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UK/USA Double Taxation (Form 1116)

UK/USA Double Taxation (Form 1116)

Old Mar 27th 2020, 3:02 pm
  #1  
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Default UK/USA Double Taxation (Form 1116)

Hi Everyone,

I have recently filed my UK taxes and am now in the process of filing the US Tax returns for 2019.

In the UK we paid taxes on our Social Security and Pensions. Our UK Accountant used Article 17 of the UK/USA Double Taxation Convention as her frame of reference.

In filing our US Taxes our US Accountant said that we would also be liable for US taxes on our Social Security and Pensions which would mean being double taxed on these items.

Our US Tax Accountant is using form 2555 (Foreign Earned Income Exclusion) as his frame of reference..

We believe he should be using form 1116 (Foreign Tax Credit) to back out our SSN and Pensions.

Does this make sense?

Thanks for your help.

David







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Old Mar 27th 2020, 3:56 pm
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Default Re: UK/USA Double Taxation (Form 1116)

You don’t say but I’m assuming you are resident in the UK.

FEIE cannot be used for pensions because it is not earned income so foreign tax credits are used, form 1116.

However, section 17.3 states that SS is only taxed in the country of residence, ie UK in your case. Your other pensions are taxed in both countries hence the need for form 1116 to claim back UK taxes paid on all income other than SS.
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Old Mar 27th 2020, 8:05 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Thanks durham_lad for your reply. We wanted to confirm our assumptions before getting back to our accountant in the states. We now live in Newcastle so are going through the double filing for the first time. We had lived in the UK during the 80s. We moved over after serving a tour of duty in Rota, Spain.
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Old Mar 31st 2020, 4:02 pm
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Default Re: UK/USA Double Taxation (Form 1116)

This is our first year to file US/ UK taxes. We also live in Newcastle, and are looking for an accountant / tax specialist. Do you know of someone local? Feel free to send a private message.
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Old May 6th 2020, 1:49 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by Bodara View Post
This is our first year to file US/ UK taxes. We also live in Newcastle, and are looking for an accountant / tax specialist. Do you know of someone local? Feel free to send a private message.
Hi, Bodara ,
This is also our first year filing both US/UK tax. Just wondering if you've found an accountant yet? We keep trying to connect with one in London and even though we've spoken on the phone twice, he never follows through with anything or returns our calls. We're a bit deflated and it'd be great to find someone upon personal reference.
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Old May 6th 2020, 2:10 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by durham_lad View Post
You don’t say but I’m assuming you are resident in the UK.

FEIE cannot be used for pensions because it is not earned income so foreign tax credits are used, form 1116.

However, section 17.3 states that SS is only taxed in the country of residence, ie UK in your case. Your other pensions are taxed in both countries hence the need for form 1116 to claim back UK taxes paid on all income other than SS.
Seems a thread for the north east here !

Durham I know US social security taxable in UK being a resident here, and according to treaty should be taxed twice. How is it reported on a US return so it isn't taxed ? The 1040 has a line to report social security, and since a 1099 issued for social security I assume somehow this needs to be addressed on a US tax return ? (I still have US sourced income in US that needs to be reported on tax return there).

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Old May 6th 2020, 4:52 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by morpeth View Post
Seems a thread for the north east here !

Durham I know US social security taxable in UK being a resident here, and according to treaty should be taxed twice. How is it reported on a US return so it isn't taxed ? The 1040 has a line to report social security, and since a 1099 issued for social security I assume somehow this needs to be addressed on a US tax return ? (I still have US sourced income in US that needs to be reported on tax return there).
From what I have gathered from researching this, including the TurboTax support group you have to enter income under "Other income" that is a negative value exactly matching where the Social Security is reported on the 1040. In the comments for that "Other Income" reference tha tax treaty and you must include form 8833 claiming that treatment as part of the DTA. Unfortunately TurboTax does not have form 8833 in its library so you have to fill in the form online and print it out, and send it in with a printed copy of your return. So, no more e-filing once we start taking SS next year.
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Old May 7th 2020, 7:12 am
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by durham_lad View Post
From what I have gathered from researching this, including the TurboTax support group you have to enter income under "Other income" that is a negative value exactly matching where the Social Security is reported on the 1040. In the comments for that "Other Income" reference tha tax treaty and you must include form 8833 claiming that treatment as part of the DTA. Unfortunately TurboTax does not have form 8833 in its library so you have to fill in the form online and print it out, and send it in with a printed copy of your return. So, no more e-filing once we start taking SS next year.
thanks. seems all complicated both the form 8833, social security reporting, and then other u.s. sourced income.
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Old May 7th 2020, 9:08 am
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by morpeth View Post
thanks. seems all complicated both the form 8833, social security reporting, and then other u.s. sourced income.
This is the IRS trying to implement government policy. Complicated is their speciality.
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Old May 7th 2020, 2:58 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by durham_lad View Post
This is the IRS trying to implement government policy. Complicated is their speciality.
found the following on linehttps://www.goldinglawyers.com/form-...ns-steps-2019/

https://www.artiopartners.com/blog/i...at-tax-treaty/

yes so very complicated on what should be strautforward issue.
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Old Nov 16th 2020, 3:52 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Doesn't form 8833 have exceptions? "Exceptions to Filing Form 8833
Where you can claim a treaty exemption that results in the reduction or modification of the taxation of income from dependent personal services, pensions, annuities, social security, and any other public pensions or income of artists, athletes, students, trainees, or teachers" https://www.artiopartners.com/blog/i...0or%20teachers.
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Old Nov 16th 2020, 4:34 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Originally Posted by brokenhearted. View Post
Doesn't form 8833 have exceptions? "Exceptions to Filing Form 8833
Where you can claim a treaty exemption that results in the reduction or modification of the taxation of income from dependent personal services, pensions, annuities, social security, and any other public pensions or income of artists, athletes, students, trainees, or teachers" https://www.artiopartners.com/blog/i...0or%20teachers.
For someone living in the UK then neither the US SS or the UK OAP is taxable in the USA as per the treaty. For the OAP then you don’t even report it on the IRS return, but with US SS they have sent form SSA-1099 to the IRS so that has to be reported on the usual line on the 1040 then negated to zero with form 8833 explaining why. I think if you skipped entering the SSA-1099 on your return and just sent the 8833 then it would likely cause problems. It is similar to the FEIE in some ways as you see the wages appear in the usual place on the 1040 and then have an equal but negative value on line 6, copied from Schedule 1 “Other Income”.
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Old Nov 16th 2020, 4:49 pm
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Default Re: UK/USA Double Taxation (Form 1116)

Thank you for that insight. As always, this is a great forum.
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