Pulaski

Don't you mean "after"? ..... Or "..... do it before..... "

nun

I'm dubious about the utility of QROPS for UK expats moving to the US because they seem to be pretty expensive and the US/UK tax treaty covers pensions very well, but if you are persuaded to do a QROPS you should definitely do it BEFORE you move to the US and come under the regulation of the IRS. The IRS might well see the transfer of a UK pension to another pension plan outside the UK as a taxable event.

Pulaski

Yeah, but you said "don't.... before". ..... You might want to petition a Mod to correct it lest anyone not read the subsequent posts.

freerskier

Thanks folks. Are the thresholds on an irs site?

nun

Yes, $10k in aggregate foreign financial accounts for FBAR and the 8938 limits are here.

http://www.irs.gov/pub/irs-pdf/i8938.pdf

freerskier

OK - Re-awakening the thread here.

I have (only) about £70k in 2 UK personal pensions. I am now planning to leave them be as the IRS will not punitively tax me? Is that correct. As long as I complete the correct FBAR forms with my 1040?

I assume that once I reach retirement age and take a combination of lump sum and annuity I will pay tax -

1. Presume as a US resident I will not pay tax in the UK just in the US?
2. Given 1 is kind of correct, will the IRS tax the lump sum element or just the annuity income.

Thanks again.

nun

If you can control how the pensions are invested, ie transfer your money between various funds, you will need to file an FBAR

If you are a US resident you won't be taxed on your UK pension income, but the IRS will tax you on both the lump sum and the annuity income

freerskier

Started the FBAR pdf.

I became and LPR on 18th November 2014, but have been in the country all of 2014.

I sold my ISAs (proceeds in my non interest attracting UK bank account) in September 2014. I am assuming I have to declare that I disposed of them on the 8938.

I also assume that I put my UK back account on an 8938.

Lastly, from the brief information you enter about the investment in Part V of the 8938 how do the IRS know not to impose any tax, say, on a British Personal Pension Plan.

And yes I will be getting a knowledgeable CPA.

JAJ

Form 8938 asks if you disposed of the relevant asset in the year.
And you must declare any capital gains resulting from the disposal (plus any income in 2014)

Correct - IF you have to file an 8938.

They don't. They rely on you to self-report any income that happens to be taxable. Now, in general, whether by law or policy, the IRS do not generally seek to try to tax foreign pension plans before they come into payment.

freerskier

Ok thanks for the advice on these ones - heres a couple of follow up questions:

1) The ISAs I sold were in my name but my wife and I will be joint filing our taxes (I think).

According to the instructions for form 8938 I satisfy the threshold potentially as my total investments are over $100k during the year, despite that I sold them in September.

However this total includes personal pensions (paid up plans that I can move the funds around in so they aren't PFIC 'attractant's) that are not taxable. The ISAs at sale were valued around $87,700. Pensions around $137k. However the pensions are not taxable as per the previous advice in this thread. So, for stuff thats taxable do I actually fall below the $100k threshold anyway.

2) Related to my point above, do I need to put the pensions on the 8938 as they are not taxable. And, I am guessing from what you are saying, if I did put them on the form (as they can't easily differentiate what is/isn't taxable) they'd tax me on the gains made on them this last tax year?

I'll still of course do the FBAR for everything to comply with the treasure rules.

nun

8938 is purely informational. You should include your UK pensions on it. You can elect the treaty and avoid US taxation on any gains in covered UK pensions

freerskier

OK, and thanks again.

NOw, you are the first person to mention the tax treaty in all of this. Do I 'elect the treaty' on the 8908 or on the 1040.

Just taking a breath, I am sorry to be such a newbie PITA but this forum is effectively the best research platform I've found.

Hotscot

Hey, it's understandable.

When I go home to the North of Scotland with my (ill?) gotten gains of my life I'm just tempted to say eff it...but I don't know what the risk of extradition back to the US will be, or confiscation of accounts etc...dogs dinner the US taxation system...

I suppose I could hire a specialist but I prefer to try to understand the process.

nun

You make tax treaty elections on form 8833

freerskier

Thanks very much again. All help much appreciated.