Help with US Taxes 2010, Indian Citizen married to USC

[ramas256]

Dear KKA,
I returned to India in April 2010, and I have some questions on filing my US federal and MA state taxes for 2010. Request your guidance based on the following information.

1) Status: I am an Indian citizen with GC before I left US, my wife and two children are US citizens. I have been filing 1040 MFJ for the last several years.

2) Here are our sources of income for 2010 and the forms I have obtained from IRS.
- Earned income between January and March - W2
- My 401k rolled over to a rollover IRA and subsequent distribution - 1099-R
- My wife's 401k rolled over to a rollover IRA and subsequent distribution - 1099-R
- Distribution from my pension - I have got a 1042-S, titled "Foreign Person's US Source income subject to withholding" instead of 1099-R
- Real estate sale, long term, my own home that I sold for 209k in 2010, bought for 235k in 2006 - form 1099-S

3) Questions on my federal tax return.
a) I should file 1040 as I am married to a USC, correct?
b) Where do I include the income from the 1042-S? Line 16a?
c) For the real estate loss, I filled out schedule D, and I come up with a figure of -3000 for line 14, correct?
d) Line 61 - it asks for taxes withheld from w2 and 1099-R. Do I also add the tax from my 1042-S form in this line?
e) Have I missed out any other thing, given my situation?

4) Questions on my Massachusetts State Tax
a) State taxes were withheld from my 401k distribution, as reflected in the 1099-R form. There is a section in the Mass State Tax form to enter the 1099-R information. Where do I account for the 1042-S pension income? When I tried filling out the Mass State Tax form online, I entered my W2 information, but I get the message that the income reported to the state does not match what I had entered. Why do I see this? The online software would not allow me to e-file without resolving this income discrepancy.

Would appreciate your response. If you can provide me a number or email I can follow-up on, that would be great.

Thanks
RSankar

[ramas256]

Can one of the experts reply to the above post?

Thanks
RSankar

[Desi]

I am not KKA, but see my responses in red font embedded in the quote below:

Dear KKA,
I returned to India in April 2010, and I have some questions on filing my US federal and MA state taxes for 2010. Request your guidance based on the following information.

1) Status: I am an Indian citizen with GC before I left US, my wife and two children are US citizens. I have been filing 1040 MFJ for the last several years.

2) Here are our sources of income for 2010 and the forms I have obtained from IRS.
- Earned income between January and March - W2
- My 401k rolled over to a rollover IRA and subsequent distribution - 1099-R
- My wife's 401k rolled over to a rollover IRA and subsequent distribution - 1099-R
- Distribution from my pension - I have got a 1042-S, titled "Foreign Person's US Source income subject to withholding" instead of 1099-R
- Real estate sale, long term, my own home that I sold for 209k in 2010, bought for 235k in 2006 - form 1099-S

3) Questions on my federal tax return.
a) I should file 1040 as I am married to a USC, correct?

Assuming you have taxable income, YOU are required to file form 1040 because you have a GC which you have not officially surrendered and relinquished and it has not been administratively taken away. You are liable for US taxes on global income.

Assuming taxable income, your spouse is also required to file form 1040 and report global income to US tax authorities.

Both of you can choose to file a joint return, as long as at least one is required to file the tax return.

b) Where do I include the income from the 1042-S? Line 16a?

Yes, because it is pension plan income in your case.

c) For the real estate loss, I filled out schedule D, and I come up with a figure of -3000 for line 14, correct?

No, you cannot deduct losses for personal residential real estate.

http://www.irs.gov/businesses/small/industries/article/0,,id=98921,00.html

d) Line 61 - it asks for taxes withheld from w2 and 1099-R. Do I also add the tax from my 1042-S form in this line?

Yes and attach a note explaining that you received 1042-S from pension plan and are treating it as 1099-R.

e) Have I missed out any other thing, given my situation?

Don't know. This forum is not for a thorough tax form and filing review.

4) Questions on my Massachusetts State Tax
a) State taxes were withheld from my 401k distribution, as reflected in the 1099-R form. There is a section in the Mass State Tax form to enter the 1099-R information. Where do I account for the 1042-S pension income? When I tried filling out the Mass State Tax form online, I entered my W2 information, but I get the message that the income reported to the state does not match what I had entered. Why do I see this? The online software would not allow me to e-file without resolving this income discrepancy.

I am not familiar with MA taxes. I beleive they do not tax distributions if they were taxed at the time of contribution, but you need to look at their instructions and if the online does not allow, use paper filing with an explanation or consult a knowledgeable tax preparer.

