How to Report Foreign Retirement on U.S. Tax Forms 2024 (2024)

How to Report Foreign Retirement on U.S. Tax Forms

It is very common for U.S. Taxpayers who are considered U.S. Persons for tax purposes to have been employed in a foreign country and accumulated foreign retirement/pension over their lifetime. In addition, some U.S. Persons may also have invested in foreign personal retirement funds in countries such as the U.K. or Australia. From a U.S. tax filing and reporting perspective, foreign retirement plans/schemes may be treated much differently than retirement plans based in the United States. And, there are many complexities involving the reporting of foreign retirement plans. Some of the more common issues include:

• • • Employment-Based vs. Personal Retirement,

    • Treaty Country vs. Non-Treaty Country,

    • Is there tax-deferred status in the foreign country; and

    • Is the retirement specifically excluded for certain types of reporting in the U.S. (Example, RRSP)

In addition to any tax implications of owning a foreign retirement plan, U.S. Taxpayers may also have to file several different international information reporting forms to be compliant with the Internal Revenue Service’s rules and regulations. Some of the more common U.S. tax forms that taxpayers may have to file to report their foreign retirement plan include:

• • • FBAR (FinCEN Form 114);

      See Also

      How super is taxed

    • Form 8938 (FATCA);

    • Form 3520/3520-A; and

    • Form 8621

*Golding & Golding previously published the Is Foreign Retirement Disclosed on IRS International Reporting Forms article back in 2021 and has since updated and expanded the summary.

First, Employment Retirement vs Personal Retirement

One of the preliminary questions that a U.S. Taxpayer must consider in determining how to report a foreign retirement plan — and which tax forms to file — is whether or not the retirement plan is considered an employment retirement plan or a personal retirement plan. The U.S. government generally provides better tax treatment for employment-based retirement plans (through U.S. tax treaties) such as a 401-K equivalent than it does for personal retirement plans where the foreigner invests in foreign mutual fund-wrapped ‘personal’ retirement plans.

Treaty vs Non-Treaty Retirement

The next key issue is whether or not the retirement plan is located in a treaty country or a non-treaty country. In general, foreign retirement plans located in treaty countries will receive better treatment for tax purposes than their non-treaty country counterparts. A few common examples include the Australian Superannuation (which is located in a treaty country) and the Singaporean CPF or Malaysian EPF (which are not located in treaty countries). Without a tax treaty in place, the general rule is that the growth within a foreign retirement plan is taxable.

Form 1040 Tax Document

Form 1040 is the primary document in a U.S. individual’s tax filing. Similar to U.S. retirement income, foreign retirement income is also reported on Form 1040 — but the tax implications of a foreign retirement may be different than a domestic retirement fund.

FBAR (FinCEN Form 114)

The FBAR is used to report foreign bank and financial accounts. The term ‘financial accounts’ is very broad and involves all different types of foreign accounts — including retirement plans.

As provided by the IRS:

• • • “Example: Canadian Registered Retirement Savings Plan (RRSP), Canadian Tax-Free Savings Account (TFSA), Mexican individual retirement accounts (Fondos para el Retiro) and Mexican Administradoras de Fondos para el Retiro (AFORE) are foreign financial accounts reportable on the FBAR.”

Form 8938 (FATCA)

FATCA is the Foreign Account Tax Compliance Act. FATCA (for individual tax reporting) was introduced in 2012 on the 2011 tax return. Taxpayers file Form 8938 to report their specified foreign financial accounts. And, similar to the FBAR, Form 8938 requires the taxpayer to report foreign retirement plans:

As provided by the IRS:

• • • “If you are required to file Form 8938, in addition to reporting retirement and pension accounts and nonretirement savings accounts described in Regulations section 1.1471-5(b)(2)(i), you must report retirement and pension accounts, nonretirement savings accounts, and accounts satisfying conditions similar to those described in Regulations section 1.1471-5(b)(2)(i) that are otherwise excluded from the definition of a financial account by an applicable Model 1 IGA or Model 2 IGA. Thus, such accounts are subject to uniform reporting rules and must be reported without regard to whether the account is maintained in a jurisdiction with an IGA.”

