iceflow

In 2015 I'll start to get a pension from a previous employer. Well hopefully I will provided the pension payer will pay someone living in the US (death to FATCA / FBAR and F everything else).
Anyway, I'm going to contact the pension fund managers soon to start the ball rolling but thought I'd also try and glean some info here before I contact them.
I'm assuming I'll want the pension paid gross, ie: no UK tax taken out. If that is the case, should I pay in advance say 20% to the IRS each month in lieu of tax, I believe you can set up a payments to them....or reduce my US witholdings on my job income so as to try and offset the tax that way? What are the various approaches that folks take when drawing pension payments from the UK?

Thanks in advance

iceflow

That should read 2016, I'm aging myself before my time. Not that it makes much odds

lansbury

On my UK pensions I make quarterly estimated payments to both the IRS and for Oregon State income tax. The IRS payments can be set up online and they take the amounts you specify from a US bank account. It is just a case of working out what the estimated payments need to be.

nun

You should file a "US Individual 2002" and Form 8802. You actually send them to the IRS and they forward them to HMRC. This will make sure your UK pension is paid free of UK tax. You then enter it on line 16 of the 1040.

You should pay quarterly estimate taxes using 1040ES vouchers and inform SSA if the UK pension should be included for WEP calculations.

MidAtlantic

Given that you are also working it would be much more straightforward to increase your withholding with your employer. That's what I do and it works well. Don't forget state taxes also, if applicable.

nun

Agreed

durham_lad

Exactly what I should have done when I started getting my UK pension 8 years ago but I knew nothing. Instead HMRC wrote to me telling that my taxcode was a default max PAYE and wanted to know about my other sources of income. Only then did I discover that I should have done what nun suggests above. It was pretty easy and quick and once the pension company in the UK got the new "0" taxcode from HMRC they refunded the 2 months of PAYE that had been withheld.

As I was working at the time I just increased my withholdings to cover the extra tax I would need to pay on the UK pension.

iceflow

Got it folks, thanks for the responses. I'll follow up accordingly. Thanks

iceflow

Sounds like you have to file form 8802 every year? I was hoping this was a one off process. There is something in the instructions about getting a 3year 8802.

durham_lad

I only filed once. If they start to withhold PAYE then I'll file again.

Sailortobe

Joined British Expat today. If this isn't the right way to ask a question, apologies.

A question about WEP and UK pension. If I qualified for a UK pension BEFORE becoming a US citizen, and then worked and qualified for US Social Security, am I affected by WEP and will my US Social Security be reduced using the WEP formula.

My UK state pension is due to begin in May 2015.

lansbury

If you have less than 30 years of SS contributions, you will be subject to the WEP. If you have a full 30 years contributions, WEP does not apply.

If you claim SS based on your spouses contributions that is still a matter of conjecture if it gets WEP'ed or not. I will find out in few months.

nun

The critical factor will be the nature of the pension. So you need to determine if any of it is earnings related.

Sailortobe

I guess my question would be 'on what basis?' I don't understand why a pension earned BEFORE becoming a US citizen should affect a US pension ie Social Security, earned after becoming a US citizen. My SS is not connected with my spouses income. And the UK pension is based on the 30 years of earnings in the UK.

lansbury

The basis is described in the section "why we use a different formula" here. http://www.ssa.gov/pubs/EN-05-10045.pdf