zany

Are there any drawbacks to receiving U.K. state and, UK private pensions in the U.S. if my wife and I opt to become U.S. citizens? We currently have no problems receiving them both as U.S. permanent residents.

MMcD

Drawbacks such as what?

I receive both with no problems whatsoever and am a US citizen.

nun

None, your tax situation will not change at all. If you were receiving UK Government pensions those would be affected by a change in citizenship.

edward222

If you get payments from any benefits or pensions you get from overseas you must let U.S know as it may affect the amount you get from U.S. This is because overseas benefits and pensions may reduce your UK benefit or pension.

zany

One thing I wondered about was whether by becoming a U.S. citizen, there was a greater risk of U.K. cutting off state pension.

Another thing was, by becoming U.S. citizens, whether we would have to pay U.S. tax on interest earned in our U.K. bank accounts. Presently, we are told by IRS we don't need to declare the interest as we are not U.S. citizens.

excpomea

Can't see why they would cut off your pension that you have paid into all your working life.

I'm a US citizen now and enjoy both of my UK pensions

As for the tax issue. You have to pay tax in one of the countries. Do you pay tax on your UK pension? Do you file a US tax return each year? Pretty sure you have to declare all income, anywhere in the world.
Maybe you need a tax accountant rather than our iffy advice.

MMcD

There's not a 'greater risk'...
There's no risk in either instance.

Residency is what determines your tax status, not citizenship
If you're (tax) resident in US and currently receive UK bank account interest - then yes, I believe it should be declared on your US tax return (now) regardless of your citizenship status.

I'm very surprised by what you say the IRS told you.
But, I might very well be wrong.
Hopefully someone with direct experience will be along soon to give you a more informed response. (You don't need a tax professional to deal with this!)

Take a look at this and also click on the link it contains (IRS pub 525) to see if it answers your question more definitively:

http://www.irs.gov/Businesses/Income...oad-is-Taxable

also just found this:
http://www.hrblock.com/tax-answers/s...ticle_id=66646
Ha, link doesn't seem to be working....if it doesn't for you as well...try this and then click on 5th link down (H&R Block):
https://www.google.com/search?q=fore...utf-8&oe=utf-8
and:
http://www.forbes.com/sites/robertwo...-bank-account/

nun

As US citizens you are required to declare your worldwide income....that includes UK bank interest.

nun

There are some special circumstances where having US citizenship would change how you are taxed even if you are a US tax resident.....one is the taxation of UK Government pensions.

nun

As US residents both the UK state pension and UK private pensions are only taxable in the US.....see HMRC form US-Individual2002 for details.