isimps

I am in process of transferring out my UK pension scheme with the option of a 25% tax free lump sum, my advisor tell me because the lump sum is only a partial payment it will be tax free in the US as per the treaty article 17 1 (b)

lansbury

Are you a UK citizen, US citizen or dual citizen living in the US, because if you have US citizenship my understanding is the lump sum is taxable. If you are just a UK citizen and live in the US, it isn't taxable.

The last paragraph (Lump Sums) of this HMRC document is what suggests the above. https://www.gov.uk/hmrc-internal-man...elief/dt19876a

isimps

I am a permanent resident, still a British citizen, i believe that is the document he is referring to.

lansbury

For what the opinion of anybody on the Internet is worth, I think your advisor is correct. The only caveat being a document published by HMRC is not binding on the IRS.

lansbury

This is about the only document from the IRS I can find that helps.
https://www.irs.gov/businesses/the-t...-distributions

General Rule:Treaties confirms that the Tax Treaty is the defining document so giving support to the HMRC document stating what the treaty agrees.

wlvbrit

I cannot figure out why there is no clear statement on the question of how to fill out the IRS form(s) under the following simple circumstances, which probably relate to many UK ex-pats in the USA:
1. I am a "US Person" under common parlance.
2. I am not a US citizen.
3. I am a UK citizen by birth and heritage.
4. I am a Long Term Resident of the USA (>30 years)
5. I just turned 70.
6. I am taking US Social Security payments monthly.
7. I am taking UK State Pension payments quarterly to my UK £ account
8. I am taking payments from a USA company pension.
9. I have no other foreign pensions.
10. Because I delayed taking my UK State Pension I received a one-time catch-up payment representing the payments I had deferred.

A Is the USA/UK Tax Treaty of any benefit to me in terms of reducing taxes (I have no requirement to pay UK taxes)?
B How/where do I report the one-time income from my UK State Pension?
C How/where do I report the recurring quarterly income from my UK State Pension?

lansbury

Pensions are reported on line 16a of form 1040

durham_lad

A - no help in reducing taxes, you pay US taxes on your UK pension
B&C - you total up all payments for your UK pensions for the calendar year and report that total on line 16a. You can use the IRS average exchange rate to convert to $’s. I create a substitute 1099-R each year to report my UK pensions. (TurboTax and the like will walk you through this)

1penelope1

I retired in the UK (where I have been resident most of my life) at the end of July 2017 and I receive the UK State Pension, a State Pension from Luxembourg, and two occupational pensions from the U.K. I also had a one-off tax free lump sum payment from one of the U.K. occupational pensions. How do I report this on the US tax form? How can I allow for tax treaties and avoid any double taxation? I find this area very confusing. I am a dual US/UK citizen.

Cook_County

These are all pension oncome, so Lines 16a and 16b on the 1040 and foreign source these on a general basket Form 1116.

Glasgow Kid

I also have a few questions for the Expat group based on the following:
1) My 2016 US taxes included 2 UK company pension lump sums (25% each) and I considered not submitting based on the US/UK Tax treaties as it was very confusing.
2) I would now like to appeal to the IRS to reconsider my 2016 taxes based on the treaties as I have everything to gain and nothing to lose.
3) How do I go about this process without involving a lawyer?

durham_lad

File an amended return, 1040X, you have 3 years after filing to amend a return.

https://www.irs.gov/pub/irs-pdf/i1040x.pdf

(Page 2, “When to File”)

1penelope1

So, is it correct to say that I just need to complete 1040 and Form 1116 and no other forms are needed?

Thanks!

durham_lad

If you are a USC then there are I think a couple more forms than the 2 you mention. I am also a USC living in the UK with UK private pensions and some of the additional forms I needed in were:

a substitute 1099-R (4852) to support each foreign pension entry on line 16

Schedule B to report bank interest from my UK savings accounts and part III of
this form is where one records if they have or do not have any foreign bank accounts

Form 6251 to show the calculation that I did not come under the AMT even though I did not itemize deductions.

Desertsun2018

Hi. I also would like to know the answer to the 25% tax free question. I just started taking amounts from Pension lump sum commencement not taxed in U.K. I have been told these amounts are NOT taxable in US. The lump sum meaning in US is NOT the same as UK lump sum. The relevant tax treaty para is 17, 1 b NOT 17, 2. Why is this section in the U.K. US tax treaty? The 25% tax free amount was always there so does the treaty not exist to add protection? I found a US tax lawyer online who has published opinion it is NOT taxable, see tax-charts.com at the bottom of his form. I have tried to contact him but so far been unsuccessful...