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US Tax Question

US Tax Question

Old Mar 26th 2019, 3:26 pm
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Default Re: US Tax Question

Originally Posted by theOAP View Post

On Schedule B, Part I, in the future, list all accounts both foreign and domestic. If there was no interest, state $0 in the 'Amount' column. Then complete Part III.

Again, all IMO.

As for the UK pensions, provided they are currently dormant (no contributions), then no reporting is required to the IRS other than 8938 (if you meet the threshold) and form 3250 if the pension is a grantor trust or you wish to take a specific position in relation to the treaty. Defined Contribution pensions are included on FBAR, Defined Benefit pensions are not included. The UK State pension is not included.
Thank you for all your help it has been greatly appreciated you know a great deal about US/UK taxes!

With my UK employer-based pension plan the value of it can slightly change when I get a statement through the post does this affect taxes? I was auto-enrolled in this plan, if a small % of my check automatically went into this pension previously (before moving) would this be noted anywhere on taxes or am I looking to much into this?
  1. Would a 3250 not be needed for this type of plan? I understand I can't do anything with the small amount of funds until I retire and withdraw then it will be noted on taxes .
  2. Am I correct that the 8398 is required if you have over $50k in foreign account/assets OR $100k if you are married.​​​​​​
  3. Additionally, would I include the pension on schedule B each year in addition to the bank account or my UK bank account only
  4. I know you mentioned some type of pensions are not required for the Fbar, I did include my pension was this required for the type I have? (Not familiar with the different types of pensions)

Last edited by dee98; Mar 26th 2019 at 5:18 pm.
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Old Mar 26th 2019, 6:42 pm
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Default Re: US Tax Question

Originally Posted by dee98 View Post
With my UK employer-based pension plan the value of it can slightly change when I get a statement through the post does this affect taxes??
For the books, and no other reason than general knowledge, a foreign pension is non-qualified deferred compensation. The non-qualified bit is a killer.

IRS reporting and foreign pensions are like trying to mix oil and water. If perfection is required, it's best to use a qualified, highly competent, US/UK tax advisor. The changing value is due to the investment side resulting in growth of the pension funds. Yes, it can be a tax reporting event, but, no, due to unfathomable IRS regulations and in conjunction with the relevant treaty, most don't bother. Cook_County (a frequent poster here) will know all the ins and outs of reporting growth in the pension. I don't.

Originally Posted by dee98 View Post
I was auto-enrolled in this plan, if a small % of my check automatically went into this pension previously (before moving) would this be noted anywhere on taxes or am I looking to much into this?
Any contributions made before becoming a US Person generally are not a part of year to year IRS reporting.

Originally Posted by dee98 View Post
Would a 3250 not be needed for this type of plan? I understand I can't do anything with the small amount of funds until I retire and withdraw then it will be noted on taxes .
Are contributions still being made by you or the employer to the pension. I would guess they are not. If they were, and your contributions exceeded the company's contributions, I believe a 3250 would be required (grantor trust). There may be other reasons to file in conjunction to a treaty position, but that is above my knowledge level. Most, rightly or wrongly, allow an inactive plan to remain dormant with no reporting (other than FBAR/8938) until the actual drawdown phase.

Originally Posted by dee98 View Post
Am I correct that the 8398 8938 is required if you have over $50k in foreign account/assets OR $100k if you are married.​​​​​​
If you are resident in the US, the threshold for a single (S, MFS) taxpayer is $50,000 on the last day of the tax year, or $75,000 at any time during the year. For a married taxpayer filing MFJ, the amounts are $100,000 on the last day of the tax year, or $150,000 at any time during the year. NOTE: that is the aggregate value of all foreign assets/accounts, at their maximum amounts during the year, when combined.

Originally Posted by dee98 View Post
Additionally, would I include the pension on schedule B each year in addition to the bank account or my UK bank account only
No pension information is needed for schedule B during the dormant phase. If the pension pays dividends, then Part II may come into play, but I have no knowledge level on this.

Originally Posted by dee98 View Post
I know you mentioned some type of pensions are not required for the Fbar, I did include my pension was this required for the type I have? (Not familiar with the different types of pensions)
What type of pension do you have? Company pensions can be Defined Benefit, Defined Contribution, auto-enrolled Personal Pensions (and there are now many more auto-enrolled types), plus others. Generally, all pension plans are reported on an FBAR with the exception of the Defined Benefit pension. ALL foreign pensions plans are reported on 8938, including a Defined Benefit plan.

As a side note, this year is the first time I have seen the words 'foreign' and 'pension' side by side in the general instructions for the 1040 form itself. Yes, it's been on 8938 and others, but never any basic instructions in Pub. 17 or 1040i, including which line to use to declare the foreign pensions - until this year. Who knows what additional information may become available next year!
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Old Mar 26th 2019, 7:01 pm
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Default Re: US Tax Question

Originally Posted by theOAP View Post
For the books, and no other reason than general knowledge, a foreign pension is non-qualified deferred compensation. The non-qualified bit is a killer.

