JAJ

And is FTC likely to be claimed for 2014 tax year? If so, the simplest approach may be to be to offset this refund against any FTC taken for that year. The smaller the dollars, the simpler the approach. On the assumption that the IRS really don't want to process 10 years of amended tax returns that contain no difference in tax due.


Two further thoughts:

1. Discussion on amending tax returns. Including the often-overlooked fact that there is not the same obligation to amend as there was to file in the first place: 5 Simple Rules to Follow When Amending Your Tax Return - Forbes

2. Note at this point, that if you filed on time, only the tax years 2011-13 inclusive are open under the statute of limitations. Other than in exceptional circumstances.

theOAP

Yes, my thoughts exactly. It becomes somewhat even more logical if you happen to have been using the accrued method for foreign tax paid for 1116 (part II, which you continue to use without requesting a change from the IRS), instead of the more common and simpler cash basis.

A further consideration also comes into play if you have chosen the general basket for pensions and have income on a passive 1116 also. The refund should be apportioned between the two baskets, and is an especial consideration if filing multiple 1040X.

The Robert Woods article is a good read.

nun

I'd put them on line 16 as it has a place to put the taxable portion. As my voluntary NICs were after tax I will calculate the US taxable portion.

theOAP

I believe in equality, so I use both line 16 and line 21 for pensions, on the same 1040.

nun

The 1040 is not designed to cover every situation under the sun. Foreign income is going to require some interpretation and creative form filling. As a scientist I have no problem in filing out forms creatively as long as I have a good reason and can "show my workings" for anyone interested. I also have no problem in providing/creating documentation when prompted by Turbo-Tax or just for my own records.

durham_lad

Retired engineer here, and like you I do like forcing it through on line 16 with a substitute 1099-R and form 4852 as it provides a good documentation trail.

theOAP

I'm not a scientist, but that is the reason I use both 16 and 21. Think of form 8938, foreign Social Security pensions, and a basis in a pension. I don't have to do it that way, but it's for my convenience (but not for any tax benefit). It provides a clear documentation trail by doing it that way and line 22 is exactly the same result.

nun

I think we are agreeing......do what seems most sensible and best completes your taxes

theOAP

I keep saying this to the youngsters over on UKY, and I'm sure they don't believe me, but everyone's tax return is unique. Variations of circumstances, even minor, and the resulting decision of how to report those minor variations differently on a return does not make any return less accurate or less acceptable to the IRS as long as the required information is presented logically and in a way that meets the regulations. There are often so many different ways to report income accurately, as well as many regulations that offer no latitude at all in reporting.

I do go off on an anti-software rant every now and then, but for those who want to understand the workings of the US tax system it's key they understand the intricacies before going anywhere near TurboTax or TaxACT. You'll also notice that I often go off on rant about the unique US CBT (citizenship based taxation). It's only by understanding the basic principles of the unique US tax system that one can be critical of its deficiencies.

More importantly, I also understand that many people just want to file an acceptable return without doing a research degree in the US tax system, and get on with the much more enjoyable and rewarding aspects of their lives.

A confession: nun is a scientist; my profession was as far removed from accounting and science as it's possible to be, although I shared more with a research scientist than an accountant. You may have noticed from my approach (and my lack of linguistic abilities ). Engineers were at times my worst enemies, and at other times, my closet allies (and some of my best friends). Accountants were always my worst enemies.

nun

....so a profligate theologian then.....

theOAP

Now that you mention it,..... I'm sure some would agree with profligate.

Eycott

Nun, if you have made voluntary contributions to your UK Pension do you know if you can claim back the amount you paid in on the US 1040 form?

I paid Class 3 (I didn't qualify for Class 2), started my UK Pension in March 2014, and all my voluntary contributions were amortized by December 2014.

I'm a little confused (which is more wishful thinking) whether or not I can deduct the total cost of the voluntary contributions the first year before posting the net amount on Form 1040 line 16b, or if I have to use the Simplified Method Worksheet?

The former preferably as the latter will take about twenty-five years of cost adjustments!

Any thoughts much appreciated.

Thank you,

Matt

nun

I'm a few years away from getting the UK state pension, but when I looked at the 1040 and the instructions for line 16a and 16b it certainly seems to me that if you paid your voluntary NICs with already taxed US money you can deduct the tax free basis of your UK state pension just like you would for an annuity paid for with after tax dollars. But as the UK state pension is a non-qualified plan you'll have to use the General Method. It's quite easy, but you'll need to know your total contributions. I estimated it for my situation and I only get to deduct 5% of the pension because Class 2 NICs are so inexpensive. If you paid Class 3 I imagine you will be able to deduct closer to 25%.

Eycott

Thank you. A great help!

Eycott

Using the General Method on IRS Publication 939 (and following Example 1 on Page 10) it seems I can only deduct about 4 to 5% of cost per annum of my total voluntary NICs paid in to a UK State pension (57% were voluntary NICs, a few years Class 1, and pre-1975 credits of which I have no idea cost wise!) on the 1040 line 16b, or about the equivalent of around £300 per annum tax free for 20 years!

I suspect there is a creative solution to this?