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UK State Pension and US tax return

UK State Pension and US tax return

Old Feb 23rd 2024, 10:06 am
  #31  
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Default Re: UK State Pension and US tax return

Yes, taxed in all states, it is income after all.
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Old Mar 2nd 2024, 1:15 am
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Default Re: UK State Pension and US tax return

OK, not an expert but having read the US/UK treaty some time ago from memory it implies and United States that UK State pension is treated the same as USA Social Security. Since US Social Security is only taxed upto 85% of the amount you recieve at the highest level. If UK State pension is not included in line 6a with USA how is it calculated at a max of 85% in TurboTax and other apps.

This also removes problem of being taxed in states that dont tax Social Security.

WEP does not effect me as my USA benefits are based on my deceased wife's benefits funded by her.

Your thoughts please.


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Old Mar 2nd 2024, 1:40 am
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Default Re: UK State Pension and US tax return

Originally Posted by ohiocalling
OK, not an expert but having read the US/UK treaty some time ago from memory it implies and United States that UK State pension is treated the same as USA Social Security. Since US Social Security is only taxed upto 85% of the amount you recieve at the highest level. If UK State pension is not included in line 6a with USA how is it calculated at a max of 85% in TurboTax and other apps.

This also removes problem of being taxed in states that dont tax Social Security.

WEP does not effect me as my USA benefits are based on my deceased wife's benefits funded by her.

Your thoughts please.

The treaty states the following in Article 17:
the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the first-mentioned State.
Since OAP is 100% taxed in the UK then it is also taxed at 100% in the US for a US resident.

For a UK resident receiving US SS then 85% or less is taxable in the UK by HMRC so you get at least 15% tax free.

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Old Mar 2nd 2024, 1:43 am
  #34  
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Default Re: UK State Pension and US tax return

Originally Posted by ohiocalling
OK, not an expert but having read the US/UK treaty some time ago from memory it implies and United States that UK State pension is treated the same as USA Social Security. Since US Social Security is only taxed upto 85% of the amount you recieve at the highest level. If UK State pension is not included in line 6a with USA how is it calculated at a max of 85% in TurboTax and other apps.

This also removes problem of being taxed in states that dont tax Social Security.

WEP does not effect me as my USA benefits are based on my deceased wife's benefits funded by her.

Your thoughts please.

The treaty states the following in Article 17:
the amount of any such pension or remuneration paid from a pension scheme established in the other Contracting State that would be exempt from taxation in that other State if the beneficial owner were a resident thereof shall be exempt from taxation in the first-mentioned State.
Since OAP is 100% taxed in the UK then it is also taxed at 100% in the US for a US resident.

For a UK resident receiving US SS then 85% or less is taxable in the UK by HMRC so you get at least 15% tax free. (And it is not taxed at all by the IRS)


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Old Mar 2nd 2024, 5:38 am
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Default Re: UK State Pension and US tax return

OK, I see the logic accept that usually the lowest numbers apply. Also if more than 85% is taxed its not being treated the same as USA SS. Also how does it not fall under State general income for their taxation?
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Old Mar 2nd 2024, 5:47 am
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Default Re: UK State Pension and US tax return

Originally Posted by Glasgow Girl
Yes, taxed in all states, it is income after all.
You are correct, but in California and many other states SS is not counted as income and is not taxed at all. That's probably the reason for the question about whether the UK state pension is treated the same way as SS in the various states. Unfortunately it is not - it is ordinary income.

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Old Mar 2nd 2024, 3:36 pm
  #37  
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Default Re: UK State Pension and US tax return

The State of Ohio where I live does have a long standing policy of honoring international federal tax treaties.
So it looks like UK social Security State Pension fits better in 6a? That way no State tax will be levied. For TurboTax etc the two should be lumped together as the treaty says they xhould be treated identically.?
..
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Old Mar 2nd 2024, 5:08 pm
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Default Re: UK State Pension and US tax return

Originally Posted by ohiocalling
So it looks like UK social Security State Pension fits better in 6a?
..
6a is on the Federal 1040, and that's specifically for SS income. By Social Security, it means just USA SS pension in order to figure out the taxable proportion of that specific income. You cannot lump your UK state pension on that line.
Now, as for what Ohio does with SS income you need to refer to its tax forms. If SS is all tax free in Ohio that does not necessarily mean 'foreign' state pensions are also tax free. The tax treaty does not provide for tax relief of UK state pensions in the USA - it is fully taxed at the federal level because it is also fully taxed if you live in the UK and receive it there (if it were tax free in the UK it would quality as tax free in the US under the treaty).
So even if Ohio honors the federal tax treaty, your UK state pension is not tax free under those rules. It would only be tax free at the state level if Ohio has its own clause treating foreign state pensions the same as SS, and then only if SS is tax free in Ohio. My guess is that foreign state pensions are not given special treatment in your state.
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Old Mar 2nd 2024, 5:19 pm
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Default Re: UK State Pension and US tax return

Originally Posted by Pierre_Tete
6a is on the Federal 1040, and that's specifically for SS income. By Social Security, it means just USA SS pension in order to figure out the taxable proportion of that specific income. You cannot lump your UK state pension on that line.
Where in the instructions to the 1040 does it define what SS is. The instruction is written assuming SS is only sourced from the SSA, but it doesn't define what SS is.
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Old Mar 2nd 2024, 7:16 pm
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Default Re: UK State Pension and US tax return

