UK Pension incl Lump Sum
 

I know this subject has been done to death but just for my benefit.

I'm now receiving a monthly pension payment from my old employer in the UK. I also had an AVC which I had the pension managers cash in as a lump sum, it wasn't really worth punting around for an annuity. I've covered the tax by way of additional tax withholding on my W-2

I think I'm resigned to paying tax on the lump sum piece and of course the monthly payments. So..........

Where does it go on the tax return?

Should I include any documentation from my employer and pension fund manager associated with the lump sum and /or the monthly pension?

Finally...I'm using Turbo Tax basic....I didn't see anything so far that was very explicit around foreign pension reporting. If anyone is using tax software for this activity can you let me know the name. I'm assuming there should be some sort of IRS generic foreign income form, if you know the form number that would be great. Note this is not UK state pension, rather this is an employment pension.

Thanks for the help!

Re: UK Pension incl Lump Sum
 

a couple of questions for those who have been through this:


Do you submit a 1099-R & 4852 with the return?
Also..is it best to send copies of correspondence stating the lump sum and annual pension amounts to the IRS so they have proof, or wait until they ask?
and....$1.30 to the pound? That's what I'm seeing.
Thanks

Re: UK Pension incl Lump Sum
 

Some people (myself) put UK pensions on line 16A. Others on line 21. I don't think either way has caused any problems. As far as UK pensions go I do not submit a made up 1099 and again have never been asked for one. However keep all records of pension payments in case the IRS do decide to audit you.

The IRS average exchange rate for 2016 is $1.2987.

Re: UK Pension incl Lump Sum
 

As your lump sum will be taxed in the US as income just like the rest of your pension just enter the total amount you've received on 1040 line 16a....unless there is some other tax free basis.

Re: UK Pension incl Lump Sum
 

I've done both but in the end I prefer putting it on line 16A, filling in a substitute 1099-R and supporting form 4852, as it makes it clear exactly what it is.

As you say it makes absolutely no difference to what tax is paid so I expect the IRS doesn't really care.

Re: UK Pension incl Lump Sum
 

The pension plan will continue for 2016 to be disclosed on the 8938. The AVC plan would arguably also be reported on your FBAR.

Re: UK Pension incl Lump Sum
 

OK folks got it. I very much appreciate the replies. I'll be guided by the Turbo Tax but I think it will end up spitting out a 1099-R and a 4852. I did finally find the links to foreign accounts / pension in Turbo Tax basic but you have to look for them. I recall last years DeLuxe edition asked up front, do you have control over any foreign accounts, or do you have any foreign income. The basic just blew straight by everything.
I was also thinking of including a copy of the letter from the pension fund managers that states the lump sum and yearly pension amounts, but then I thought that's a bit useless as I'd need to send that proof every year. I'm assuming they take your numbers as gospel unless they have an issue?

:thumbup: Thanks!

Re: UK Pension incl Lump Sum
 

I've always filed electronically with Turbotax including the 1099-R and 4852 with no problem at all, and they've never come back and asked for any additional paperwork. With FATCA in place I suppose my UK pension providers may be required to inform the IRS of the sums involved, which will match the figures I use each year.

Re: UK Pension incl Lump Sum
 

Got it, thanks for the help and kudos to this site. :goodpost:

Re: Voluntary NI Payments
 

Hi,

Can anyone tell me if this is worth it ?

I have 5 years on record as having made payments into the NI system from working in the UK many many years ago. I have been living in the US for the past 25 years.

I have 14 more years to go until pension age.

I read that I need 10 years of contributions to collect.

Is it worth me to pay 5 more years ? Should I just start paying now? Or try and pay back payments (I think I can pay up to 6 years back payments).

I haven't found a place where I can find what I will get based on what I pay.

Thanks, Clive.

Re: UK Pension incl Lump Sum
 

You need 35 years for a full pension, and 10 years for a minimum pension. My calculation is you can get 25 years (5+14+6) of contributions, so a pension of 25/35ths of the full amount if you made voluntary contributions.

Re: Voluntary NI Payments
 

If you do nothing you get nothing. If you pay 5 years of contributions at the max rate of ~£720/year you will qualify for a minimum pension of ~£2,300/year. To me that looks like a good deal.

Re: Voluntary NI Payments
 

Agreed.
Whenever I ran the numbers I always came up with the purchasing of additional UK pension years as being a good deal. The way I did it is figure out how much each additional year purchased adds to your UK pension, then guestimate what you would need to get as a return on your money if you decided not to give it to HMRC but rather invest it yourself and come up with a consistent year in year out return to match or better what the UK is giving you. The only possible 'wrinkle' would be if you fell off a cliff just after turning 65 or so and didn't get a chance to get the punts.

Re: Voluntary NI Payments
 

Not even that wrinkle if you are married and your spouse survives a decent length of time...

Re: UK Pension incl Lump Sum
 

Back in 1987 when I was 25 I got a US job offer and an H1-B. I went down to W.H. Smiths and found an advice book for UK expats. There was a chapter on "Voluntary National Insurance" and it strongly recommended that UK expats should continue to pay NI so that's what I did. The longer I'm on these forums the more I realize that a little planning can go a long way.