along with any school tuition fees companies sometimes pay for their employees etc.

With regards to the Pillar 2 employer contributions. Technically, filing amended returns would be the best way. The impact is you have been negligent. However, many US tax payers are, it is not easy. You could go back and file amended returns. However, you should note, interest and penalties will be applied to the amended balance due from the April 15 deadline of which they were due. Unless you were out of the US of which penalties will kick in from the June 15 deadline of the tax year they were due.

You could perhaps report all employer contributions for years mentioned in one hit as a catch up. This will most certainly generate a liability, as not only will you have a shortfall of FTCs in anycase, the Pillar 2 is decreasing your taxable income in Switzerland, yet increasing it in the US, of which you do not have FTC to offset.

The reason the Pillar 2 is reported is its a non qualifying pension plan in the US and thus regarded a deferred compensation plan. The upside to reporting it, is you are atleast addressing the US tax upfront, thus minimizing liability at distribution/withdrawal. It is important to track your basis for this reason. You will have paid reported your own contributions as these are paid from Gross salary, which you report as income on the 1040 Line 7 I assume.

Lastly, it is important you do not exclude the pillar 2 income if you are claiming s.911 and taking foreign earned income exclusion. It is non qualifying income for these purposes.

Thanks Kepete! I have 2 questions:

1. Where did you include it as income? (which line on 1040)

2. Do you also include the 2nd Pillar on your FBAR? Till now, I've only been including the 3rd Pillar.

Each year I do the US taxes, I learn something new. One of these years I'll get it completely right!

1. Line 7 or Line 21. (As per my post above, if in Line 7, and claiming earned income exclusion/filing Form 2555, you will need to additionally indicate as non-qualifying income, essentially add back into the excluded amount). For this reason, line 21 is easier.

2. Yes Pillar 2 should be on FBAR. Simple rule, report everything on here. Its is a reporting obligation only. Best to declare every minute account, sub account ,pension account, best friends mums dogs account. Reporting is far easier than dealing with the penalties or audit.

We did line 7 and I did not include it in FBAR. Foreign Pensions don't need to be on FBAR as I understand it, only on FATCA. Why report it till they tell us we have to. FBAR and FATCA go do different agencies.

Hi T.Sue,
As Kepete17 suggests you'd better report the income via amended return.
[QUOTE=T.Sue;1548751]

I agree with Kepete, technically foreign pensions do not need to be reported on the FBAR, of course depending on how they are strutured, etc. Seems pillar 2, is not an individual account so most I've heard is that it is not required to be reported on FBAR. But yes it should be reported on new FATCA form (8938).

Thanks everyone for your helpful posts. I've asked my husband to get the detailed 2nd pillar info. from his company.

Just a quick add-on question if allowed: how about interest that piles up in the 2nd pillar pension plan? Report as interest income every year, or report at the time of withdrawal of the pension funds? I guess the same answer will also apply to interest earned from 3rd pillar accounts?

Yes, report annually but make sure you add amounts to basis to avoid being taxed again upon withdrawal.

Could you clarify is this advice for pillar 2 and 3? For pillar 2, when you report contributions each year plus interest, when/how could you be taxed upon withdrawal? in the case of audit?

Yes, please clarify. I thought I had read that you only report interest on an account you have control over, which we do not have any control over this account.

I just found this in a document produced by Democrats Abroad Switzerland (31 August 2009, Lully (VD) Switzerland)

"Employer pension plan accounts would not generally be reportable on the FBAR."

Isn't the 2nd pillar an employer pension plan? I'm not sure what 'generally' means above, but it seems this doesn't need to be reported.

It doesn't need to be reported on the FBAR. Employee, employer and interest do have to be reported though as income - the portion of the interest seems to be a bit unclear as to when it needs to be reported, every year or only at withdrawal.

Anyway, from this year on forward, pension plans need to be reported on 8938, there is no doubt about that - whether you report it on FBAR in addition or not probably doesn't make any difference.

How are disability payments from insurance company or disability from pension fund handled? Is there an FEIC applied or is this double taxed?

thanks

...
http://www.thelocal.se/39522/20120306/

[QUOTE=JordanBarrZurich86;1545364] This is where I have a serious problem when people spread the gospel that employer's contribution to pillar 2 (Pensionskasse) has to be added to your income as taxable income (in the US).

Below is an extract from a US IRC IRC 402b, which applies to this topic: remember, you do not need to report contributions as long as the plan is not vested and this is the key. You will pay your taxes once you retire or leave Switzerland and go back to the US.


NON-QUALIFIED DEFERRED COMPENSATION

The determination of when amounts deferred under a non-qualified deferred compensation arrangement are includible in the gross income of the taxpayer depends on the facts and circumstances of the arrangement and which Code section applies to those facts.

IRC § 402(b) Plans

Employer sponsored non-qualified funded deferred compensation plans are generally governed by the provisions of IRC § 402(b). US employees who participate in such a plan are taxed on the amount of the contributions made by the employer (once the benefits are vested or not subject to a substantial risk of forfeiture). If the employee is a "highly compensated" (compensation exceeds $105,000 or part of the top 20% of employees) the employee is taxed on both the contribution and the growth in the plan each year (to the extent the benefits are vested. (Non-Highly compensated employees are not taxed on the growth in the plan, but are taxed when the benefits are distributed.)

But only as long as you make less then 105'000 USD per year, correct? Or does that threshold apply to the amount of the employer's contribution to the pension plan?

In any case, Swiss 2nd and 3rd pilastri pensions ARE vested.

Tom

Ergo: include employer's contribution every year as income, and if you make more than 105k, also include growth (I.e. Interest in case of 2nd pillar).
Fair summary?

Pillar 2 is not vested, be it a highly compensated employee or not. In my case, I don't see the money until I live Switzerland or retire. I discussed this topic with an IRS person at the US embassy in Paris and the response I got was the most common sense reply I ever got from a government employee: why reporting something that you do not see on your pay statement. You will pay the taxes when the time is right (either retirement or when leaving Switzerland).