Originally Posted by lansbury
Where in the instructions to the 1040 does it define what SS is. The instruction is written assuming SS is only sourced from the SSA, but it doesn't define what SS is.
on page 23 it states that foreign pensions and annuities should be reported on line 5. (If you don’t receive a 1099-R there is a substitute form available)

on page 30, the instructions headed “Social Security Benefits” line 6, it does not say specifically say “US” Social Security but it says you will have received SSA-1099 and describes which boxes to copy over to the specific boxes on line 6 on the 1040 and also directs you to the instructions on how to calculate how much of it is taxable. I don’t believe there is a substitute form available for SSA-1099 like there is for the 1099-R and W-2

Given that the IRS gets a copy of the SSA-1099 I would think you are extremely likely to have the return rejected if the figures you enter on line 6 don’t match up with the figures on the SSA-1099

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
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Old Mar 3rd 2024, 2:20 am
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Default Re: UK State Pension and US tax return

[QUOTE=durham_lad;13243207]on page 23 it states that foreign pensions and annuities should be reported on line 5. (If you don’t receive a 1099-R there is a substitute form available)
/QUOTE]
It does say that and I used to do it that way, but since lines 2 thru 6 have taxable and non-taxable parts, those lines are assuming you have 1099 forms to show the taxable amount. Foreign pensions probably don't supply a 1099-R. If you are doing a 1040 manually you can enter your foreign pensions on line 5 but if you use something like TurboTax it will force you to do a substitute 1099-R which is a nuisance if there wasn't one in the first place. I report foreign pensions as 'other income' on Schedule 1 which does not require substitute 1099's (it ends up on line 8 of the 1040). And since those pensions are fully taxable it all adds up correctly.
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Old Mar 3rd 2024, 3:08 am
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Default Re: UK State Pension and US tax return

[QUOTE=Pierre_Tete;13243218]
Originally Posted by durham_lad
on page 23 it states that foreign pensions and annuities should be reported on line 5. (If you don’t receive a 1099-R there is a substitute form available)
It does say that and I used to do it that way, but since lines 2 thru 6 have taxable and non-taxable parts, those lines are assuming you have 1099 forms to show the taxable amount. Foreign pensions probably don't supply a 1099-R. If you are doing a 1040 manually you can enter your foreign pensions on line 5 but if you use something like TurboTax it will force you to do a substitute 1099-R which is a nuisance if there wasn't one in the first place. I report foreign pensions as 'other income' on Schedule 1 which does not require substitute 1099's (it ends up on line 8 of the 1040). And since those pensions are fully taxable it all adds up correctly.
I agree that it is easier, and the IRS won’t object, to putting foreign pensions as other income. TT is also happy to let you put the foreign pension as other income. The main point I am making above is not to put any foreign equivalent to the SS State pension on line 6 which is reserved for SS with its special tax treatment. You can put the OAP on line 5 or as other income.
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Old Mar 3rd 2024, 3:10 am
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Default Re: UK State Pension and US tax return

Originally Posted by Pierre_Tete
It does say that and I used to do it that way, but since lines 2 thru 6 have taxable and non-taxable parts, those lines are assuming you have 1099 forms to show the taxable amount. Foreign pensions probably don't supply a 1099-R. If you are doing a 1040 manually you can enter your foreign pensions on line 5 but if you use something like TurboTax it will force you to do a substitute 1099-R which is a nuisance if there wasn't one in the first place. I report foreign pensions as 'other income' on Schedule 1 which does not require substitute 1099's (it ends up on line 8 of the 1040). And since those pensions are fully taxable it all adds up correctly.
I agree that it is easier, and the IRS won’t object, to putting foreign pensions as other income. TT is also happy to let you put the foreign pension as other income. The main point I am making above is not to put any foreign equivalent to the SS State pension on line 6 which is reserved for SS with its special tax treatment. You can put the OAP on line 5 or as other income.
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Old Mar 3rd 2024, 4:16 am
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Default Re: UK State Pension and US tax return

OK, So the concensus is that UK State pension goes on line 5. This way I will still get Ohio State deductions. I then fill on form 4852.

However: If using TT I need to fill in 1099 substitute form.
My only concern is if I file through TT where do intially enter UK State pension and my Personal Pension.

Thanks
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Old Mar 3rd 2024, 6:55 am
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Default Re: UK State Pension and US tax return

Originally Posted by durham_lad
on page 23 it states that foreign pensions and annuities should be reported on line 5. (If you don’t receive a 1099-R there is a substitute form available)

on page 30, the instructions headed “Social Security Benefits” line 6, it does not say specifically say “US” Social Security but it says you will have received SSA-1099 and describes which boxes to copy over to the specific boxes on line 6 on the 1040 and also directs you to the instructions on how to calculate how much of it is taxable. I don’t believe there is a substitute form available for SSA-1099 like there is for the 1099-R and W-2

Given that the IRS gets a copy of the SSA-1099 I would think you are extremely likely to have the return rejected if the figures you enter on line 6 don’t match up with the figures on the SSA-1099

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
My interest in this is solely State based in that Oregon does not tax SS. At present I report the UK State pension as "Other Income".

But for the sake of filling my less productive time, I did start to try and find where SS is defined. The best I could fine is it is reported on SSA-1099 as you say. But is UK State pension not really social security. It is not reported as a foreign account or pension on FBAR etc, and is similar to US SS. Indeed in a discussion with Oregon Department of Revenue they grudgingly conceded I had a point, but for their systems to exempt it from tax it had to be on line 6 on the Federal 1040. The system is set up with no thought to anything not sourced from within the US. So SS only comes from the SSA because they issue the SSA-1099.

Not an argument that there is any chance of winning, but poking the bear fills some idle time.
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