US taxation on UK pension
Dec 13th 2013, 2:23 pm
#31
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Joined: Aug 2004
Posts: 4,754
Re: US taxation on UK pension
3) Interpretation of the tax code.
A prime example being whether a US citizen who is also UK resident should include UK state pension payments on their 1040. The spirit of the treaty, the technical explanation and many IRS agents would say no......the treaty, certain professional gurus, and pedantic amateurs would say yes.
Last edited by nun; Dec 13th 2013 at 2:30 pm.
Jan 1st 2014, 5:05 pm
#32
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Joined: Nov 2010
Posts: 46
Re: US taxation on UK pension
In your circumstances your UK state pension is not UK taxable, but it is taxable in the US.
File form US-Individual2002
http://www.hmrc.gov.uk/cnr/us_individual_2002.pdf
with the IRS and they will send it to HMRC to make sure no UK tax is withheld from your pension.
When you get your UK pension you must enter it on line 16a of your 1040 as the IRS treats it like an annuity. It is not considered as SS. You can also do the maths to calculate any part of the payment that is return of already taxed principal and enter the remaining taxable amount on 16b. This could be significant for those who have made many voluntary NI payments.
File form US-Individual2002
http://www.hmrc.gov.uk/cnr/us_individual_2002.pdf
with the IRS and they will send it to HMRC to make sure no UK tax is withheld from your pension.
When you get your UK pension you must enter it on line 16a of your 1040 as the IRS treats it like an annuity. It is not considered as SS. You can also do the maths to calculate any part of the payment that is return of already taxed principal and enter the remaining taxable amount on 16b. This could be significant for those who have made many voluntary NI payments.
Jan 1st 2014, 10:00 pm
#34
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Joined: Aug 2004
Posts: 4,754
Re: US taxation on UK pension
1) The pension amount due to voluntary NI is not included in any WEP calculations.
2) Voluntary NI is paid with money that has already been taxed. As the US treats the UK state pension an annuity you don't have to pay tax again on the part of that annuity payment that is a repayment of already taxed principal. The IRS has worksheets to help you with that calculation.
Jan 14th 2014, 4:17 pm
#35
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Joined: May 2012
Location: Raleigh, North Carolina
Posts: 46
Re: US taxation on UK pension
Neither of us gets our US SS yet, but my wife started receiving her British State Pension about a year ago, it'll be a few years before I get mine.
First off, as you mentioned, the UK authorities do not tax your British pension, since from the application that you sent in to start receiving the pension, they know you are a US resident and so are not subject to UK income tax on the pension.
Next, it is taxable in the US. You declare the total amount in line 16a of the 1040, and put the same amount in line 16b. We also filed a form 4852. Probably not strictly necessary, but gave us a good paper trail for future reference.
This is my two cents, others will have further insights ..
First off, as you mentioned, the UK authorities do not tax your British pension, since from the application that you sent in to start receiving the pension, they know you are a US resident and so are not subject to UK income tax on the pension.
Next, it is taxable in the US. You declare the total amount in line 16a of the 1040, and put the same amount in line 16b. We also filed a form 4852. Probably not strictly necessary, but gave us a good paper trail for future reference.
This is my two cents, others will have further insights ..
Jan 14th 2014, 5:38 pm
#36
Lost in BE Cyberspace
Joined: Jun 2008
Location: San Francisco Bay Area
Posts: 10,678
Re: US taxation on UK pension
http://www.irs.gov/taxtopics/tc352.html
Last edited by Michael; Jan 14th 2014 at 5:44 pm.
Jan 14th 2014, 5:50 pm
#37
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Joined: May 2012
Location: Raleigh, North Carolina
Posts: 46
Re: US taxation on UK pension
Form 1040 is acceptable in all cases for residents where as form 1040A and 1040EZ have limitations.
http://www.irs.gov/taxtopics/tc352.html
http://www.irs.gov/taxtopics/tc352.html
