@Richard67 ,
(a) When you receive the monies from UK pension ( taking a lump sum ), you recognize that amount in the US tax year when you receive it. You report it just like if you were liquidating a US pension fund ( kind of ) -- you report the total received and your basis ( your contribution total )
(b) For handling the taxes paid to UK there are a few options ---{1.} you report the initial amount paid ( assuming that you pay excess before final settlement ) --- show your gross pension as foreign income, taxes as foreign taxes paid and get foreign tax credit ( note that this is limited by ratio of total foreign income to total world income), generally you will not get 100% credit; Then when you get your UK taxes finalized, you file an amended return to reconcile the difference in foreign taxes; {2.} you recognize the Gross income from liquidating pension fund as in {1} above, ignore the foreign taxes and when everything is settled then file an amended return to claim foreign tax credit; {3.} you delay your US filing till ( generally not past Oct 15th ) the UK taxes are settled and then file thus avoiding need for amending filed return. {4} this last option while not quite right , is to recognize only the final amount received i.e. Gross less taxes paid ---- this is attractive only because this does away with a whole bunch of paperwork and if the difference in the final tax liability to IRS is small , say under $100 ---- depends on tax liability less foreign tax credit -- then IRS will not bother. But ,as I said , this requires very careful work through to make sure that there is minimal disadvantage to the IRS and the argument for this is that paperwork reduction / simplification / and very small or nil cost to the IRS.
Any adjustment to recognized foreign tax or to the net amount is taxable income and must be recognized.
Does all of this make sense ?
Is there more I can do for you ?
pk
