Tax Question - Form 8833, 8938 and SIPP

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Mar 27th 2015, 5:09 pm

#16

nun

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Re: Tax Question - Form 8833, 8938 and SIPP

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Originally Posted by newadventure

Much as I hate form filling and generally take the option of less is better, I agree with Nun that in this case it makes sense to send in an 8833. Couple of points that may be relevant to my particular case: I am not a US citizen, I am here on L1 visa. Also the SIPP contains investments that pay dividends so it generates 'income' although this is all within the SIPP wrapper. I cannot access any of the money in the SIPP until I am at least 55

Be careful with "income". In the context of a pension the income is taxed at marginal income tax rates. Dividends, capital gains etc are taxed differently.

Mar 27th 2015, 5:18 pm

#17

newadventure

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Re: Tax Question - Form 8833, 8938 and SIPP

Thanks. I am trying to differentiate between income that I receive from my pension (none) and the increase in value of the pension due to dividends declared by investments held in the pension. The former I would have to declare on my tax return, the latter I am assuming not

Mar 27th 2015, 5:22 pm

#18

Neillc37

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Re: Tax Question - Form 8833, 8938 and SIPP

Quote:

Originally Posted by nun

Be careful with "income". In the context of a pension the income is taxed at marginal income tax rates. Dividends, capital gains etc are taxed differently.

I am not sure the distinction is worth noting. Dividends could be ordinary, qualified, return of capital, capital gains distributions or sec 1291 tax and interest. Some of these are taxed at marginal rates. Some are taxed at lower rates (15%, 18.8%, 23.8%) and some are taxed at the highest marginal rate anyone could pay for that year. Of course you have NIIT also.

Mar 27th 2015, 5:58 pm

#19

nun

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Re: Tax Question - Form 8833, 8938 and SIPP

Quote:

Originally Posted by Neillc37

It's obviously an important distinction if you have a SIPP and elect treaty treatment to shelter those gains from US tax. If you are a US tax payer with a SIPP and not filing a W-8BEN you probably won't run into much trouble if you don't file an 8833, you can point to the IRS code and argue that the annual gains are reinvested income, but to be complete and head off any future IRS questions why not just file the 8833? You might get a question form the IRS as to why you have a foreign trust and are not filing 3520s etc...the 8833 makes that obvious.

Mar 27th 2015, 7:17 pm

#20

durham_lad

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Re: Tax Question - Form 8833, 8938 and SIPP

Quote:

Originally Posted by newadventure

I am using TurboTax. Last year (2013 return) the CPA included form 8833 'Treaty-based Return Position Disclosure under section 6114 or 7701(b)' to report my SIPP in the UK.

FYI - TurboTax does not have form 8833 available, as far as I'm aware. I have TT Premier Desktop and couldn't find it so I posed a question on the TT site and was told that I'd have to download a copy from the IRS website, and the return would have to be printed and mailed.

No big deal, just thought I'd mention it in case you went looking for it in TT.

Mar 28th 2015, 1:29 am

#21

Steve_

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Re: Tax Question - Form 8833, 8938 and SIPP

Quote:

Originally Posted by Neillc37

Why do people think they need to file 8833 for a foreign pension? The code contains an exception so you don't have to file the form for pensions:

26 CFR 301.6114-1(c)(c) Reporting requirement waived.
(iv) That a treaty reduces or modifies the taxation of income derived from dependent personal services, pensions, annuities, social security and other public pensions, or income derived by artistes, athletes, students, trainees or teachers;

But you do to avoid taxation on the undistributed earnings. I assume because it's not "derived" at that point, it's still within the foreign trust.

Mar 28th 2015, 1:31 am

#22

Steve_

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Re: Tax Question - Form 8833, 8938 and SIPP

Quote:

Originally Posted by nun

There is no exemption for gains in foreign trusts,

Which is why the IRS used to have a form (8891) specifically for Canadians to make the tax treaty claim, which was basically a combined 8833 and 3520, but now they waived it because they have access to the T3 reporting via the tax treaty anyway. But there wouldn't have been a form if there wasn't a requirement.

Mar 28th 2015, 1:33 am

#23

Steve_

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Re: Tax Question - Form 8833, 8938 and SIPP

Quote:

Originally Posted by newadventure

Yep that's right. Not sure why you're still bothering with us because all we're going to do is confuse you. You had it 100% correct to begin with.

Apr 1st 2015, 3:40 pm

#24

newadventure

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Re: Tax Question - Form 8833, 8938 and SIPP

Thanks for your help so far and the interesting discussion it has initiated....

To conclude (and for the benefit of anyone else in this positions), I am filling in a 8938 as the max value of the SIPP during the year was greater than the cut-off for my filing circumstances (married, filing joint)
I am reporting it as an 'other financial asset', description 'SIPP', and the type of Entity I have put as a trust (although I am not sure about this?). I have checked 'This asset did not have income, deductions or credits associated with it' box, and it is held in a foreign currency

I am also going to declare it on 8833

Form 8833 is not used in Turbo Tax, so it means I will have to print out and send in

Thanks again