Income tax on money transferred in one year, but received in the next year

Question

I am a citizen of Israel, where I currently reside, work and pay taxes. I am about to terminate my employment in Israel in December 2015 and move to the US to work for a US-based company, starting January 2016.

I am entitled to severance pay, which is held in a dedicated account (quite common in Israel). After terminating employment and prior to leaving the country, I plan to withraw funds from this account and close it (I can't do that while I am working). It might take 30-60 days until the money is actually transferred to my bank account.

In 2016 I will be considered a Resident Alien in the US due to the precense test. In 2015 I am not considered a US resident. If the order to withdraw was given in 2015, but the money was only transferred in 2016, will it be considered as an income in 2016?

On one hand, sevearance pay in the US is considered as regular income and taxed accordingly. On the other hand, there is the concept of "Constructive Receipt".

Answer 1

You should consult a US CPA to ensure your situation is handled correctly. It appears, the money is Israel source income and not US source income regardless if you receive it while living in the U.S. If you file the correct form, I suspect the form is 1040NR and your state form to disclose your income, if any, in 2015 and 2016, it should not be a problem.

Having said that, if you do earn any type of income while in the U.S. , you are required to disclose it to both the IRS and state.