Russet

We took pension distributions from our UK Private Pensions for the first time in December 2023. The pension company withheld taxes and sent us P45s. As UK residents we need to complete HMRC SA return for 23/24. We will include this retirement income and will no doubt receive a partial refund of the tax withheld (after taking account of our personal allowances) once the SA is processed. Although presumably this will not be until some point later in 2024 .This all seems fine.

We are now preparing our 2023 US Federal return. We will include the UK Pension Income as Other Income (but understand we could alternatively include it under pension income and include replacement 1099Rs/ Form 4852). However, we are not sure if we can also include Form 1116 with our 2023 US return to claim FTC for the taxes withheld? Or do we need to wait until taxes are paid to HMRC?

Our options seem to be:
Try filing our SA asap after April 5 23, hope it is processed quickly and refund settled, so that the actual amount of tax paid is established.. At the same time, opting for an extension in filing our 2023 US taxes so that when they are filed we can include the 1116 for the tax paid in UK.

or Include the UK Pension income on our 2023 US return and then wait until filing our 2024 US return to claim the FTC relating to this income? This would mean that for tax withheld in UK in Dec 23, paid again in US in mid 2024, we would realistically not be receiving a refund back in the US until our 2024 US return is processed in Mid 2025!

Or are there any alternatives?

thanks in advance...

durham_lad

As overseas residents you automatically get an extension from the IRS to June 15th. No forms to file, your 1040 will have your foreign address and country on it. If you file your HMRC SA in May you will know exactly how much HMRC tax you will be paying, then when filing your IRS return with forms 1116 to get the foreign tax credits you can click the box "Accrued" in Part II ("Taxes paid or Accrued") since you may not actually have paid them but you know how much. If for some reason the amount of HMRC taxes change after you have filed, you can always file a 1040X correction with a new form 1116.

Pierre_Tete

Include UK pensions under 'Other Income'. Replacement 1099 forms are for income sources which ought to have provided a 1099 but some reason didn't (or it was lost and you can't get the provider to supply another one). 1099 forms are also sent by the payer to the IRS so ideally your forms and the IRS copies should match. UK pension providers have no reason or obligation to supply a 1099 to the IRS, so you shouldn't go to the trouble of generating a replacement.

When the time comes to claim the UK state pension and US Social Security, make sure you understand the US/UK tax treaty. Such payments are only taxed in the country of residence, so if you are UK resident, both state pensions should not even be listed as income on your IRS tax return (for US SS, show the total distribution on line 6a, and the taxable amount on line 6b as zero) . That's the one simple part of the dual citizen/dual tax return problem!

Russet

Thanks Durham Lad - that is exactly what we were hoping to do so the clarification is great.

Russet

Thank you - Other income was our first choice so good to hear this is the best way to go. We have a few more years before the other pensions start but it is good to hear there is a simple part to the tax return process!