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Old 26.06.2020, 17:12
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US tax: employer contributions to pillar 2

Hi,

All of my salary qualifies for FEIE. After reading other posts, I've finally come to terms with that I will have pay US income taxes nonetheless. This is because employer contributions to pillar 2 are not excludable. And since no tax is paid on them, no tax credit can be taken either.

My question is whether the employee contributions are considered compensation for Roth IRA contributions. Otherwise, I wouldn't have any as my salary is excluded income.

I can see the IRS's rationale that since these contributions are not taxed in Switzerland they shouldn't be excluded so at least someone can tax them. This suggests they aren't excluded from the exclusion because they aren't "earned." BTW, this in turn suggests they should be put under Wages instead of "Other income."

OTOH, the IRS guy I just talked to referred to table 1.1 of 590a (www.irs.gov/pub/irs-pdf/p590a.pdf#en_US_2019_publink1000230355) which mentions "deferred compensation" is not considered compensation for IRA purposes. He said that term referred to when the IRA is contributed to as well as when it's distributed. I'm sure he is wrong though as below that under "What isn't compensation?" it rewords that item it say:
Quote:
Deferred compensation received (compensation payments postponed from a past year).
Does anyone know anywhere else there might be a definition or a comment that would disclude using the employer contributions toward the compensation threshold for Roth IRA contributions? Or any other thoughts?

thanks!
michael

Last edited by 3Wishes; 26.06.2020 at 19:41. Reason: fixed weird spacing
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Old 26.06.2020, 19:25
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Re: US tax: employer contributions to pillar 2

As far as the US gov cares the 2nd pillar is income including the employer contribution. However, for the future, you can make a traditional IRA contribution which will lower the income resulting in less tax. Unfortunately the deadline was April 15th.
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Old 27.06.2020, 10:48
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Re: US tax: employer contributions to pillar 2

Thanks robBob. After 2 weeks reading tax docs, I am careful to distinguish income from compensation. As I understand only compensation is eligible for IRA contributions. Along with you though, I am leaning toward pillar 2 being compensation rather than "other income" for example.

Also for anyone else reading this, I think everything, including contributions, has been extended to July 15. Please correct me if I am wrong.
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Old 03.09.2020, 13:01
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Re: US tax: employer contributions to pillar 2

I've been reporting pillar 2 contributions as 'other income' for the last years, based on the research and recommendations I've gotten friends working in US-CH tax. But it does seem there are different views.


Has anyone found a US-CH Tax expert with good experience in IRAs, Roths, and rollovers, etc?


What I found so far is only companies with very basic experience with US retirement accounts for expats in CH.
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Old 03.09.2020, 13:13
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Re: US tax: employer contributions to pillar 2

No one to recommend, but ACA usually provides a listing of US tax experts that have a specialization in expat tax matters. Maybe check with them/their website.
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