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Old 16.01.2020, 18:55
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2nd pillar - US citizen - tax return issue

Hello!

Before I begin - I realize I'm an idiot and have likely been filing my taxes all wrong. At this point I'm just looking for advice on how to best proceed or some recommendations for an international tax expert

So, in 2016 I moved to Switzerland and began work as a temporary trainee, which lasted from September 2016 to June 2019. I received my Pillar 2 into a Bank of Fribourg account, something I didn't/ still do not fully understand. I'm only realizing now with a recent move out of Switzerland going through old mail and receiving a new letter from the Bank of Fribourg (and learning a bit of French) that I completely ignored their requests for personal information before and that I need to submit a W2 to them?

For reference this account only contains ~500 francs and I only worked during those 10 months, after which I started a masters program and was unemployed but still living in Switzerland.

As for my tax situation:
In 2018 I received a letter from the IRS requesting additional taxes be paid on employment from the 2016 return year (when I was technically self-employed in the US and Spain and working as a trainee in Switzerland). In response, I submitted a request for amendment citing the totalization agreement and that I was paying into the Swiss social security system with proof from my pay slips. I additionally filed for 2017 and 2018 without any problems (as of yet!) but did not include the Fribourg bank info in any of these returns, because I did not understand what was happening there.

Bravo to you if you're still reading! Now, to my questions:
1. Am I correct in assuming I've incorrectly filed my taxes for 2016-2018 by not included this pillar 2 bank account? I was thinking that possibly I've only incorrectly filed for 2016 and 2017 since these were the years I was earning over the required threshold and was thus required to file taxes. For 2018 and now 2019, I have not earned any income and do not have any large amounts in my bank accounts - would I need to declare the Fribourg Pillar 2 on these returns?

2. What is the best way to move forward? I could care less about the 500 francs but I guess the IRS doesn't feel the same.

3. Any recommendations for international tax experts that are reasonably priced and know what they are doing? To further complicate things, I've just moved to Ireland and married a Spanish national so I'm looking to fix the errors and get ahead of the game moving forward!

Thanks so much for any advice you may have!

Emily
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Old 16.01.2020, 21:18
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Re: 2nd pillar - US citizen - tax return issue

2nd pillar is taxable but dont know your full situation or if you qualified for the tax tax free income allowance.
Best is to get an accountant.
Can recommend https://www.greenbacktaxservices.com/
Good luck.
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Old 16.01.2020, 21:36
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Re: 2nd pillar - US citizen - tax return issue

Hi OP,

Here is a useful guide for US Taxpayers residing in Switzerland:

https://www.prof.uzh.ch/dam/jcr:9693...ion_180305.pdf

Your specific situation sounds complicated and I agree with RobBob that it would serve you best to consult a tax accountant specialising in US and Swiss taxes. PS...Pillar 2 contributions by your employer are taxable in the year they were received for US tax purposes (In contrast, Swiss Tax authorities do not tax Employer contributions - which is why one has to pay taxes upon leaving to the Swiss Canton where the pension is held). Read the KPMG linked pamphlet above as it is quite comprehensive.
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Old 16.01.2020, 22:10
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Re: 2nd pillar - US citizen - tax return issue

Pillar 2 is declared in the years you add to it to your income to the IRS, and perhaps on FATCA forms (I ceased being American before FATCA came about).

Tom
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Old 16.01.2020, 22:41
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Re: 2nd pillar - US citizen - tax return issue

Nothing too complicated here that I can see other than you've seemed to not have included pillar 2 in your tax returns in the years that you received it as Tom said. You need to include your contributions plus employer contributions for the years it was received. Probably best to file amended tax returns for those years even for small amount, because when you take it out it won't be double taxed. If you're over the facta reporting threshold, your basis in the account should have also been reported in the respective years.
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Old 10.10.2020, 17:48
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Re: 2nd pillar - US citizen - tax return issue

I have a question on a similar topic.

I am moving from USA to Switzerland and as part of my contract, my employer will make a lumped sum buy-in in the 2nd pillar.

Will I have to pay taxes on the US on this lump sum and how much taxes (rate) would it be?

Thanks for the help.
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Old 10.10.2020, 19:00
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Re: 2nd pillar - US citizen - tax return issue

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I have a question on a similar topic.

I am moving from USA to Switzerland and as part of my contract, my employer will make a lumped sum buy-in in the 2nd pillar.

Will I have to pay taxes on the US on this lump sum and how much taxes (rate) would it be?

Thanks for the help.
For US tax purpose thats normal income & not deductible in any way.
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Old 10.10.2020, 22:06
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Re: 2nd pillar - US citizen - tax return issue

That means that if a company makes a large buy-in into the 2d pillar of the employees as part of the hiring contract, the employee will have to pay a large tax bill the first year of employment, despite the employer's contribution goes to a fund that is blocked until retirement?
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Old 10.10.2020, 23:28
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Re: 2nd pillar - US citizen - tax return issue

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That means that if a company makes a large buy-in into the 2d pillar of the employees as part of the hiring contract, the employee will have to pay a large tax bill the first year of employment, despite the employer's contribution goes to a fund that is blocked until retirement?
You might want to contact an independent tax pro with expertise in both US and CH tax regimes, to discuss whether that pension buy-in benefit is really as valuable to you as the company might think. That discussion might influence your negotiating stance.

FYI, if you have dependents: You should also make sure you understand how much of that pension pot - which is afterall part of your total compensation, on which you have already paid US tax - your heirs can inherit should you, doG forbid, kick the bucket before retirement. Plan dependent, it could be quite a bit less than the full amount. And then the fun starts with the IRS.

Welcome to the wonderful world of retirement/financial planning as an overseas tax payer.

As above, as a US citizens it would be prudent to see a tax pro before signing on the dotted line.
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Old 10.10.2020, 23:38
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Re: 2nd pillar - US citizen - tax return issue

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That means that if a company makes a large buy-in into the 2d pillar of the employees as part of the hiring contract, the employee will have to pay a large tax bill the first year of employment, despite the employer's contribution goes to a fund that is blocked until retirement?
Please correct me if I am wrong here... But Pillar 2 contributions by employer are not taxed in Switzerland but are considered income for US tax purposes (We report them annually on our return).

If you are a US citizen, Pillar 2 contributions can be withdrawn at any age when one leaves Switzerland and returns back to the US (which is why one must declare employers contributions each year as income - as these contributions are NOT tied to age).

Again, please correct me if my thoughts are incorrect...
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