Reporting British Pension Income to the IRS
Jan 18th 2017, 9:15 pm
#1
in Northern California
Thread Starter
Joined: Apr 2014
Posts: 284
Reporting British Pension Income to the IRS
At the risk of opening a huge can of worms, I have quite a few questions for those who have been reporting British pension income to the IRS for the past few years.
To further complicate matters, I have (or will have) several different types of pension income:
1. UK State pension
2. A defined-benefit occupational pension
3. A private draw-down pension plan (converted from Free Standing AVC's).
1. How do you report the income? Create a substitute 1099-R or something else?
2. What exchange rate do you use? I'm assuming the the current spot rate for lump sum distributions and the published Treasury annual rate for regular monthly payouts.
3. With respect to the private draw down pension... I can establish a hard cost basis since I have documentation to cover my initial investment (two lump sun contributions and 18 months of monthly contributions). Can I use this cost basis to reduce my tax liability on 2016/future withdrawals and if so how? And what exchange rate to use for that cost basis?
To further complicate matters, I have (or will have) several different types of pension income:
1. UK State pension
2. A defined-benefit occupational pension
3. A private draw-down pension plan (converted from Free Standing AVC's).
1. How do you report the income? Create a substitute 1099-R or something else?
2. What exchange rate do you use? I'm assuming the the current spot rate for lump sum distributions and the published Treasury annual rate for regular monthly payouts.
3. With respect to the private draw down pension... I can establish a hard cost basis since I have documentation to cover my initial investment (two lump sun contributions and 18 months of monthly contributions). Can I use this cost basis to reduce my tax liability on 2016/future withdrawals and if so how? And what exchange rate to use for that cost basis?
Jan 18th 2017, 9:45 pm
#2
Joined: Apr 2005
Location: Milwaukie, Oregon
Posts: 9,966
Re: Reporting British Pension Income to the IRS
1) Line 16 on the 1040. I don't send any forms but keep a record of what I have been paid in case of an audit.
2) The average yearly exchange rate as reported by the IRS. (2016 hasn't been published yet) https://www.irs.gov/individuals/inte...exchange-rates
2) The average yearly exchange rate as reported by the IRS. (2016 hasn't been published yet) https://www.irs.gov/individuals/inte...exchange-rates
Jan 18th 2017, 10:32 pm
#3
BE Forum Addict
Joined: Aug 2004
Posts: 4,754
Re: Reporting British Pension Income to the IRS
1) Line 16 on the 1040. I don't send any forms but keep a record of what I have been paid in case of an audit.
2) The average yearly exchange rate as reported by the IRS. (2016 hasn't been published yet) https://www.irs.gov/individuals/inte...exchange-rates
2) The average yearly exchange rate as reported by the IRS. (2016 hasn't been published yet) https://www.irs.gov/individuals/inte...exchange-rates
I assume you have filed your US-Individual 2002 so that no UK tax is withheld at source.
If you contributed to a non-qualified annuity or pension with already taxed money then you should calculate the taxable basis using the General Method
https://www.irs.gov/publications/p939/ar02.html
Last edited by nun; Jan 18th 2017 at 10:45 pm.
Jan 18th 2017, 11:03 pm
#4
in Northern California
Thread Starter
Joined: Apr 2014
Posts: 284
Re: Reporting British Pension Income to the IRS
Yes. Probably no need for the 4852.
I assume you have filed your US-Individual 2002 so that no UK tax is withheld at source.
If you contributed to a non-qualified annuity or pension with already taxed money then you should calculate the taxable basis using the General Method
https://www.irs.gov/publications/p939/ar02.html
I assume you have filed your US-Individual 2002 so that no UK tax is withheld at source.
If you contributed to a non-qualified annuity or pension with already taxed money then you should calculate the taxable basis using the General Method
https://www.irs.gov/publications/p939/ar02.html
Yes, I have taken care of the 2002 and all that jazz.
Thanks for the "General Method" pointer. I'll have to study and digest that.
Jan 18th 2017, 11:23 pm
#5
Deep in the woods of CT
Joined: Feb 2010
Posts: 7,002
Re: Reporting British Pension Income to the IRS
1) Line 16 on the 1040. I don't send any forms but keep a record of what I have been paid in case of an audit.
2) The average yearly exchange rate as reported by the IRS. (2016 hasn't been published yet) https://www.irs.gov/individuals/inte...exchange-rates
2) The average yearly exchange rate as reported by the IRS. (2016 hasn't been published yet) https://www.irs.gov/individuals/inte...exchange-rates
Jan 19th 2017, 1:03 am
#6
Joined: Apr 2005
Location: Milwaukie, Oregon
Posts: 9,966
Re: Reporting British Pension Income to the IRS
Yes that is another way of doing it. Posters in the past have said they either use line 16 or 21 and I don't recall anyone saying either has caused them problems.
Jan 19th 2017, 8:45 am
#7
BE Enthusiast
Joined: Nov 2012
Posts: 902
Re: Reporting British Pension Income to the IRS
The drawdown plan sounds close to a foreign grantor trust requiring 3520s and 3520-As each year. Whether or not you want to file these you'll be entering the plan on your FBAR & 8938 in any case.