IRS reporting and foreign pensions are like trying to mix oil and water. If perfection is required, it's best to use a qualified, highly competent, US/UK tax advisor. The changing value is due to the investment side resulting in growth of the pension funds. Yes, it can be a tax reporting event, but, no, due to unfathomable IRS regulations and in conjunction with the relevant treaty, most don't bother. Cook_County (a frequent poster here) will know all the ins and outs of reporting growth in the pension. I don't.


Any contributions made before becoming a US Person generally are not a part of year to year IRS reporting.


Are contributions still being made by you or the employer to the pension. I would guess they are not. If they were, and your contributions exceeded the company's contributions, I believe a 3250 would be required (grantor trust). There may be other reasons to file in conjunction to a treaty position, but that is above my knowledge level. Most, rightly or wrongly, allow an inactive plan to remain dormant with no reporting (other than FBAR/8938) until the actual drawdown phase.


If you are resident in the US, the threshold for a single (S, MFS) taxpayer is $50,000 on the last day of the tax year, or $75,000 at any time during the year. For a married taxpayer filing MFJ, the amounts are $100,000 on the last day of the tax year, or $150,000 at any time during the year. NOTE: that is the aggregate value of all foreign assets/accounts, at their maximum amounts during the year, when combined.


No pension information is needed for schedule B during the dormant phase. If the pension pays dividends, then Part II may come into play, but I have no knowledge level on this.


What type of pension do you have? Company pensions can be Defined Benefit, Defined Contribution, auto-enrolled Personal Pensions (and there are now many more auto-enrolled types), plus others. Generally, all pension plans are reported on an FBAR with the exception of the Defined Benefit pension. ALL foreign pensions plans are reported on 8938, including a Defined Benefit plan.

As a side note, this year is the first time I have seen the words 'foreign' and 'pension' side by side in the general instructions for the 1040 form itself. Yes, it's been on 8938 and others, but never any basic instructions in Pub. 17 or 1040i, including which line to use to declare the foreign pensions - until this year. Who knows what additional information may become available next year!
Thank you for the detailed post!

No contributions are being made. I am unsure what type of pension I have, I just know that all employees beer auto-enrolled. I do see on the statement that it has units and price per unit, you are correct regarding the investment pension fund increasing.

Would the pension fund go on a 8938 only if the value was above the $50k or $100k if MFJ? Is this for reporting purposes like a FBAR but it does not get taxed due to the treaty .

Last edited by dee98; Mar 26th 2019 at 8:00 pm.
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Old Mar 26th 2019, 7:31 pm
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Default Re: US Tax Question

per IRS.

Foreign pensions, deferred compensation plans, or foreign 'social security'

Q1. I have an interest in a foreign pension or deferred compensation plan. Do I need to report it on Form 8938?

If you have an interest in a foreign pension or deferred compensation plan, you have to report this interest on Form 8938 if the value of your specified foreign financial assets is greater than the reporting threshold that applies to you.
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Old Mar 26th 2019, 8:43 pm
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Default Re: US Tax Question

Originally Posted by Hotscot View Post
per IRS.

Foreign pensions, deferred compensation plans, or foreign 'social security'

Q1. I have an interest in a foreign pension or deferred compensation plan. Do I need to report it on Form 8938?

If you have an interest in a foreign pension or deferred compensation plan, you have to report this interest on Form 8938 if the value of your specified foreign financial assets is greater than the reporting threshold that applies to you.
Cheers Hotscot, if I have the threshold numbers correct as long as the pension value is below $50k if filing single or $100k if filing married this would not need to be included, would that be correct?
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Old Mar 26th 2019, 8:53 pm
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Default Re: US Tax Question

Originally Posted by dee98 View Post
Cheers Hotscot, if I have the threshold numbers correct as long as the pension value is below $50k if filing single or $100k if filing married this would not need to be included, would that be correct?

Correct.
As long as it didn't meet the threshold at any time, as can sometimes happen, especially with currency exchange rates being variable.

I'm assuming you haven't started taking anything from the pension?
Sorry, haven't had time to read past posts.
You have no other non-US accounts?

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Old Mar 26th 2019, 9:11 pm
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Default Re: US Tax Question

Originally Posted by Hotscot View Post
Correct.
As long as it didn't meet the threshold at any time, as can sometimes happen, especially with currency exchange rates being variable.

