ARP103

Hello,

I'm helping an expat friend in the U.S. with some "financial optimization". Following her husband's death, she started receiving a modest company pension from the UK, but enough that she's paid several thousand in taxes over the years since. Apparently a form P85 was never filed (maybe because the rules were different then, don't know), and in some years she just claimed U.S. subtractions for foreign tax. So is it likely that she'll have withholding completely removed, and get a refund for at least some of those years, by filing P85 and/or "DT/Individual", for double taxation relief? And it's not clear to me that she needs both at this point.

Also, she and her late husband paid into National Insurance for at least 15 years before moving. Is she able to claim some state pension from both NI and American social security? Thank you for any help.

nun

You friend should file a US-Individual 2002 form and an 8802 residency certificate form with the IRS

http://www.hmrc.gov.uk/cnr/us_individual_2002.pdf

They will send it to HMRC and your friends tax payer code should be changed to NT ie No Tax. She'll get the UK pension with no tax withheld. She will have no UK tax liability, but must enter the pension on her US 1040 on line 21.

She can certainly claim both UK state pension and US SS. However her US SS will be reduced because of the Windfall Elimination Program (WEP) if she gets any pension paid for with non-SS wages and she has less than 30 years of US FICA payments. So if the UK company pension and UK old age pension were both paid for with wages earned in the UK your friend need to tell SSA about them. But before she does she should work out the WEP amount and make sure it is less than the total of the two pensions. Here is an online calculator.

http://www.ssa.gov/retire2/anyPiaWepjs04.htm

ARP103

Very helpful. Thanks. So it looks like any refund due based on the withholding will be automatically sent to her. And I see that on the calculator page it says "WEP does not affect benefits for your survivors". Since it's a pension based on her husband's UK earnings, I wonder if that means she would not be subject to the reduction, if she later switches to her husband's survivors benefit.

nun

I don't know the situation with WEP for survivors benefit. Your friend should talk to SSA about it.

Your friend should see if she can get any refunds from HMRC for previous years taxes as the UK pensions she's getting are not UK taxable. The only tax she should be paying in future is US tax. There should be no future UK withholding and no requirement to deal with UK taxation at all. Just US income tax

ARP103

Sounds good. Presumably she would be limited to the four years of back refunds, and if they don't send that based on section C.2 of "US-Individual 2002" and her latest P60, she would have to write them directly. Thank you.