Snoozy

I have never filed for tax in the US and never had any US based income. I'm a British citizen, on a UK passport and B2 visa, with a holiday home in the US which I have visited every winter. Since I retired in 2000, my visits have been longer but still within the restrictions of the visa and never exceeded them.

I have never had any contact with the IRS and was blissfully unaware that their visitation constraints didn't mirror those of the visa. My recent marriage seems to have been the catalyst for bringing my taxation problems to the surface, indicating that I have become a resident alien, rather than a non-resident alien, for the 2016 tax year and may have inadvertently been one in a previous year when I made an overstay.

My immediate worry is finding a reliable source of help with my 2016 filing and getting my affairs in order. I'm far from sure that our local US accountant is sufficiently knowledgeable.

TXLonghorn

Wrong again. The term "national" in the OECD is left up to the individual country to define. For tax treaty purposes, the term "national" includes permanent residents. The whole purpose of the savings clause is to restrict US citizens and permanent residents from claiming treaty benefits. Maybe this flowchart will be easier for you to understand: http://www.tax-charts.com/charts/894...axation_uk.pdf

lansbury

I understand it because I have been in that situation and took professional advice. That advice came from a tax professional, from the HMRC department that deals with tax issues for the government department I worked in, and the IRS. They all said that for a permanent resident in receipt of a UK government service pension it could only be taxed in the UK.

Three years US tax returns were submitted with an excemption for US tax claimed under the treaty on my pension. For each of those years the IRS accepted that without any issues.

There are others I believe on this board, who receive a UK government pension living in the US as a permanent resident and pay tax in the UK.

For someone whose web site indicates they are a tax lawyer to give out such misleading and erroneous information beggars belief. I hope no-one on BE takes anything you say at face value, as your insistence that how both HMRC and IRS deal with these pensions is incorrect calls your competence into question.

lansbury

. However,due to the complexity of these rules, this flowchart undoubtedly includes errors and omissions.

Well that disclaimer is certainly right.

theOAP

For those struggling with the term 'national', perhaps the following from IRS Publication 901, on page 33, will clarify the intention of the treaty:

"Pensions paid by, or funds created by, the
United Kingdom, its political subdivisions, or local
authorities for services performed for the
United Kingdom are exempt from U.S. income
tax unless the recipient is both a resident and
citizen of the United States."
[emphasis mine]

https://www.irs.gov/pub/irs-pdf/p901.pdf

From a previous post in this thread:
"Wrong again. The term "national" in the OECD is left up to the individual country to define."
Not sure what the OECD has to do with any of this, but if the US always followed OECD practice, they would adopt the OECD Common Reporting Standard.

Cook_County

This thread has possibly become a tad impolite. Apologies if this was partly me over-egging the pudding. The question originally asked is a common one and quite easily resolved by a dually US/UK qualified tax adviser; as these issues are frequently seen in the UK. It is unlikely that Snoozy's current accountant would be suitable for the work required as s/he will not be familiar enough with the interpretation of various rules; including within the treaty. I would hardly ever suggest using anyone Stateside for these kinds of tax issues; as there is far more experience on these specific issues within the UK.

lansbury

It hasn't. Just the use of a 4x2 become necessary for error correction.


It wasn't.

TXLonghorn

That applies only to UK government employee pensions. Notice it says services performed for and not in.

Pensions paid by, or funds created by, the
United Kingdom, its political subdivisions, or local
authorities for services performed for the
United Kingdom are exempt from U.S. income
tax unless the recipient is both a resident and
citizen of the United States.

These exemptions do not apply to income or
pensions for services performed in connection
with a business carried on by the United Kingdom,
its political subdivisions, or local authorities.

TXLonghorn

I hope that no one takes any such information posted by anyone on an online discussion board at face value. I have not done my due diligence on this obviously because he is not a client. And I will admit it's been a long time since I've come across this issue and I'm not sure how we handled it.

I don't care what the telephone rep at the IRS told you. That is not a reliable source of information either. Unless you have a private letter ruling, I don't accept the telephone rep's advice at face value either.

Moreover anecdotal information about what worked for you or didn't in terms of the return not being audited is flawed. Not all issues are discovered by the IRS. That does not mean your position is correct.

lansbury

In post #8 you said a permanent resident is liable for tax on a UK government service pension, I point out that was wrong they had to be a citzen as well and you decided to argue the point. I even told you Article 19 and the explanatory notes said that.

I never said a non government pension wasn't taxable in the US. I see now you are saying I was correct.

TXLonghorn

Well I guess we were not talking about the same things. By gov't pension I was referring to a UK workplace pension set up by the government, not a civil service pension.

lansbury

BEVS

Just caught my eye as I was passing through.

To help and clear this up for you. The above are one and the same.