Filing the US tax for parents earning retirement income and paying taxes in India

Forum|Forum|6 years ago
April 5, 2020
2 replies
0 views

Hi,

My dad worked and retired in India a while back. He is getting his retirement income in India and is paying his taxes there for that income. He got his permanent residency in the United States last year. He is going to file his tax in the U.S. for the first time now (for 2019). Questions:

1. Where should he report his retirement income and the taxes paid in TurboTax? Does he report his retirement income under "Foreign Earned Income and Exclusion" under the "Less Common Income" section?

2. Does he report the taxes paid in India under the foreign tax credit deduction section?

3. Is entering that information and filing the tax good enough to get the Premium Tax Credit (PTC) for the health insurance marketplace?

Your help is greatly appreciated.

Thank you.

KarenJ2

1. You would not report the income under foreign earned income exclusion as that is just for foreign wages.

You would not use the foreign paid tax credit in your case. Pension from India is taxable either in the US or in India, but not in both countries. This is based on the tax treaty between the US and India. You would have to claim the tax treaty exemption in the country where the pension would not be taxable.

US/India Tax Treaty

You would report the pension on form 4852, substitute for form 1099R.
If your pension is taxable in the US, you enter the full amount as taxable amount.
If your pension should be taxable only in India, you would then enter Zero as the taxable amount ad write "Us India tax treaty Article XX" as explanation.

2. He would not need to report foreign tax credit as his pension income is only taxed in the US or India but not both

3.The premium tax credit program uses the federal poverty line as a basis for income range for credit eligibility. The range is 100 percent to 400 percent of the federal poverty line amount for the size of your family for the current tax year. For example, an individual earning between $12,490 and $49,960 in 2019 meets income criteria to qualify, while a family of four qualifies with household earnings between $25,750 and $103,000 (as of publication). Even if your income indicates eligibility, you must meet the other qualification criteria as well.

What is the Premium Tax Credit? I do not know

IRS Eligibility for the Premium Tax Credit

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Anonymous

Thanks Karen. Should I search for form 4852 in TurboTax and fill that?

KarenJ2

Once the return is open:

Click on Federal
Click on Wages & Income
Scroll down to Retirement Plans and Social Security
Click on Visit all if available on 1099-R, IRAs, 401(k), early withdrawals
When you see screen Tell US Which 1099-R You Have, click on I need to prepare a substitute 1099-R

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

KarenJ2

Box 7 would be code 7 normal distribution.

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

Anonymous

Thank you. I got past that and now I am hitting another road block. It's asking for Payer's I.D. It says "The state of Illinois requires an entry in this field in order to complete the state tax return". I am still in federal tax, but I will be filing the state tax also after federal. I tried giving the PAN number which is the ID in India and it's alphanumeric whereas it's expecting a numeric value for Payer's ID. It didn't take that. It didn't take 0 either. Any suggestions?

KarenJ2

You can print and mail the Illinois state return and see if you can e-file the federal return. When you are doing the review, you need to ignore the review issue regarding the state Payer's ID.

I know Illinois exempts nearly all retirement income however only for qualified plans.If he is receiving retirement income only from India, it would not be a qualified plan.

The other option is to enter the income as other miscellaneous income: