CPF interest and FBAR?

[lcl]

Would you have any firm links on the treatment of reportable income and how it's treated, tax wise with regard to the Employer's Contributions to the CPF fund (not the employee's as we know that is included in the gross income). I'm under the impression that is has to be added to gross income but it is not allowable as an item which would fall under the Income earned abroad exclusion. Any confirmation on this?

Thanks, unfortunately have not found anything official from the authorities, but according to this tax service, only employer contribution to ordinary account is to be included, not special/medisave. https://www.taxesforexpats.com/articles ... ounts.html

Even though CPF is non-reportable account under the IGA, that is only specific for the reporting institution or exempt institution. Not so clear when it comes to individual reporting. See https://www.irs.gov/businesses/corporat ... orm-8938-1

[GSM8]

Thanks, unfortunately have not found anything official from the authorities, but according to this tax service, only employer contribution to ordinary account is to be included, not special/medisave. https://www.taxesforexpats.com/articles ... ounts.html

I second SMS's thanks to you for researching these links. Although this tax service's interpretation is not explicitly written in any official documents, it is indeed consistent with the purpose of Ordinary, Special and Medisave accounts, if one thinks about it. In such cases I suppose the interest on Special and Medisave accounts will also be exempt by the same reasoning. That does raise a question about tax treatment of the CPF balance at withdrawal though - will Special and Medisave balances be treated as ordinary income at the time of withdrawal, or not taxed at all, or will Special Account only be treated as SS payments (and what if these are taken out before the corresponding SS/Medicare eligibility ages in the US?)

Frankly, this whole citizenship based taxation is unreasonable, unethical and impractical. But that's another topic. (Now is the time to voice your opinion/experience, if any, via various organizations have asked for expat views on CBT vs RBT to present to Congress)

Even though CPF is non-reportable account under the IGA, that is only specific for the reporting institution or exempt institution. Not so clear when it comes to individual reporting. See https://www.irs.gov/businesses/corporat ... orm-8938-1

Would your interpretation be that only Oridinary account balances need to be reported on form 8938?

[sundaymorningstaple]

Well, as I have been doing all along, I will probably continue to do. If I am wrong, the government get a tax contribution from me. If I am right, then I have no amendments to do later as I've reported all interest, CPF contributions including employers contributions on 1040 and paid the taxes if any on said sums. Then the only thing they could get me for would be my inclusion of the employers CPF contributions as part of my basic salary and also eligible for the Foreign Earn Income Exclusion. But the taxes on $990/year OR less (before the new caps) is not something I'm too worried about. I will continue to report the medisave and retirement accounts and their interest drawn as well.

[lcl]

Because IRS has not issued further clarifications, that leaves everyone at their mercy, some over-report, some under-report, based on each one's interpretation as no one knows for certain. Even the so-called tax experts/attorneys may not all agree. For instance, on the CPF accrued interest, some would say they are not taxable (cash vs accrual basis) until CPF monies are actually distributed subject to retirement age etc. http://www.justanswer.com/tax/6hcms-tax ... ccoun.html
I suppose if you report everything and pay your taxes now, you should not have any tax liability when you finally take out your CPF balance. Otherwise, at the time of distribution, tax will be payable on any amount for which no tax has been paid. For example, a Singapore citizen with no CPF contribution since becoming a US resident would have to pay tax on amounts withdrawn, as he or she has never paid any tax on it. Yes, worldwide taxation basis without regards to where the income is actually earned can be rather unreasonable.

There's a pending bill https://meadows.house.gov/media-center/ ... es-hr-5935, not sure how that would pan out. However, with a new administration, hopefully the tax code will be simplified. Singapore IRAS does correct your errors and adjusts for any overpayment. Not sure if the IRS has ever done that.

On whether CPF needs to be reported on 8938, it would seem so for tax years after 12/12/14 (ie 2015 onwards?) based on IRS revised 8938 instructions (link sent previously), IF CPF a/cs were categorized under Annex II, V - "a/cs excluded fr fin'l accounts" in the US-Singapore IGA. Only the CPF investment a/cs is clearly stated as such. So trying to clarify/confirm for OA/SA/MA.

[foxmill]

I cannot understand why the contribution made / interest accrued before becoming US tax person are taxable during CPF withdrawal. CPF is non-qualified plan, it is taxable when the contribution is made or interest is accrued and you are US tax person. The withdrawal are free of tax. All contribution and interest income before you became US tax person should not be subject to US tax. Anyone can clarify? Thanks

Here's the general consensus as best I can determine it. I'm going to try to cover everything CPF-related in the U.S. context in one post.

3A. On edit: If you became a U.S. person after some or all of your/your employer's CPF contributions were made, and after some interest was paid, then the untaxed portion is probably U.S. reportable and taxable on a pro rata basis upon withdrawal. (Double check, but that's my understanding.) For example, if your CPF account balance is $50,000 on the date you became a U.S. person you would report and pay tax on interest (and contributions, if any) from that date forward. Let's suppose you start to withdraw after another $10,000 of interest has been paid (and $0 contributions in this example, just to keep it simple). The account balance is now $60,000. You withdraw $6,000. At that point, $5,000 (the pro rata untaxed portion) is U.S. reportable and taxable, and $1,000 (the additional interest already reported and taxed) is not U.S. taxable. (This example also ignores MediShield Life premiums, if applicable. MediShield Life premiums tend to drive down your CPF account balance if you have no further contributions, but they would not affect the pro rata allocation between previously taxed and untaxed CPF monies.) Pro rata tax treatment makes sure that each/every dollar is taxed once and only once. Dollars prior to your U.S. personhood are taxed only upon withdrawal, while dollars flowing in (and accruing) during your U.S. personhood are taxed as/when they flow. Consequently the timing of your withdrawal(s) is(are) important. For example, it may make sense to withdraw CPF monies (if permitted) before becoming a U.S. person -- although I wouldn't go overboard with this idea since, even U.S. taxed, CPF is quite attractive.

[PNGMK]

Unfortunately our wise mods banned BBCWatcher - you won't get a response. A shame really.

[foxmill]

That is sad, the discussion here is the only online resource I can find for CPF US tax treatment discussion. it is a dead end due to the ridiculous forum policy.

Unfortunately our wise mods banned BBCWatcher - you won't get a response. A shame really.

[Strong Eagle]

That is sad, the discussion here is the only online resource I can find for CPF US tax treatment discussion. it is a dead end due to the ridiculous forum policy.

Unfortunately our wise mods banned BBCWatcher - you won't get a response. A shame really.

I banned him, for reasons that were not ridiculous.

[earthfriendly]

May I ask why is BBCwatcher being banned?

[Strong Eagle]

May I ask why is BBCwatcher being banned?

He was banned Aug 30, 2016 for making false statements concerning employment passes, refusing to back down even when presented with hard evidence to the contrary, thereby causing a great deal of consternation and fear in the individual who made the original inquiry.

He was warned. It was the last straw that broke the camel's back.

[x9200]

I don't remember details of that specific, last case, but as he can not defend himself... generally he didn't make false statements. The problem was elsewhere. He often advised people based on purely theoretical knowledge suggesting solutions formally possible but very unlikely to happen in any practical scenario. He called it providing different options. And the people took or might have taken such "options" as the right approach while in reality chances for "the options" to happen were zero.

[PNGMK]

I used to race home to read his/her diatribes.

[earthfriendly]

OIC