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UK state pension and USA social security

UK state pension and USA social security

Old Jul 4th 2012, 7:21 pm
  #16  
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Default Re: UK state pension and USA social security

Hello all,

I a British citizen living and working as a permanent resident in the US, and have been for the last four years. I am 28, and only worked in the UK (with some gaps) from age 18 until I moved at age 24. I have not been paying into my UK pension since I left, and have been taxed for US social security etc. Obviously I have not received any pension payments either.

My question is, does the UK pension need to be reported on a US tax return before being paid to the recipient, and does the UK pension accrue interest which would be reportable before actually being paid out?

Thanks,

Jack
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Old Jul 4th 2012, 7:56 pm
  #17  
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Default Re: UK state pension and USA social security

Originally Posted by JackF View Post
Hello all,

I a British citizen living and working as a permanent resident in the US, and have been for the last four years. I am 28, and only worked in the UK (with some gaps) from age 18 until I moved at age 24. I have not been paying into my UK pension since I left, and have been taxed for US social security etc. Obviously I have not received any pension payments either.

My question is, does the UK pension need to be reported on a US tax return before being paid to the recipient, and does the UK pension accrue interest which would be reportable before actually being paid out?

Thanks,

Jack
If you mean the UK state pension the answer is no to both questions.

If you are talking about a UK private pension covered under the US/UK tax treaty the answers are also no, although you should declare the pension for treaty purposes.
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Old Jul 5th 2012, 1:22 am
  #18  
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Default Re: UK state pension and USA social security

Ok, good to know, thank you for your reply. It is the UK state pension I am referring to. So the US is essentially ok being unaware of this pension (neither reported or taxed) until such time as HMRC starts actually sending me money?
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Old Jul 5th 2012, 1:48 am
  #19  
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Default Re: UK state pension and USA social security

Originally Posted by JackF View Post
Ok, good to know, thank you for your reply. It is the UK state pension I am referring to. So the US is essentially ok being unaware of this pension (neither reported or taxed) until such time as HMRC starts actually sending me money?
Yes totally. When you start getting the UK state pension, and assuming you are a US resident or US citizen, then you have to include it as income on your 1040. There is some debate as to whether the UK state pension is US taxable if you are a US citizen living in the UK though.
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Old Jul 5th 2012, 2:53 am
  #20  
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Default Re: UK state pension and USA social security

Unless the unforeseable happens, I hope to be a citizen and still resident of the US by that point, so that shouldn't be a bridge I have to cross.
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Old Jul 5th 2012, 2:59 am
  #21  
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Default Re: UK state pension and USA social security

oops, misread your reply. That IS a bridge I will have to cross as US resident and citizen. Boo

Incidentally, is there a nutshell version (or indeed, thread about) what the US tax differences are between being a permanent resident and US citizen?
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Old Jul 5th 2012, 4:10 am
  #22  
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Default Re: UK state pension and USA social security

Originally Posted by JackF View Post
oops, misread your reply. That IS a bridge I will have to cross as US resident and citizen. Boo

Incidentally, is there a nutshell version (or indeed, thread about) what the US tax differences are between being a permanent resident and US citizen?
There aren't any.

Not sure I understand your first comment, as a US citizen and resident you will be taxed in the US on any UK state pension.....it will be free of UK tax.
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Old Jul 5th 2012, 5:10 am
  #23  
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Default Re: UK state pension and USA social security

Got it, thank you I need only think about the Uk pension in thirty five years or so, when I actually start benefiting from it. As to the differences between citizenship and residency for tax purposes, I saw other posts that indicated this would be a big deal and that the choice to become a citizen carried a lot of 'implications', aside from the personal ones.
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Old Jul 5th 2012, 1:02 pm
  #24  
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Default Re: UK state pension and USA social security

