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British Army Pension and 1040

British Army Pension and 1040

Old Feb 1st 2009, 12:37 pm
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Default British Army Pension and 1040

As far as I can tell, as an LPR, I have to report my Army pension. Does anyone know where on the 1040?

Also, as it is a 'Crown Service' pension it is taxed in the UK. I think that I can claim that as a credit towards my IRS tax bill using a 1116. Can anyone confirm this?

Thanks in advance.

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Old Feb 1st 2009, 5:01 pm
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Default Re: British Army Pension and 1040

There has been a discussion on this.

My accountant says my UK government pension (police) is excempt from US tax under the UK/US Tax Convention and that it is also exempt from being declared on the tax return. So last two years it hasn't been shown on the tax return.

Couple of others on here in a similar position and I know at least one has been told the same, it is exempt from the return.

Having read the UK - US Tax Convention 2001 I agree he is correct as long as I don't take US citizenship. If a joint UK/US national that clouds the waters and I intend discussing that situation with him when I see him later this month.

The pension is exempt from declaration because the Tax Convention stipulates that a government pension will be tax by the country paying it, and the Convention also prohibits double taxation. A non government pension you would declare as you suggested as you have the choice where to pay tax and if you paid tax in the UK that tax can be offset against US tax.

Last edited by lansbury; Feb 1st 2009 at 5:19 pm.
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Old Feb 1st 2009, 5:03 pm
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Default Re: British Army Pension and 1040

I don't have the direct answers to your questions, but I searched the IRS website for "foreign pension" and came up with a lot of very useful looking documents and guidelines.


This looks like a good place to start.
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Old Feb 1st 2009, 5:53 pm
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Default Re: British Army Pension and 1040

Originally Posted by dbj1000 View Post
I don't have the direct answers to your questions, but I searched the IRS website for "foreign pension" and came up with a lot of very useful looking documents and guidelines.


This looks like a good place to start.
The relevant documents are

UK/US Tax Treaty Article 19 and

The Technical Explanation to it again Article 19

They clearly state that as long as you are not a US citizen a UK government pension can only be taxed in the UK.
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Old Feb 1st 2009, 5:57 pm
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Default Re: British Army Pension and 1040

Originally Posted by lansbury View Post
The relevant documents are

UK/US Tax Treaty Article 19 and

The Technical Explanation to it again Article 19

They clearly state that as long as you are not a US citizen a UK government pension can only be taxed in the UK.
That makes sense. I'm just surprised that the income doesn't get reported anywhere on your US return.
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Old Feb 1st 2009, 6:10 pm
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Default Re: British Army Pension and 1040

Originally Posted by dbj1000 View Post
That makes sense. I'm just surprised that the income doesn't get reported anywhere on your US return.
So was I as I thought originally the same as the OP suggested it should be done.

Our CPA is adamant he is doing it the correct way, and I made a point of questioning him on it before signing the return the last two years.

It also stops me from paying State income tax on it because the Oregon tax return requires the Federal adjusted gross income from the 1040.

Last edited by lansbury; Feb 1st 2009 at 6:15 pm.
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Old Feb 1st 2009, 6:40 pm
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Default Re: British Army Pension and 1040

Originally Posted by dbj1000 View Post
That makes sense. I'm just surprised that the income doesn't get reported anywhere on your US return.
Hubby's Canadian military pension does get reported and then written off. No plus in it in anyway.
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Old Feb 1st 2009, 6:49 pm
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Default Re: British Army Pension and 1040

Originally Posted by Rete View Post
Hubby's Canadian military pension does get reported and then written off. No plus in it in anyway.
That might be the case, what does the Tax Treaty between the US and Canada say. It could be different from the UK/US one, or even is there a Tax Treaty between US/Canada.
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Old Feb 1st 2009, 7:26 pm
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Default Re: British Army Pension and 1040

Thanks for this.

My wages from the Consulate are not reportable either. So how do you report zero income, when having a Green Card, I have to file?

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Old Feb 1st 2009, 7:58 pm
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Default Re: British Army Pension and 1040

Originally Posted by cranners99 View Post
Thanks for this.

