I was previously an L1 visa holder here in the US, and I then resigned from that employer in Japan (2010). I will receive the retirement money in Japan on 2011, and would like to use that here in US to buy a house. I have these questions.

1. Upon receiving the retirement money in Japan it will be taxed by Japan, but should I also file it here in the US as an income? (I know that there is an agreement with Japan to prevent double-taxing but, I don't know the extent).
2. Or should if it's not an income should I just file a 90-22 form? (Around what percent will this be taxed)
3. If filing of necessary papers is needed, when is that for? For 2010 (the year I resigned) or 2011 (the year the retirement money was transfered).

Thank you.

HOW LONG were you on the L-1 visa and working in the United States?

I was previously on L1 visa for 2 years, and same working duration here in the US.

Thank you.

If you received the retirement income from your Japanese employer while you were physically located in Japan, then it is NOT subject to U.S. income taxes. Hence, do NOT report that retirement income on your tax return.

AtlantaTaxExpert,

Thank you for the helpful advice.
Yes, I was physically in Japan when I resigned from my previous employer.

But, the problem is they will transfer the retirement money after 2 to 3 months in my Japan bank, and in that time frame I'm in my new company here in the US. And this might be considered a income outside the US which needs submission of 90-22 form.

Your advice is greatly appreciated.

Furthermore, when my retirement money is released in Japan, the Japanese gov't will tax this. Thus, it seems I will be paying double tax. :-(

It is NOT necessarily subject to U.S. taxes. If you can get your Japanese employer to released the funds while you are NOT in the U.S. (even if the money is not formally transferred), you can file a dual-status return and NOT claim that retirement money on that return.

If this is NOT possible, then file Form 1116 and claim a tax credit for the Japanese taxes.

AtlantaTaxExpert,

Thank you for the advice, but the Japanese employer will be releasing the retirement money when I'm here in the US.

Thus, I think I'll just file Form 1116 for tax credit.

By the way, what is the definition of income date from retirement? Is it the date that is in the paper as the last day of employment or is it the date when the employer transfer the retirement money to my bank?

Thank you.

Historically, it is the date of the check or the date of the electronic transfer.

Thank you AtlantaTaxExpert,

Thus filing Form 1116 with the necessary documents exempt my Japan retirement money from being taxed here in the US or there will still a portion that I need to pay for tax?

The retirement check will be added to your income, and taxes will be assessed, but after the tax assessment, you will receive a credit (probably dollar-for-dollar, assuming that the Japanese tax rate is LESS than the U.S. tax) for the Japanese taxes that you paid.

AtlantaTaxExpert,

Thank you for the information and you've given me valuable input regarding offshore retirement money taxation.

JPTax:

No, it is STILL going to be taxed. You are just going to get a CREDIT (probably dollar-for-dollar) for the Japanese taxes you paid on the retirement.

This avoids double taxation by two countries on the same income.