United Nations Joint Staff Pension Fund(UNJSPF) is a fund established to provide retirement, death, disability, and related benefits for staff of the UNs. Is the benefit from the fund taxable?
In some countries, UNJSPF benefits may be tax-exempt or partially tax-exempt. However, in the United States, whether or not the UNJSPF benefits are subject to income taxes can be quite confusing. If you are US citizens and resident aliens, even living overseas at the time you received the payment, you might be liable for US income taxes. Critically, the taxability of the benefit is not based on your tax status when you earned the benefit, instead of the tax status at the time of distribution. Besides, your tax status as US citizens or resident aliens is different than your immigration status. If your tax status changes, the taxability of UNJSPF income received might change as well.
Besides, UNJSPF benefit is not "earned income
" per IRS code Sec 911. Therefore, if you live overseas, You can not claim the foreign earned income exclusion for any UNJSPF pension benefits.
The UNJSPF is a "qualified" retirement plan under IRC section 401(a). Therefore, UNJSPF Benefits are taxed a similar fashion as other qualified retirement plans. As most people already know, any pre-taxed contribution and its earnings will be taxed as ordinary income when distributed. Any after taxed contribution will be distributed tax-free (such as Roth IRA).
For the United Nations Joint Staff Pension Fund, typically, the employer's contributions are twice the amount of the employee's contribution. Generally, the contributions are tax paid or tax-exempt. This "investment" portion, and it's tax-free, rest of the benefits are treated as ordinary income.
The IRS Publication 575:Pension and Annuity Income instruct the method of calculations necessary to determine the tax liability of the distribution. The tax-free part of a periodic retirement payment is calculated as the total investment divided by the numbers of the months of life expectancy determined under the IRC.
The taxpayer also needs to keep track, year by year, the total amount of the tax-free part of the benefits claimed until that total equals the participant's investment in the pension. Following that, the entire portion of the distribution is taxed as ordinary income.
A lump-sum or partial lump-sum distribution is taxed differently. For more detail information on the UNJSPF fund tax portion calculation, please do not hesitate to contact us. Virtual CPA for You is a 100% paperless online accounting and tax service based in California. With technology, communicating can be faster and more secure than face-to-face meetings.