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UK pension - how to report on 1040

UK pension - how to report on 1040

Old Oct 4th 2009, 6:42 pm
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Default UK pension - how to report on 1040

I got several different advices when I did my 2007 US tax. Some said line 21 and some said line 16

Line 16 has a schedule with lots of US 1099R questions and I judged it was for US pensions only and I used line 21 with a schedule. I filed in February 2008 for 2007 tax year.

Yesterday I got a demand from the IRS for ADDITIONAL $12,800 as 'self employed tax' and it was in respect of my UK pension

I did submit a schedule to other income line 21 and detailed my UK pension with supporting documents but they have still classed it as self employed and assessed the equivalent of self employed NHI contributions which make up the 12,800 (2,800 penalties)

I called them and they said they archive all supporting documents and they just send out assessments for self employed tax on anyone who has ' other income' line 21 and who hasnt paid self employed tax. They said write in.

I have written to ask em to squash it, but for future years I would like to use line 16 pensions. How do I complete that, as the schedule to line 16 is all about US pensions which have a form 1099R

The world is very light on info as how to report foreign pensions on line 16 schedules

I use turbo tax but it is blind to foreign pensions - totally blind both in preparation and in the help files. It's great for the rest of it but useless with foreign pensions


thanks
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Old Oct 4th 2009, 6:47 pm
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Default Re: UK pension - how to report on 1040

Originally Posted by exvj View Post
I
I use turbo tax but it is blind to foreign pensions - totally blind both in preparation and in the help files. It's great for the rest of it but useless with foreign pensions


thanks
The turbotax forum had lot on foreign pensions
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Old Oct 4th 2009, 9:36 pm
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Default Re: UK pension - how to report on 1040

I too judged that line 16 could not be used without a 1099R and have for the last 4 years used line 21 with a Line 21 Statement for our UK pensions (using Turbotax). All without problems. On the statement I write “UK NHS Pension” followed by the amount.

Last year my wife was paid by her employer gross by check and this was entered on line 12 with a Schedule SE. This results in income tax and medicare etc. being paid via the tax return. Again no problems.

Perhaps the IRS person just got it wrong?
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Old Oct 4th 2009, 10:08 pm
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Default Re: UK pension - how to report on 1040

Originally Posted by Zonie View Post
On the statement I write “UK NHS Pension” followed by the amount.
Is that a work related pension from the UK National Health Service if so is it not classed as a "government service pension" in which case unless you are a US citizen it doesn't have to be declared on your tax return. Or is it the State retirement pension?
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Old Oct 4th 2009, 10:17 pm
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Default Re: UK pension - how to report on 1040

Alan,

You could phone the IRS helpline and ask. I found them very information re a government service pension and the timing of becoming a citizen
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Old Oct 4th 2009, 11:54 pm
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Default Re: UK pension - how to report on 1040

Originally Posted by lansbury View Post
Is that a work related pension from the UK National Health Service if so is it not classed as a "government service pension" in which case unless you are a US citizen it doesn't have to be declared on your tax return. Or is it the State retirement pension?
We are permanent residents.

Yes it is a work related pension from the UK National Health Service. I don’t think it is classed as a "government service pension".

As a result of filing a US-Individual 2002 (under the double taxation agreement) with the IRS and HMRC Residency Nottingham, all our UK pensions are paid to us tax free. We then pay tax on them in the US.

Edit: Found this.

http://www.hmrc.gov.uk/cnr/faq4.htm

Government Service Pensions
Pensions paid for former service to the UK Government are known as Government Service Pensions or Civil Service Pensions. Pensions paid for former employment with HM Forces, Civil Service and Foreign and Commonwealth Office are all regarded as Government Service Pensions.

National Health Service Pensions
National Health Service Pensions are not regarded as Government service pensions for the purposes of most Double Taxation Agreements.