[QUOTE]Would appreciate your response. If you can provide me a number or email I can follow-up on, that would be great.
Sorry, no personal numbers or emails. Will try to respond here if time permits and you have further questions.

[raj779]

Hi Desi,

I had a question regarding US Taxes for any assets, bank balance, property inherited from parents in India.

If parents in India have a nomination or a will for their cash, assets, property etc. in India on their childrens name who are US citizens, then will there be any US Estate taxes, gift taxes or any other US Taxes which the children who are US Citizens have to pay for any cash, property, other assets etc. which they get when their parents will/nomination is actually executed.

If there are any US taxes which the children who are US citizens have to pay then what is the exemption limit before which the US taxes apply and what are the tax rates ?

Appreciate if you can provide this info.

Thanks!

[Desi]

Hi Desi,

I had a question regarding US Taxes for any assets, bank balance, property inherited from parents in India.

If parents in India have a nomination or a will for their cash, assets, property etc. in India on their childrens name who are US citizens, then will there be any US Estate taxes, gift taxes or any other US Taxes which the children who are US Citizens have to pay for any cash, property, other assets etc. which they get when their parents will/nomination is actually executed.

If there are any US taxes which the children who are US citizens have to pay then what is the exemption limit before which the US taxes apply and what are the tax rates ?

Appreciate if you can provide this info.

Thanks!

If a US citizen receives a gift, inheritance, etc, that is not income and no taxes are due to US.

Any interest or other income earned on an inheritance that you actually receive, is income and hence taxable and required to be reported.

An inheritance or gift received in a foreign country may necessitate filing of TDF90-22.1 (FBAR).

If the inheritance or a gift received is in excess of $100K (latest numbers may a bit different), then form 3520 is required to be filed with the return.

[r2maa]

Hi Desi,
Is form 3520 filing required when someone makes a random donation to some foreign trust? when doing so to some foreign person as a gift?

[Desi]

Hi Desi,
Is form 3520 filing required when someone makes a random donation to some foreign trust? when doing so to some foreign person as a gift?

If this "someone" is a US person, then the answer is YES, provided the trust is a "related' trust. This answer is to the best of my knowledge which is limited. If the trust is unrelated with no benficiary or grantor interest, then form 3520 reporting may not be required. None the less, this requires more investigation and I suggest to go over the instructions of form 3520.

Note that if this gift exceeds 13K, you will have to file form 709 regardless of whether or not you file 3520.

[greyfri]

Hi Desi,
Is form 3520 filing required when someone makes a random donation to some foreign trust? when doing so to some foreign person as a gift?

Form 3520 is incredibly complex with many exceptions and caveats and you should generally consult a professional.

[Tijean250]

I am a tax expert who live in the USA. I am a Certified Public Accountant (CPA) and Certified Management Accountant and I can answer and do any tax from any state in the USA or if there is Indian income that need to be reported to the US authorities. You can email me at [email protected] for a quicker answer. I specialize in complicated Scenarios and I would also help with bookkeeping that is compliant with GAAP and the IRS to achieve accurate reportings

[r2maa]

This link talks about the filing requirements exceptions etc.
http://www.law.cornell.edu/uscode/pdf/uscode26/lii_usc_TI_26_ST_F_CH_61_SC_A_PA_III_SP_B_SE_6048.pdf

A section from the page is produced below.
How do we access sections: 402 (b), 404 (a)(4), or 404A mentioned below?

----
(B) Exceptions
(i) Fair market value sales
Subparagraph (A)(ii) shall not apply to any transfer of property to a trust in exchange for
consideration of at least the fair market value of the transferred property. For purposes
of the preceding sentence, consideration other than cash shall be taken into account at its
fair market value and the rules of section 679 (a)(3) shall apply.
(ii) Deferred compensation and charitable trusts
Subparagraph (A) shall not apply with respect to a trust which is?
(I) described in section 402 (b), 404 (a)(4), or 404A, or
(II) determined by the Secretary to be described in section 501 (c)(3).

----

If this "someone" is a US person, then the answer is YES, provided the trust is a "related' trust. This answer is to the best of my knowledge which is limited. If the trust is unrelated with no benficiary or grantor interest, then form 3520 reporting may not be required. None the less, this requires more investigation and I suggest to go over the instructions of form 3520.

Note that if this gift exceeds 13K, you will have to file form 709 regardless of whether or not you file 3520.