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Japanese Pension Lump Sum Payment Taxation 2020/2/17 10:36
Hello, My wife is 65 years old and received a lump sum employer sponsored pension (equivalent of US 401K plan) from her employer in Japan. It was a plan, where she contributed 100% of funds, the employer was not participating financially. She stopped working there in 1995, but still she was making small contributions monthly. According to Japanese law, only 50% of her income would be normally taxed in Japan, if she lived there, but because she is a US person and lives in the US, she was told by the Japanese Tax Authority to pay tax in the U.S.

She mostly contributed to that plan when she was working in Japan, at that time she was not living in the US and she was not a U.S. person. She was a nonresident for U.S. tax purposes. She became a U.S. person in 1999. My question is, we know, that she would have to pay tax in the U.S., but does she have to pay tax on whole amount (even on contributions while she wasn't a U.S. person for tax purposes) or only on income after she became a U.S. person (from 1999)? I know it's not an easy topic, but maybe there are professionals here who can answer my questions. Thank you,
by Pete (guest)  

Re: Japanese Pension Lump Sum Payment Taxation 2020/2/17 14:46
follow US income law, because she is a resident of US. (she is tax payer in US.)

generally speaking, according to Japanese tax law, they don't charge to "potential" increase. they only charge tax when she withdraws money.
for example, the contribution is 1 million yen and the present balance is 2 million yen. you have "potential" (hypothetical) increase of 1 million yen. when you withdraw all money back. they charge tax to the increase of 1 million yen "temporarily", because some (or many ?) people don't report this income.

in your case, you need to report the income, following US income law.
and in the final calculation, you can subtract the tax amount which you were withhold in Japan, according to the mutual agreement for tax purposes between Japan and US.

I am not a professional. you need to consult an accountant of US.
by ken (guest) rate this post as useful

Re: Japanese Pension Lump Sum Payment Taxation 2020/2/17 17:01
There was no tax withheld in Japan. i understand, that she has to pay tax in the U.S., but how much tax.
I'm looking for a professional consultation from a CPA who specializes in taxation of foreign pensions in the U.S. It can't be just any CPA, I know many tax laws, but this one is beyond my expertise. I just want to know if she has to pay tax on contributions and part of income she made before she came to the U.S. Until year 2000 she contributed most monies to her pension. In 2000 she was not a U.S. person for tax purposes yet.
by Pete (guest) rate this post as useful

Re: Japanese Pension Lump Sum Payment Taxation 2020/2/17 18:04
no relation to the place where you paid (made contribution).
1. make sure that the payment (form Japan) corresponds to 401K in US.
2. calculate tax, following US law of 401K, as assuming that the contribution was made in US.
3. sometime, you may get unexpected benefit, when calculation. that is Okey, because the laws are different between Japan and US. (in some case, you may lose money, because of the difference of tax law.)

brief information about 401K in Japan.
1. the contribution was 100% tax deductive. it means you have not paid income tax in past years.
2. when you get money as pension (small amount every year), the money is considered as 雑所得, miscellaneous income. you can get 公的年金控除, the deduction because the income is public pension.
3. when you get all money back at one time, the money is considered as 退職所得, retirement money. there is the deduction for retirement money. (I am afraid that there is no such deduction in US.)
by ken (guest) rate this post as useful

Re: Japanese Pension Lump Sum Payment Taxation 2020/2/18 16:35
I want to add one thing.
Today H tell me: Pension deducted from your salary will be refunded, (average of 300000 yen),however, this is subject to a 20% tax(60000 yen).h=Hamamatsu nakaku sunayamacho......
by Jim (guest) rate this post as useful

Re: Japanese Pension Lump Sum Payment Taxation 2020/2/18 16:35
I want to add one thing.
Today H tell me: Pension deducted from your salary will be refunded, (average of 300000 yen),however, this is subject to a 20% tax(60000 yen).h=Hamamatsu nakaku sunayamacho......
by Jim (guest) rate this post as useful

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