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Old 27.03.2013, 14:25
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Tax on 401K and IRA contributions

I am filing my taxes for the first time in Switzerland. This year I have contributions made to US IRAs and 401Ks (by an employer on my behalf). Therefore I am not taxed on these contributions in the U.S.

Does anybody know if Switzerland also recognizes this? Or do I need to pay swiss tax on the contributions I make there? This would be most unfair.
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Old 27.03.2013, 14:57
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Re: Tax on 401K and IRA contributions

I assume you are referring to be taxed on your earned income and not on your 'contributions'. If you are living permanent here in CH, then you have to pay Swiss taxes on your income and I don't think you can deduct any contributions you make in the US.

Separate from the above you can open a 3a account here in CH and up to CHF 6.7k can be deducted from CH taxes;however, then you can't deduct this from US taxes.

I strongly disagree on your statement that the Swiss tax authorities are doing something 'unfair'. What the US is doing - taxing us without any corresponding services is what is unfair. You are now experiencign one of the thousands of problems encountering by having to deal with 2 different tax systems and the resulting unfair double taxation.
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Old 27.03.2013, 16:16
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Re: Tax on 401K and IRA contributions

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I assume you are referring to be taxed on your earned income and not on your 'contributions'. If you are living permanent here in CH, then you have to pay Swiss taxes on your income and I don't think you can deduct any contributions you make in the US.

Separate from the above you can open a 3a account here in CH and up to CHF 6.7k can be deducted from CH taxes;however, then you can't deduct this from US taxes.

I strongly disagree on your statement that the Swiss tax authorities are doing something 'unfair'. What the US is doing - taxing us without any corresponding services is what is unfair. You are now experiencign one of the thousands of problems encountering by having to deal with 2 different tax systems and the resulting unfair double taxation.
Thanks for your response. However, whenever I hear of dual citizens complaining about US taxation I always invite them to leave the US passport behind. I would if I were you.
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Old 27.03.2013, 16:25
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Re: Tax on 401K and IRA contributions

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I am filing my taxes for the first time in Switzerland. This year I have contributions made to US IRAs and 401Ks (by an employer on my behalf). Therefore I am not taxed on these contributions in the U.S.

Does anybody know if Switzerland also recognizes this? Or do I need to pay swiss tax on the contributions I make there? This would be most unfair.

Were these contributions made from CH or were you working part of the year in the US and then moved here and thus have contributions? If it is the former then I am not sure if CH sees that income as tax-free.

Using IRAs might not make sense when not living in the US as I think it doesn't necessarily provide you with tax savings now. However, I am a lay person on these matters and it is possible that I don't understand the system 100%!

Oh, and you might find lots of things that seem "unfair" as a US taxpayer abroad
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Old 27.03.2013, 16:30
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Re: Tax on 401K and IRA contributions

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I am filing my taxes for the first time in Switzerland. This year I have contributions made to US IRAs and 401Ks (by an employer on my behalf). Therefore I am not taxed on these contributions in the U.S.

Does anybody know if Switzerland also recognizes this? Or do I need to pay swiss tax on the contributions I make there? This would be most unfair.
Interesting question - I don't know the answer, but since Switzerland doesn't include IRAs and 401ks in the calculation for wealth tax, I would guess there is a similar structure in place for deducting these contributions, at least for 401ks.

For the IRAs - traditional or Roth? For traditional, in the US, you are taxed on these contributions if make over a certain amount of money (otherwise, you can deduct these contributions) http://www.irs.gov/Retirement-Plans/...duction-Limits. For Roth IRAs, you pay taxes on the contribution in the US (just no taxes for the withdrawal). If SIMPLE IRA, then I have no idea

Last edited by anowheels; 27.03.2013 at 16:35. Reason: simple IRA
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Old 27.03.2013, 16:35
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Re: Tax on 401K and IRA contributions

If you earned money, you are responsible for reporting it as income. Even if from another country.

If you received money, you are responsible for reporting it as wealth. Even if from another country or within Switzerland (i.e. casino).

If your employer put funds into a stateside account, you neither made or received the money.

If you take a portion of those funds in the states and turn them into cash, then you are responsible for reporting it here too.

CYA, going on logic here.
JC
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Old 27.03.2013, 17:02
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Re: Tax on 401K and IRA contributions

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I am filing my taxes for the first time in Switzerland. This year I have contributions made to US IRAs and 401Ks (by an employer on my behalf). Therefore I am not taxed on these contributions in the U.S.

Does anybody know if Switzerland also recognizes this? Or do I need to pay swiss tax on the contributions I make there? This would be most unfair.
The information from my accountant is that you need to declare every account that issues a 1099 to CH. Your IRA and 401K accounts do not issue a 1099 therefore you do not need to tell CH about them. You should also keep in mind that the US does not recognize foreign tax deferred accounts (such as the 3rd pillar), so any contributions to them will not reduce your US tax liability.