Last edited by Zonie; Oct 5th 2009 at 12:16 am. Reason: Add government pension definition
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Old Oct 5th 2009, 12:32 am
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Default Re: UK pension - how to report on 1040

What gets me is that I filed 2007 in February 2008 and they wait til this week and then zap me with $10k plus $2800 in interest and penalties as their first intimation. I am pretty confident I can get them to cancel this before they start garnishing my wife's wages, but they could have written and asked for confirmation about whether it was self employment before sending a thick parcel of legal forms and threats and court proceeding etc

Turbo tax program actually wrote on line 21 -'See attached schedule of line 21 items' and a full description was given on the schedule and pay slips etc were attached too

It's obvious that the IRS computer isnt looking at schedules as they require human intervention and it's just spinning these demands off untouched by humans and it's all program driven

I think its pretty cruel but the inland revenue in the UK do this and hit self employed hairdressers with £50k demands and let em squirm and prove otherwise

My wife suffers from anxiety and i can guarantee that she wont sleep for the 2 months or so or much more that it takes me to get the IRS to withdraw this. They should have called or written and asked or better still read the schedule and supporting documents i sent with the return


gits, there will be no peace at my house until I can get the IRS to admit they are wrong to assess for self employed tax
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Old Oct 5th 2009, 12:38 am
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Default Re: UK pension - how to report on 1040

Originally Posted by Zonie View Post
We are permanent residents.

Yes it is a work related pension from the UK National Health Service. I don’t think it is classed as a "government service pension".

As a result of filing a US-Individual 2002 (under the double taxation agreement) with the IRS and HMRC Residency Nottingham, all our UK pensions are paid to us tax free. We then pay tax on them in the US.

Edit: Found this.

http://www.hmrc.gov.uk/cnr/faq4.htm

Government Service Pensions
Pensions paid for former service to the UK Government are known as Government Service Pensions or Civil Service Pensions. Pensions paid for former employment with HM Forces, Civil Service and Foreign and Commonwealth Office are all regarded as Government Service Pensions.

National Health Service Pensions
National Health Service Pensions are not regarded as Government service pensions for the purposes of most Double Taxation Agreements.
If the uk have said they will pay you tax free then it isnt government service pension


I have a private pension UK tax free and government service pension which the UK still taxes (its less than my personal allowance so tax free effectively)- I don't pay US tax on it either as it is the ONLY thing I have ever found that doesn't have to be declared in the US. Next year as a citizen, I will have to pay US tax on it. It's an anomaly to the usual rule of declare everything
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Old Oct 5th 2009, 12:50 am
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Default Re: UK pension - how to report on 1040

Originally Posted by Zonie View Post
I too judged that line 16 could not be used without a 1099R and have for the last 4 years used line 21 with a Line 21 Statement for our UK pensions (using Turbotax). All without problems. On the statement I write “UK NHS Pension” followed by the amount.

Last year my wife was paid by her employer gross by check and this was entered on line 12 with a Schedule SE. This results in income tax and medicare etc. being paid via the tax return. Again no problems.

Perhaps the IRS person just got it wrong?
Did you write that on the face of the 1040 on line 21, or on a supporting schedule ?

The person I called at the IRS said the program picks people out at random who have substantial 'other income' line 21. It then assesses that for self employment tax - she sounded like she gets people calling about this all the time. Looks like it picked me at random as one of those. If that is so then the computer will not read what is written on line 21 and will go ahead and assess self employment tax anyway and let you rot. Let you lose sleep, let you spend hours on correspondence and certified mail and they really dont give a damn.

Is that what the revolution was for ? They would have been better off staying with the bloody inland revenue. Tea party nothing.


Glad I posted this so if you guys get selected in the future, you know what it is and not to panic. Not panicking but thoroughly cheesed off with it
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Old Oct 5th 2009, 1:02 am
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Default Re: UK pension - how to report on 1040

Originally Posted by Ray View Post
The turbotax forum had lot on foreign pensions

Thanks Ray I will try the forums. When I try the help files 'foreign pensions' it asks is it a Canadian pension. When I say no, it kicks me back to the menu

That all turbo tax has on foreign pensions - bloody useless
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Old Oct 5th 2009, 6:02 am
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Default Re: UK pension - how to report on 1040

Originally Posted by Zonie View Post


National Health Service Pensions are not regarded as Government service pensions for the purposes of most Double Taxation Agreements.
I was not sure if they were or not, although it seems strange that if a local authority, police and fire service pensions are the NHS isn't, still who said these things are meant to make sense.
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Old Oct 5th 2009, 2:25 pm
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Default Re: UK pension - how to report on 1040

reporting back from turbo tax forums:

I raised the issue of which line on the 1040 for foreign pensions

Saw one definitive reply that says a person has used line 21 for the last 4 years with no problems and that line 16 is for 1099R cases (US pensions)

I will dig some more but a manual entry on line 16 would help steer the IRS away from a self employed tax assessment

Then I got worried about buying and selling shares and whether this might class me as a self employed trader and thus attract self employment tax.
Two separate turbo tax specialists showed me lots of case law that says I am nowhere near a trader classification even though I have turned over several million so far this year (not big profits). One of the cases was a guy who had lots of staff and offices and its the IRS that refused to see him as a self employed trader as then he could have claimed all the costs of his staff and offices. The IRS like to keep people as Investors rather than traders

So that's a worry off my mind

As far as the foreign pension is concerned, I will keep digging for info, but if there was away I could get it on line 16, it would help with this self employed tax problem I am sure. It's just that line 16 stuff seems to demand schedules which are suited to 1099R pensions and my entries wouldn't fit...

ok if I find more I will report
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Old Oct 5th 2009, 2:28 pm
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Default Re: UK pension - how to report on 1040

Originally Posted by lansbury View Post
I was not sure if they were or not, although it seems strange that if a local authority, police and fire service pensions are the NHS isn't, still who said these things are meant to make sense.
I was in a QUANGO - a public transport organisation and that is classed as government and the HMRC have told me it will always be UK taxed. Its paid from a fund that includes all local authority workers in the county.

Yes its strange that NHS isnt government - however I am sure that if the HMRC are not taxing it, then the category of non- government is correct. I wonder if its because the NHS is a 'trust ' and not government as such
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Old Oct 5th 2009, 4:57 pm
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Default Re: UK pension - how to report on 1040

Originally Posted by exvj View Post
Did you write that on the face of the 1040 on line 21, or on a supporting schedule ?

The person I called at the IRS said the program picks people out at random who have substantial 'other income' line 21. It then assesses that for self employment tax - she sounded like she gets people calling about this all the time. Looks like it picked me at random as one of those. If that is so then the computer will not read what is written on line 21 and will go ahead and assess self employment tax anyway and let you rot. Let you lose sleep, let you spend hours on correspondence and certified mail and they really dont give a damn.

Is that what the revolution was for ? They would have been better off staying with the bloody inland revenue. Tea party nothing.


Glad I posted this so if you guys get selected in the future, you know what it is and not to panic. Not panicking but thoroughly cheesed off with it
Using Turbotax I essentially did the same as you. On the face of the 1040 Line 21 Turbotax added “See Statement L21” and printed out an “Other Income Statement – Form 1040 Line 21” on which my pension entries such as “UK NHS Pension “ were printed on line17 with the $ amount I had entered.

I appreciate your posting all this as it seems it is possible that what happened to you is just lurking waiting to strike any of us with UK pensions. Next tax return I will look more into using line16 but from memory it couldn’t be done without creating falsehoods.

I keep saying to my neighbors (tongue in cheek) so much for the tea party. Here we are paying income tax, sales tax, property tax, social security tax etc. and we can’t vote. If that is not taxation without representation I don’t know what is. Like you we apply for citizenship next year, perhaps then I’ll be a bit more blasé with line16!
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Old Oct 5th 2009, 5:16 pm
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Default Re: UK pension - how to report on 1040

Just called the advocate line and the lady was so dumb sounding it was like talking to someone who was drunk

I explained to her very slowly and clearly that my line 21 items were UK pension and UK wages for my wife. I explained that they were detailed on the schedule. I told her they were not self employment and the assessment for self employment should be reversed

She said - er well er hum de charge is fo yo pension coz you muss have retired early and we charge 10% fo dat - what does it say on yo 1099r - do dey hissue doze in hingland ?

I said - ther assessment says its for self employed tax not pension tax and it includes my wifes UK wages

She said - wail fax yo evidence - then she gave me a fax number and I repeated it back slowly - the number doesn't work !

I know now that this will be an appalling nightmare and i will end up paying
$12,800 to stop them garnishing my wife's salary and having her disgraced in her company - then it will take 4 years to get the money back

Both my wifes sister and mother have had 4 year nightmares with the IRS and their money was returned at the end of that living hell
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