How do you exclude Social Security from a foreign country (under a Tax Treaty) on the Form 1040? Do you include on line 5b and then deduct on line 7a for a U.S. Citizen living in that foreign country?
The other client who is living in the States is my next problem because I was told that both retirements should be taxed and a Tax Credit taken by Form 1116. That does not seem right to me because of the Treaty. It should also be an exclusion for someone living in the U.S. and not be taxed in both the U.S. and Greece and then the taxes paid to Greece attempted to be allowed as a tax credit by filing 1116 (which hardly ever works for the correct amount and leaves foreign tax carryovers).
Why do you think social security paid by Greece should be excluded from US taxation, whether or not the US citizen lives in the US or Greece?
What Greece has with the US is an antiquated tax treaty from 1950, which has not been updated since. Public and private pensions are dealt with by Article XI and everything is subject to Saving Clause without exceptions or re-sourcing provisions under Article XIV(1).
This essentially means social security paid by Greece would be subject to US tax the same way as US social security benefits, except foreign tax credit may be claimed to alleviate double taxation. What you have been told is correct.
Still an AllStar