**edit**
If in 2013 you no longer qualify for contributions to your 401k your contributions to a traditional IRA are fully deductible in the US. For a married couple you can reduce your liability in the US by 11,000 USD in 2013. If you plan on going back to the US this is a nice option to take advantage of.
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Old 27.03.2013, 17:08
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Re: Tax on 401K and IRA contributions

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whenever I hear of dual citizens complaining about US taxation I always invite them to leave the US passport behind. I would if I were you.
Thanks for your invitation to leave Club US.
In general I'm not a complainer but the problems US taxation are causing me are long and well founded (denial bank accounts, job discrimination, etc...)
This is the exact type of comment(usually coming from people inside the US) that make me thing that as an overseas American that I am looked upon with disdain and tainted as being unpatriotic. This is despite the fact that I contribute significantly to the US economy (Vaca, helping family members there, exhorbitant US tax preparation fees, taxes themselves, etc.). It is beyond my understanding why the US doesn't want to promote its overseas expats rather than punishing them.
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Old 27.03.2013, 17:21
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Re: Tax on 401K and IRA contributions

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Thanks for your invitation to leave Club US.
In general I'm not a complainer but the problems US taxation are causing me are long and well founded (denial bank accounts, job discrimination, etc...)
This is the exact type of comment(usually coming from people inside the US) that make me thing that as an overseas American that I am looked upon with disdain and tainted as being unpatriotic. This is despite the fact that I contribute significantly to the US economy (Vaca, helping family members there, exhorbitant US tax preparation fees, taxes themselves, etc.). It is beyond my understanding why the US doesn't want to promote its overseas expats rather than punishing them.
Simple. Expats are a very very small percentage of the US population. We don't move the needle
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Old 27.03.2013, 17:34
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Re: Tax on 401K and IRA contributions

The IRA contributions are tax deductible on Swiss Taxes but only for the year you actually contributed.

i.e; In the US you can contribute into an IRA for 2012 up to April 15, 2013. US recognizes that as deductible item for 2012.

In Switzerland, your IRA contribution paid in 2013 is only deductible for 2013.
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Old 27.03.2013, 17:48
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Re: Tax on 401K and IRA contributions

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The IRA contributions are tax deductible on Swiss Taxes but only for the year you actually contributed.

i.e; In the US you can contribute into an IRA for 2012 up to April 15, 2013. US recognizes that as deductible item for 2012.

In Switzerland, your IRA contribution paid in 2013 is only deductible for 2013.

But the OP didn't contribute. The employer did. Does that make a difference?
JC
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Old 27.03.2013, 17:51
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Re: Tax on 401K and IRA contributions

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The IRA contributions are tax deductible on Swiss Taxes but only for the year you actually contributed.

i.e; In the US you can contribute into an IRA for 2012 up to April 15, 2013. US recognizes that as deductible item for 2012.

In Switzerland, your IRA contribution paid in 2013 is only deductible for 2013.
Sorry Monigue. Can you explain more? IT would seem then in this case that making an IRA contribution in the US is in fact deductible against Swiss taxes. And this is against what others have said. Maybe you are confusing IRA with the Pillar 3a?
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Old 27.03.2013, 18:17
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Re: Tax on 401K and IRA contributions

IRA is not an employer contribution, 401K is.

IRA is voluntarily personal contribution and IT IS deductible from SwissTaxes (no confusion here with 3rd Pillar).
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Old 27.03.2013, 18:19
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Re: Tax on 401K and IRA contributions

To be more precise; you can only contribute up to 5,500 (changes every year) into an IRA per year, so for those looking for a way to find extra deductibles this is your limit.
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Old 27.03.2013, 18:24
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Re: Tax on 401K and IRA contributions

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To be more precise; you can only contribute up to 5,500 (changes every year) into an IRA per year, so for those looking for a way to find extra deductibles this is your limit.
That is very interesting. I would be interested to speak to an accountant who can tell me how to represent that on the Swiss return.
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Old 27.03.2013, 18:28
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Re: Tax on 401K and IRA contributions

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IRA is not an employer contribution, 401K is.

IRA is voluntarily personal contribution and IT IS deductible from SwissTaxes (no confusion here with 3rd Pillar).
Unless it is a SIMPLE IRA - http://en.wikipedia.org/wiki/SIMPLE_IRA - then there are employee contributions.

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To be more precise; you can only contribute up to 5,500 (changes every year) into an IRA per year, so for those looking for a way to find extra deductibles this is your limit.
And note that there are income limits for these deductions for traditional IRAs. If you are over these limits, you cannot deduct in the US, and it generally makes more sense to just contribute to a regular investment account.

Not related: If you are eligible to contribute to a Roth IRA, you should do it. For those of us living abroad, that means making enough money to have non-excluded income, but making not quite enough to be over the Roth IRA contribution income limits.
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Old 27.03.2013, 18:35
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Re: Tax on 401K and IRA contributions

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That is very interesting. I would be interested to speak to an accountant who can tell me how to represent that on the Swiss return.
Also if you can contribute and get deduction on the Swiss return for both the Pillar 3a and the IRA.

As some have noted, the 3a is not recognized by the US. But, if you make an amount that is below the foreign exclusion the 3a is still advantageous.
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Old 27.03.2013, 18:39
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I find it hard to believe that I would be able to contribute to an IRA in the US and have it reduce BOTH my US and Swiss taxes? That's what it seems is being said as possible here?

Dan
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Old 27.03.2013, 18:49
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Re: Tax on 401K and IRA contributions

I am only talking about regular IRA (not ROTH or Employee one).

You are correct, there is a income limit on the actual deduction in the US. However here it didn't seem to matter. I am talking from personal experience and it is possible.

Talk to a Swiss accountant and they will explain it.
They will however reguire an official contribution paperwork.
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Old 28.03.2013, 00:54
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Ok thanks, forgot about the income limit. So for the Roth, contributions are not tax deductible anyway for the US, since the withdrawals aren't taxed. How does Switzerland consider the Roth? Also not deductible? Sorry if this has already been asked....

Dan
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