My wages from the Consulate are not reportable either. So how do you report zero income, when having a Green Card, I have to file?

Cranley
Then your army pension and Consulate salary both come under the Government Service Article in the Tax Convention.

Do you have to file a tax return if you have below a certain level of reportable income. I didn't think you did but will admit to not being sure on that.

But I believe I've seen people say when asking about applying for a visa that they don't have a tax return for some years because they didn't make enough to have to submit one.
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Old Feb 3rd 2009, 2:43 am
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Default Re: British Army Pension and 1040

Originally Posted by lansbury View Post
There has been a discussion on this.

My accountant says my UK government pension (police) is excempt from US tax under the UK/US Tax Convention and that it is also exempt from being declared on the tax return. So last two years it hasn't been shown on the tax return.

Couple of others on here in a similar position and I know at least one has been told the same, it is exempt from the return.

Having read the UK - US Tax Convention 2001 I agree he is correct as long as I don't take US citizenship. If a joint UK/US national that clouds the waters and I intend discussing that situation with him when I see him later this month.

The pension is exempt from declaration because the Tax Convention stipulates that a government pension will be tax by the country paying it, and the Convention also prohibits double taxation. A non government pension you would declare as you suggested as you have the choice where to pay tax and if you paid tax in the UK that tax can be offset against US tax.
I recently obtained my citizenship here in the US and am now trying to resolve some issues like the one psed here. I too have a British Army pension and later (when 65) will have a British State Pension also. I have read all the statements here and still a little confused but think I have the answer. Am I right in reading then that due to the US?UK tax treatie both my Army and subsequently the State pension not have to be declared in our 1040s etc due to the fact they are already taxed at source...ie British taxed?
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Old Feb 3rd 2009, 6:44 am
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Default Re: British Army Pension and 1040

Originally Posted by Fifer View Post
I recently obtained my citizenship here in the US and am now trying to resolve some issues like the one psed here. I too have a British Army pension and later (when 65) will have a British State Pension also. I have read all the statements here and still a little confused but think I have the answer. Am I right in reading then that due to the US?UK tax treatie both my Army and subsequently the State pension not have to be declared in our 1040s etc due to the fact they are already taxed at source...ie British taxed?
As you have obtained citizenship that muddies the waters and it seems uncertain if they have to be declared or not.

I am seeing my CPA next Monday for this years returns and intend to get his advice on the subject. As I read the treaty once you hold dual nationality the US can claim the right to tax a UK government pension. What needs to be established is if they do in fact claim that right or not.
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Old Feb 3rd 2009, 1:23 pm
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Default Re: British Army Pension and 1040

Originally Posted by lansbury View Post
As you have obtained citizenship that muddies the waters and it seems uncertain if they have to be declared or not.

I am seeing my CPA next Monday for this years returns and intend to get his advice on the subject. As I read the treaty once you hold dual nationality the US can claim the right to tax a UK government pension. What needs to be established is if they do in fact claim that right or not.
I'd be interested to know too as I also have citizenship and I'll start receiving a partial army pension at 60.
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Old Feb 3rd 2009, 4:57 pm
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Default Re: British Army Pension and 1040

This is the reply to the question I asked HMCE in the UK about who taxes a government service pension when a person has dual UK/US citizenship.

<quote>

When you gain US citizenship, you may be able to claim exemption from UK tax under the UK/US double taxation agreement.

Until such time that exemption is formally granted however, your pension would remain liable to tax in the UK.

You will no doubt appreciate that I am not able to say how US Citizenship will affect your tax position in the US. You would have to check with the local tax authorities as to whether your pension would also be taxable there.

</quote>

Again it is all about claiming. If you had to pay US tax you can claim exemption from UK tax.

I have just re-read the Tax Convention and realized I was saying the US can claim the tax when it in fact it says about a government service pension:-

such pension, however, shall be taxable only in the other Contracting State if
the individual is a resident of, and a national of, that State.

This only applies to pensions received from working for the UK government in some capacity. It does not apply to the UK retirement pension which is taxable in the country of residence.

Under the Treaty you cannot be taxed in both countries on the same money.
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