UK State Pension & IRS

[Stinkerpotsam 6]

If this is the wrong section of the forms please move.

 

Quick question for anyone who has already passed this milestone. My Mister reached retirement age and filed for us UK State Pension and received his first monthly pay this week. I'm trying to research to see if we should be setting aside $$ for year end US tax purposes, OR, will this not be taxed?  I was hoping to see how this is working for others before paying a CPA to answer me.

 

 

 

 

[TBoneTX 43,666]

Thread is moved from the "Moving to the US" forum (an OK choice) to the "Tax & Finances" forum.

If adequate replies aren't forthcoming there, we can try a move to the UK regional forum.   

[OldUser 5,350]

I'm not a tax expert, but he will have to pay taxes in the US:

 

https://www.gov.uk/tax-on-pension/tax-when-you-live-abroad

 

He generally wouldn't be double taxed if he isn't a resident of the UK. E.g. he should not need to file taxes in the UK for the same pension he receives.

 

There's definitely a lot of nuance we, regular VJ users cannot answer. I think the best course of action is speaking to somebody specializing in taxation (not just regular CPA in the US). There's even companies built around this problem targeting British Expats.

[EatBulaga 269]

42 minutes ago, Stinkerpotsam said:

If this is the wrong section of the forms please move.

 

Quick question for anyone who has already passed this milestone. My Mister reached retirement age and filed for us UK State Pension and received his first monthly pay this week. I'm trying to research to see if we should be setting aside $$ for year end US tax purposes, OR, will this not be taxed?  I was hoping to see how this is working for others before paying a CPA to answer me.

According to your Timeline, I assume the UK pensioner is a US naturalized citizen?

Where is the UK pensioner residing?

 

All US citizens are required by law to file for the IRS tax return every year regardless.

Depending on where you reside, in the US or abroad, will determine how you can claim the pension income.

 

If living abroad (pass the physical presence abroad definition), then you can file for foreign income exclusion within the maximum limit.

 

If living in the US, check with a CPA if UK pension is already taxed by the UK and how to file with the IRS to avoid double taxation.

 

In addition, if the UK pension is distributed to a foreign bank account, and the foreign account balance exceeds 10,000 US at any time, don't forget to file for the FINCEN FBAR.

[OldUser 5,350]

51 minutes ago, EatBulaga said:

If living in the US, check with a CPA if UK pension is already taxed by the UK and how to file with the IRS to avoid double taxation.

 

In this case he won't be taxed by UK as he isn't a tax resident, in my understanding.

[JeanneAdil 6,328]

https://www.irs.gov/businesses/the-taxation-of-foreign-pension-and-annuity-distributions

 

US has tax treaty with UK

 

As a general rule, the pension/annuity article of most income tax treaties allows for exclusive taxation of pensions or annuities under the domestic law of the resident country (as determined by the residence article). This is generally true unless a treaty provision specifically amends that treatment. For example, some treaties provide that the country of residence may not tax amounts that would not have been taxable by the other country if you were a resident of that country. There also may be special rules for lump-sum distributions.

With respect to government pensions/public pensions/annuities (typically covered under the Government Service article) or social security payments, generally the payments are only taxable by the country in which the government is making the payments. Note that what constitutes a government pension or public pension is dictated by the treaty, and the rule may apply narrowly.

 

Read under

Tax Treaty Residency Issues

[Conchas Chinas 153]

As others have stated, he will be taxed by the country in which he resides, US. However your spouse will initially be taxed by the HMRC on his UK pension payment. He will then need to complete form 2848 and send that to the IRS, per the example and instructions within the >>>> link <<<<

 

Per the notes, you cannot send in this form until he starts receiving payments.

 

 

Edited Wednesday at 01:16 PM by Conchas Chinas

[Stinkerpotsam 6]

Thanks so much for the info everyone! (And Mod for moving it, I didn't even see this section.)

 

He is now a US citizen for a few years and we live in MO full time to answer a few of you. 

 

I will definitely review all this info and again, thanks so much. You never really outgrow this site do you?

 

[TBoneTX 43,666]

On 7/3/2024 at 9:39 AM, Stinkerpotsam said:

Thanks so much for the info everyone! (And Mod for moving it, I didn't even see this section.)

Our VJ members are wonderful and are a wealth of information.

This forum is newer than some of the others.   

On 7/3/2024 at 9:39 AM, Stinkerpotsam said:

You never really outgrow this site do you?

Never -- and it's a pleasure to see someone from approximately my era, again.   

[Stinkerpotsam 6]

Agree! 🤗