Form 3520-A/3520 (Foreign Trust)

This is where foreign retirement reporting can get much more complicated. Forms 3520 and 3520-A are used to report foreign gifts, foreign inheritance, and foreign trusts. At first glance, it would not appear that Form 3520/3520-A is required to report a foreign retirement — but the problem lies in the fact that technically, a foreign retirement plan can be considered a foreign trust. As a result, in some circ*mstances, the taxpayer may have to file these forms to report their foreign retirement. Presumably, the U.S. government did not develop these forms to have to report foreign retirement plans, which is why the U.S. government has also published various Revenue Procedures and even proposed foreign trust regulations in 2024 seeking to limit the reporting of foreign retirement on Forms 3520 and 3520-A.

Revenue Procedure 2014-55 (RRSP and RRIF)

This Revenue Procedure refers specifically to Canadian Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Funds (RRIF). While these types of Canadian retirement plans are still reportable on the FBAR and Form 8938, they are not reportable for Form 3520/3520-A as foreign retirement plans.

Revenue Procedure 2020-17

With the globalization of the U.S. economy, it is simply not feasible for the United States government to prepare separate Revenue Procedures for every country-specific type of retirement plan, similar to how they did it for Canadian retirement plans. Therefore, the U.S. government published a catch-all revenue procedure to assist taxpayers with tax-deferred retirement and non-retirement savings plans which serves to help minimize the reporting on forms 3520 and 3520-A — but does still require the reporting of foreign retirement plans on the FBAR and Form 8938.

Proposed Foreign Trust Regulations

In addition to the recent revenue procedure 2020-17, in 2024 the IRS released certain proposed regulations involving foreign trusts. These regulations expanded upon the above-referenced revenue procedure to help minimize the reporting requirements for foreign retirement plans on forms 3520 and 3520-A.

Form 8621

Form 8621 is used to report Passive Foreign Investment Companies (PFIC), which includes foreign mutual funds and foreign ETFs. PFIC reporting can be very complicated, and since many foreign pension plans contain mutual funds and ETFs, reporting foreign pension plans may require separate PFIC reporting as well. There are some exceptions to having to file Form 8621, and sometimes the foreign retirement plans can fall into those exceptions. Otherwise, the taxpayer may have to parse out each fund contained in their foreign retirement plan and include it on their tax return (this is typically in situations in non-treaty countries that do not qualify for any other exception).

Common Foreign Retirement Examples

Here are a few common examples to consider for reporting purposes.

Treaty Country Employment Pension

• • • Michelle is a U.S. Person who previously worked in Australia but relocated to the U.S.. Since she worked in Australia, she accrued retirement, including superannuation. This type of retirement is reportable on her U.S. tax return even though it is a treaty country and even though she is not taking any distributions or made any contributions to the superannuation since becoming a U.S. Person.

Non-Treaty Country Employment Pension

• • • Denise is a U.S. Person who lives overseas. Denise previously worked in Hong Kong and accrued a significant amount of retirement income in her Hong Kong Provident fund. Denise reports the Provident Fund on her U.S. tax return and she may have some additional reporting since Hong Kong is a non-treaty country. As a result of being in a non-treaty country, she does not receive certain protections or qualify for certain exceptions that a treaty country retirement plan may qualify for.

Treaty Country Personal Pension

• • • Vance is a U.S. Person who previously worked in a foreign country and invested in his own personal retirement plan. Once Vance relocated to the United States, he stopped making any contributions to the foreign retirement plan and has not received any distributions either — but the plan consists primarily of foreign mutual funds and ETFs. Vance will have to report this information on his tax return and must to do a deep dive into the type of investments held in the retirement plan to see if it qualifies as a retirement plan — and qualify for certain PFIC reporting exceptions.

Foreign Pension/Insurance

• • • Fran previously worked in Switzerland where she accrued Pillar two (2) and Pillar three (3) retirement savings. Once she left Switzerland, the Foreign Financial Institution (FFI) would no longer house her investments, so they were transferred into insurance policies instead of retirement plans. Depending on how far back she has to go for the reporting, she may have a more complicated reporting requirement since there are different reporting components for retirement plans and life insurance policies — even though the life insurance policy was previously a retirement plan.

Late Filing Penalties May Be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist Taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a Taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making aquiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, Taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties.

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring anexperiencedinternationaltax attorney to represent you forunreported foreign and offshore account reporting, it can become overwhelming for Taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who areBoard-Certified Tax Specialistsand who specializeexclusively in offshore disclosure and international tax amnesty reporting.

*This resource may help Taxpayers seeking to hire offshore tax counsel: How to Hire an Offshore Disclosure Lawyer.

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