Originally Posted by JackF View Post
Got it, thank you I need only think about the Uk pension in thirty five years or so, when I actually start benefiting from it. As to the differences between citizenship and residency for tax purposes, I saw other posts that indicated this would be a big deal and that the choice to become a citizen carried a lot of 'implications', aside from the personal ones.
Becoming a US citizen has a lot of tax implications if you ever move outside the US as the US taxes on citizenship as well as residency. If you are just a permanent resident, when you leave the US, you can leave any requirement to file US taxes behind too, you can't if you are a US citizen.
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Old Jul 5th 2012, 1:16 pm
  #25  
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
Becoming a US citizen has a lot of tax implications if you ever move outside the US as the US taxes on citizenship as well as residency. If you are just a permanent resident, when you leave the US, you can leave any requirement to file US taxes behind too, you can't if you are a US citizen.
I thought there was a requirement for GC holders to file for a particular number of years after leaving the US ... or maybe it was something else I just dreamt about.
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Old Jul 5th 2012, 2:54 pm
  #26  
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Default Re: UK state pension and USA social security

Originally Posted by dunroving View Post
I thought there was a requirement for GC holders to file for a particular number of years after leaving the US ... or maybe it was something else I just dreamt about.
Under the legislation that came in in 2008 if you expatriate as US citizen or GC holder you will have to pay an exit tax if your average net taxable income for the last 5 years was over $139k adjusted for inflation or your net worth is more than $2M or you're not up to date with your tax filing for the last 5 years. You have to file an 8854 expatriation form, but after that an ex GC holder will be a NRA and I don't think that the previous requirement to file for 10 years after expatriation still holds. If you continue to have US based accounts you'd obviously have to file with the IRS for those.

http://www.irs.gov/pub/irs-pdf/p4588.pdf

Last edited by nun; Jul 5th 2012 at 3:13 pm.
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Old Jul 5th 2012, 3:11 pm
  #27  
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Default Re: UK state pension and USA social security

Originally Posted by nun View Post
Under the legislation that came in in 2008 if you expatriate as US citizen or GC holder you will have to pay an exit tax if your average net taxable income for the last 5 years was over $139k adjusted for inflation or your net worth is more than $2M or you're not up to date with your tax filing for the last 5 years. You have to file an 8854 expatriation form, but after that an ex GC holder will be a NRA and I'm not sure that the previous requirement to file for 10 years after expatriation still holds.
Heaven forbid that tax rules would be simple and stay the same ... although this new arrangement looks better for most people.
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Old Jan 28th 2013, 9:27 pm
  #28  
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Default Re: UK state pension and USA social security

From what I read the WEP reduction in US social security only applys if you did NOT pay into the social security system of the foreign country where you earned wages.
So, if I worked in the UK for a number of years and am entitled to a UK pension, and I paid 25 years into the USA social security system then I can receive UK Pension (Not Taxed) AND US social security without losing money due to the WEP program - Am I right??
Of course it has to be reported to the IRS I assume.
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Old Jan 29th 2013, 2:40 am
  #29  
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Default Re: UK state pension and USA social security

Originally Posted by Foamy View Post
From what I read the WEP reduction in US social security only applys if you did NOT pay into the social security system of the foreign country where you earned wages.
So, if I worked in the UK for a number of years and am entitled to a UK pension, and I paid 25 years into the USA social security system then I can receive UK Pension (Not Taxed) AND US social security without losing money due to the WEP program - Am I right??
Of course it has to be reported to the IRS I assume.
If you work in US (earning a substantial amount) paying into SS for 30 years or more you don't lose any of the pension due to the WEP, under 30 years and they will reduce your US pension as you are receiving UK pension and any other pensions you might have.
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Old Jan 29th 2013, 9:45 am
  #30  
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Default Re: UK state pension and USA social security

Originally Posted by Foamy View Post
From what I read the WEP reduction in US social security only applys if you did NOT pay into the social security system of the foreign country where you earned wages.
So, if I worked in the UK for a number of years and am entitled to a UK pension, and I paid 25 years into the USA social security system then I can receive UK Pension (Not Taxed) AND US social security without losing money due to the WEP program - Am I right??
Of course it has to be reported to the IRS I assume.
WEP applies to pensions received from salaries that did not contribute to US SS.
So even though a person may pay into the US SS system through US employment it does not excuse that person from WEP on the non-contributing pension - unless the 30 year rule applies as Mummy in Foothills rightly says.
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