Thank you malcontent. You are very knowledgeable, I would like to get more inputs and advice from you. More questions.malcontent wrote: ↑Wed, 22 Mar 2023 11:28 pm1. No, paying a Medishield premium out of CPF would be no different than paying a private insurance premium from your own bank account, there’s no tax impact whatsoever.
2. Same rule as #1 applies, neither are considered distributions in the US tax sense.
3. I am not 100% sure on GST rebates; it should be classified as a tax refund and tax refunds are not taxed (that is how US stimulus money went tax free, because it was deemed a tax refund). However, interest added to CPF by the government is interest income from a US tax perspective, and cannot be deferred - it has to be declared and taxed as paid each year.
4. No, it is NOT considered a distribution, it is no different than withdrawing money from a bank account. The reason is because the US does not allow deferral on the contributions in the same way that Singapore does, because CPF is not a qualified (tax advantaged) account from a US tax perspective. The only exception is CPF LIFE payments (there are special rules pertaining to annuities that were purchased with previously untaxed dollars).
5. CPF is except from 3520 because it is a foreign trust that is considered under 402(b), and technically, it is exempt from 8938 because it is a foreign government’s social security program (most advisors will “play safe” and tell you to report it anyway, just in case CPF might not fit perfectly as described, but I personally would not bother). I would, however, declare my CPF account on the FBAR.
In summary:
CPF after becoming a US person:
1. Tick the box on 1040 schedule B part III
2. Report it on FBAR
3. If you wish, report it on 8938
4. Include interest income earned each year
(in other words, it’s like any other foreign bank account)
If you withdraw it, everything was already taxable when contributed under 402(b) so there is no further taxation — again, it’s like any other foreign bank account, it comes out 100% tax free except for the interest earned each year.
Very good point about being consistent. If you do a google search on something called “quiet disclosure” - - you might have gotten away with in the past — i.e. suddenly starting to report after not reporting before… but nowadays they are wise to it. Better safe than sorry.sundaymorningstaple wrote: ↑Thu, 23 Mar 2023 6:27 pmI've been filing from Singapore for the last 40 years (mine went into the mail to the NC P.O. Address this afternoon along with a physical cheque for the amount due - got hit rather hard (for me anyway) due to the proceeds from a 10 yr endowment ins policy which when thrown on top of my 85% taxable SS caused a bit of damage. As I am now retired, I no longer have the 2555 to stave off the wolves. Having said that, regarding CPF. I, like Mal, treat my CPF like another bank deposit account. I do file the 8938 every year and also include it on FINcen every year and I list it as a deposit account. I report the full interest earned annually AND from the time I started contributing to CPF in 1995 when I got PR I have always included both my full salary AND the employers contributions as salary. Therefore with the exception of the topups (and we don't get all of the ones the government gives) and medishield ins payments, all the income in my CPF account has been taxed previously. So far no issues in this regard over the last 25 years. I think consistency is the key. Bad decision in the beginning just festers and grows if you try to swap horses in the middle of the stream. Once commitment is made I think it will hold you in good stead. On, and like Mal, I do not use any tax preparation company for any assistance. If fact Mal, MD, GSM8 & myself have discussed this at length several times over the years.
(1) - no, it’s not income.zhangqian0324 wrote: ↑Tue, 28 Nov 2023 1:34 amHi. I would like to follow up on this thread and ask a few questions specific to my own situation:
1. My wife and I were previously Singapore permanent residents (PRs). We had jobs and incomes, and therefore CPF accounts.
2. However, we lost our Singapore PR status after staying for several years in the US for graduate schools. Our CPF accounts remained open, but no new salaries/contributions were added.
3. Several years later, we obtained USA PR status in 2021.
4. We did not do anything with our Singapore CPF when we file our US taxes in 2022 and 2023, because we were not aware of that we need to report our foreign accounts.
5. This year (2023), we completely closed our Singapore CPF accounts and transferred the balances to our Singapore local bank accounts.
To get ready for filling taxes when we enter 2024, I would like to get feedback on:
(1) Is the transfer from our closed CPF accounts to Singapore local bank accounts considered "income"? As you could expect, that would significantly increase our taxable income and hence our taxes.
(2) Do we need to pay for taxes for the entire CPF balance or just the portion we earned (interests actually) after we became USA PR in 2021?
(3) Do we need to take further actions (and what actions) to avoid any potential penalties for not reporting our Singapore CPF information when we file our taxes in 2022 and 2023? We were not aware of that as USA PRs we need to report our foreign accounts.
Thank you all for your help!
malcontent wrote: ↑Wed, 29 Nov 2023 3:56 am(1) - no, it’s not income.zhangqian0324 wrote: ↑Tue, 28 Nov 2023 1:34 amHi. I would like to follow up on this thread and ask a few questions specific to my own situation:
1. My wife and I were previously Singapore permanent residents (PRs). We had jobs and incomes, and therefore CPF accounts.
2. However, we lost our Singapore PR status after staying for several years in the US for graduate schools. Our CPF accounts remained open, but no new salaries/contributions were added.
3. Several years later, we obtained USA PR status in 2021.
4. We did not do anything with our Singapore CPF when we file our US taxes in 2022 and 2023, because we were not aware of that we need to report our foreign accounts.
5. This year (2023), we completely closed our Singapore CPF accounts and transferred the balances to our Singapore local bank accounts.
To get ready for filling taxes when we enter 2024, I would like to get feedback on:
(1) Is the transfer from our closed CPF accounts to Singapore local bank accounts considered "income"? As you could expect, that would significantly increase our taxable income and hence our taxes.
(2) Do we need to pay for taxes for the entire CPF balance or just the portion we earned (interests actually) after we became USA PR in 2021?
(3) Do we need to take further actions (and what actions) to avoid any potential penalties for not reporting our Singapore CPF information when we file our taxes in 2022 and 2023? We were not aware of that as USA PRs we need to report our foreign accounts.
Thank you all for your help!
(2) - any interest earned in a tax year is taxable in that tax year (CPF is not a qualified account per IRS rules, so you can’t defer the income).
(3) - it’s not US LPR that triggers tax/reporting obligations on your worldwide income/assets, it’s US personhood, which typically happens once you reach the US physical presence limit… unless you had a visa that explicitly exempted you. So you may have been liable for longer than you think.
Claiming ignorance or not being aware of your US reporting obligations — that is not going to help you avoid penalties if you are caught. And, your US LPR could even be at risk.
You now need to decide whether to do an expensive “voluntary disclosure” or a “quiet disclosure” and take your chances (keeping your fingers crossed until the statute of limitations passes). The fact that you have filed your taxes in the US means the clock on the statute of limitations is already ticking. If no financial institution in SG had your SSN, it’s not likely being reported to the US under the Singapore FATCA IGA. However, any amount over $10k that gets wired to a US account would often get reported to FINcen, and that is how many get caught.
If you seek advice from legitimate experts or professionals, they will all advise you to enter the voluntary disclosure program - considering the risks to you, and the profit for them in helping you do this. But that is the only way to be sure you won’t face severe penalties or worse.
It’s a tough decision that carries great risk, but only you can make that decision after researching it for yourself. No matter what you decide, you’ll want to “clean house” and “be smart” starting from now, that is for sure!
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