BT Pension

Old Apr 14th 2019, 9:42 pm
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Default BT Pension

Hi
New here hoping someone can help. My accountant is now telling me that the USA IRS may want to Tax my BT Pension Tax Free Lump Sum that I received last year. This surely cant be accurate can it? I started working for BT in 1976 up until I moved here in 2004. Does anyone know if this the the correct information i am being given?
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Old Apr 14th 2019, 10:42 pm
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Default Re: BT Pension

Let's clarify.

You worked with BT until 2004.
They provided a company pension.
You took a lump sum from it last year. 2018. And you are a US tax resident.

Yes, the information is correct.
The IRS may want to tax it.

As far as I know there's never been definitive guidance on this.
You can do some reading on 'treaty based tax position' and Form 8833. (They may or may not apply to you.)

If the sum is significant to you I would not DIY this. Find a professional.

Last edited by Hotscot; Apr 14th 2019 at 10:58 pm.
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Old Apr 15th 2019, 12:49 am
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Default Re: BT Pension

Originally Posted by GeorgiaBoy View Post
Hi
New here hoping someone can help. My accountant is now telling me that the USA IRS may want to Tax my BT Pension Tax Free Lump Sum that I received last year. This surely cant be accurate can it? I started working for BT in 1976 up until I moved here in 2004. Does anyone know if this the the correct information i am being given?
If you moved here in 2004 have you become a US citizen in that time. If yes the IRS can tax your lump sum. If not you might have an argument that it isn’t taxable under the UK/US tax treaty.
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Old Apr 15th 2019, 10:29 am
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Default Re: BT Pension

Originally Posted by GeorgiaBoy View Post
Hi
New here hoping someone can help. My accountant is now telling me that the USA IRS may want to Tax my BT Pension Tax Free Lump Sum that I received last year. This surely cant be accurate can it? I started working for BT in 1976 up until I moved here in 2004. Does anyone know if this the the correct information i am being given?
Yes if you're a US Citizen they might well want a chuck of it,
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Old Apr 15th 2019, 11:03 am
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Default Re: BT Pension

Hi
Let me clarify:

1. Yes i am a US Citizen
2. I get a lump sum and a monthly pension
3. The lump sum was paid in UK as Tax Free, it was always set up for the Pension to be paid that way
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Old Apr 15th 2019, 11:08 am
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Default Re: BT Pension

As a USC, you pay taxes on your worldwide income (let's hope you've been declaring that monthly pension).

It is possible that the US/UK tax treaty may save you from paying US income tax, but I would suggest that you consult a tax attorney with experience of international tax treaties.
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Old Apr 15th 2019, 1:35 pm
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Default Re: BT Pension

I never had a lump sum, but as a USC living in the USA, and also now as a USC living in the UK, the IRS taxes my UK private pensions.
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Old Apr 15th 2019, 2:04 pm
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Default Re: BT Pension

Talk to a pro fast and/or file an extension fast.
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Old Apr 15th 2019, 2:07 pm
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Default Re: BT Pension

Originally Posted by Hotscot View Post
Talk to a pro fast and/or file an extension fast.
Thanks Hotscot, we already filed an extension to try and get this mess straightened out
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Old Apr 15th 2019, 2:09 pm
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Default Re: BT Pension

Be aware that the extension only allows delaying the filing. Any tax that is due is still due from today and there will be penalties/interest charged monthly with no pro rating.
However don't panic.
You won't get in trouble, you'll just have to square the tax.

If, when it all comes out, the IRS tries to impose significant penalties go for the First Time Abatement.
https://www.aicpa.org/interestareas/...abatement.html

Last edited by Hotscot; Apr 15th 2019 at 2:13 pm.
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Old Apr 15th 2019, 2:13 pm
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Default Re: BT Pension

Originally Posted by GeorgiaBoy View Post
Thanks Hotscot, we already filed an extension to try and get this mess straightened out
Have you filed FBAR and/or Form8938, if applicable? If not, you need to add that in to the mix.

https://www.irs.gov/businesses/compa...r-requirements
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Old Apr 15th 2019, 2:19 pm
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Default Re: BT Pension

Oh yes, after that long a pension contribution period it probably meets the FBAR threshold of $10,000.
I imagine.

And possibly FATCA (Form 8938)

However if this is the case still don't panic. You won't get in trouble.
You'll see all sorts of horror stories online but that's from places selling their services to take care of said horror stories.

An experienced pro will sort it.
Try to find a Enrolled Agent.
https://www.irs.gov/tax-professional...nt-information

Last edited by Hotscot; Apr 15th 2019 at 2:22 pm.
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Old Apr 17th 2019, 8:14 pm
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Default Re: BT Pension

Originally Posted by GeorgiaBoy View Post
Hi
New here hoping someone can help. My accountant is now telling me that the USA IRS may want to Tax my BT Pension Tax Free Lump Sum that I received last year. This surely cant be accurate can it? I started working for BT in 1976 up until I moved here in 2004. Does anyone know if this the the correct information i am being given?
I took my 10 year BT pension last year, but chose not to take the lump sum. I just took a bigger monthly payment as we had previous knowledge from when my wife took her NHS pension a couple of years back. We were advised that it was taxable. They took quite a chunk as we were still both working at the time and had good incomes here.
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