Unemployment compensation from a foreign government?

Forum|Forum|1 year ago
October 5, 2024
2 replies
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Where do I report unemployment compensation a self-employed individual received from the French government? The individual is self-employed, and did part-time work for a French media company for many years and had paid unemployment tax to the French government. So when he was let go, he received a large lump sum severance payment from the French government, and also was paid unemployment compensation also by the French government.

No taxes were paid on either payments, and a large part of the severance payment was considered 'non-taxable' by the French government too. So where would he report that payment, and would he just report the taxable portion?

Thanks in advance for any help!

TurboTax Home & Biz Windows

Best answer by pk12_2

@beechmi64 than k you for all the answers. From this what I get :

1. The taxpayer is a US person

2. Taxpayer, being a dual citizen ( US would recognize only US citizenship for tax purposes ), lived in the USDA. The work for the French Entity was performed in the US.

3. For US tax purposes this is self-employment ( Schedule-C reporting and subject US SECA rules , absent a certificate of compliance shown to SSA so he pays SECA/FICA to only one jurisdiction ).

4. Assuming that because the same income was also taxed by the French authorities, he had been claiming foreign tax credit using form 1116 under "re-sourced b y treaty ".

5. I see from the Tax Treaty, that if the lump-sum distribution is considered "pension" then ONLY US can Tax since the taxpayer is national and resident of US. US will then tax it like a total distribution from a pension scheme ( from a no-qualified / tax advantaged retirement plan ) with 100% taxability ( I am assuming that the taxpayer did not make any contribution into this )

Does this make sense ?

Anonymous_

Employee

Please check back here later. I will page Champ @pk12_2.

pk12_2

Employee

@beechmi64 Could you provide more data please ( while I refresh my memory on the US-France Tax Treaty 😞

(a) Are you filing jointly with "him" or is he single ?

(b) Are you and/or "He" US persons ( Citizen / GreenCard / Resident for Tax purposes ) ?

(d) If he is still in France did he use FEIE ( Foreign Earned Income Exclusion ) for the past years and/or this year ?

(e) Why did get a lump sum ( rather than monthly amounts ) ? Is this pension or what ? Was it taxed ?

(f) French Unemployment was taxed or not by the French Tax authorities ?

(g) Are we talking about 2023 tax or 2024 tax year ?

I will circle back once I hear from you .

beechmi64Author

Thank you so much for your detailed response.

The individual is single, and all work was performed in the USA. He’s an American citizen (although he was born in France to a French mother and American father). He files a US tax return, and no taxes have been withheld from any of the payments he received. He received u employment but did not pay any taxes on it in France but will include it on his 1040. I think it’s important to note he’s received no tax forms from either the French government or the company that laid him off, just letters.

This is what was communicated to me….

“Following the purchase of the media group by an outside entity that could not guarantee amount of work I would be granted, I was given the option to be laid off and my last day as an independent freelance journalist by XYZ Company was Feb 28th 2023.

Because I had been working regularly for the past 21 year and opted to be paid in salary with contributions to unemployment benefits etc. I was entitled to severance benefits.

I separated this big chunk of money received as severance in the xl spreadsheet. As noted, a big part of this severance package is considered NOT taxable by the French authorities. Whether The IRS allows me to deduct that portion is another story...”

Thanks again!

pk12_2Answer

Employee

@beechmi64 than k you for all the answers. From this what I get :

1. The taxpayer is a US person

2. Taxpayer, being a dual citizen ( US would recognize only US citizenship for tax purposes ), lived in the USDA. The work for the French Entity was performed in the US.

3. For US tax purposes this is self-employment ( Schedule-C reporting and subject US SECA rules , absent a certificate of compliance shown to SSA so he pays SECA/FICA to only one jurisdiction ).

4. Assuming that because the same income was also taxed by the French authorities, he had been claiming foreign tax credit using form 1116 under "re-sourced b y treaty ".

Does this make sense ?