I'm assuming you haven't started taking anything from the pension?
Sorry, haven't had time to read past posts.
You have no other non-US accounts?
Hi Hotscot,

No that's fine, I have not taken anything out from my pension yet as I am not of age to be able to do so. The only other non US account I had was my UK bank account which I put down on my Fbar as I had funds that just went over $10k at one point in the tax year.
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Old Mar 26th 2019, 9:24 pm
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Default Re: US Tax Question

You sound good, and aware.
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Old Mar 26th 2019, 10:27 pm
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Default Re: US Tax Question

Originally Posted by dee98 View Post
The only other non US account I had was my UK bank account which I put down on my Fbar as I had funds that just went over $10k at one point in the tax year.
You may well be under the threshold for filing 8938, but let's word your situation correctly.

If you are filing MFJ, and if you are resident in the US, and if the only foreign assets/accounts are your UK pension and one UK bank account, and if the amount of your pension on 31 Dec. plus the amount of your bank account on 31 Dec. is below $100,000, and if the maximum amount of your pension at anytime during the year plus the maximum amount of your bank account at anytime during the year is below $150,000, you are not required to file 8938.

For the above, if during the year your bank account obtained a maximum amount of $50,000, but by 31 Dec. it was $8,000, and during the year the value of your pension reached $101,000, but on 31 Dec. it had dropped (market crashed) to $39,000, you would be required to file 8938.

For FBAR, if the aggregate (combined) maximum amounts of both your pension and your bank account are over $10,000, you must file the FBAR. From what you have said, you know the value of your pension (and it sounds like an FBAR reportable pension - Defined Benefit pensions have no value until the point of drawdown).
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Old Mar 26th 2019, 10:52 pm
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Default Re: US Tax Question

Originally Posted by theOAP View Post
You may well be under the threshold for filing 8938, but let's word your situation correctly.

If you are filing MFJ, and if you are resident in the US, and if the only foreign assets/accounts are your UK pension and one UK bank account, and if the amount of your pension on 31 Dec. plus the amount of your bank account on 31 Dec. is below $100,000, and if the maximum amount of your pension at anytime during the year plus the maximum amount of your bank account at anytime during the year is below $150,000, you are not required to file 8938.

For the above, if during the year your bank account obtained a maximum amount of $50,000, but by 31 Dec. it was $8,000, and during the year the value of your pension reached $101,000, but on 31 Dec. it had dropped (market crashed) to $39,000, you would be required to file 8938.

For FBAR, if the aggregate (combined) maximum amounts of both your pension and your bank account are over $10,000, you must file the FBAR. From what you have said, you know the value of your pension (and it sounds like an FBAR reportable pension - Defined Benefit pensions have no value until the point of drawdown).
Thank you very much for explaining this with the above examples. I guess going forward when doing US taxes and when to include my UK accounts this would be on schedule B with an interest of 0? and answer part 3 or only complete part 3?. To confirm this would only be my UK bank account and not the pension for schedule B

Last edited by dee98; Mar 26th 2019 at 11:16 pm.
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Old Mar 28th 2019, 10:11 pm
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Default Re: US Tax Question

As an associated question, I made a withdrawal from my private UK Pension in 2018 and moved that to the US. I am over 55 and wanted to hedge against a rapid decline in the pound to dollar exchange rate as the Brexit chaos progressed. This will be reflected in a revised FBAR and 8938, but I understand that it is classed as income by the IRS.. Can anyone confirm where it gets reported - is it just a standard income item as line 7 on Form 1040 ? Thanks
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Old Mar 28th 2019, 10:31 pm
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Default Re: US Tax Question

Originally Posted by reltub View Post
As an associated question, I made a withdrawal from my private UK Pension in 2018 and moved that to the US. I am over 55 and wanted to hedge against a rapid decline in the pound to dollar exchange rate as the Brexit chaos progressed. This will be reflected in a revised FBAR and 8938, but I understand that it is classed as income by the IRS.. Can anyone confirm where it gets reported - is it just a standard income item as line 7 on Form 1040 ? Thanks
The 1040 instructions explain where it is reported on a 1040. It is also 8938 and 1116 reportable. If the plan is a foreign grantor trust you'd also report this payment on your Form 3520. If (unusually) you have basis; you'd want to calculate that percentage so you know how much is US taxable.
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Old Mar 28th 2019, 11:03 pm
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Default Re: US Tax Question

Originally Posted by reltub View Post
As an associated question, I made a withdrawal from my private UK Pension in 2018 and moved that to the US. I am over 55 and wanted to hedge against a rapid decline in the pound to dollar exchange rate as the Brexit chaos progressed. This will be reflected in a revised FBAR and 8938, but I understand that it is classed as income by the IRS.. Can anyone confirm where it gets reported - is it just a standard income item as line 7 on Form 1040 ? Thanks

You were a US tax resident in 2018?
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Old Mar 28th 2019, 11:06 pm
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Default Re: US Tax Question

Yes - US resident throughout 2018
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Old Mar 29th 2019, 10:19 pm
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Default Re: US Tax Question

Cook County - sorry i overlooked this yesterday but thanks for the inout on this. Apparently Mr Trump's simplify thetax return so its the size of a postcard isn't quite ready for primetime yet:-).
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