GeoffreyG
New Member

Deductions & credits

There are some good existing discussions on this very topic (foreign pension income, that is), on a few of the other TurboTax AnswerXchange threads.  Here are some of those links, so that you can read them for yourself:

https://ttlc.intuit.com/questions/3175138

https://ttlc.intuit.com/questions/3642520


After doing some additional research on this subject, I essentially agree with those answers, writing as a CPA.  You can input a foreign pension into TurboTax (and thus report it on a US tax return) in one of two different ways.

One is to enter the foreign pension on Form 1040, Line 21.  You can do that mechanically in TurboTax through the "other income" interview of the program (i.e., through the pathway Federal Taxes -> Wages & Income -> Less Common Income).  If you do that, I might respectfully suggest shortening the description you input for Line 21, so that the wording will all fit on Line 21 and be readable to the IRS.  You could try something simple and straightforward, such as "Swedish Social Security" for example.

Two, a US taxpayer with a foreign pension amount can alternatively create a "substitute" Form 1099-R.  This will have the same practical effect as reporting the income on Form 1040, Line 21 (i.e., the tax is just the same), but it gives the IRS more detail, and allows the taxpayer to explain their foreign pension in somewhat greater depth.

If you choose this way, then you fill out Form 4852 (substitute 1099-R statement).  This form is available in TurboTax, and can be easily added to a tax return by first beginning a normal 1099-R entry, and then answering the program interview that you need to prepare a "substitute" 1099-R.  However, again, the end tax result is still the same.

However, if your spouse's foreign Social Security benefits are non-taxable by treaty, then you can simply fill out Form 4852, include the full gross distribution amount (in US dollars) of the benefits received in Box 8a, but then in Box 8b you would enter $0.  Normally, a separate tax treaty benefit claim needs to be included with your tax return (by filing Form 8833) to take such a treaty-based tax position.  However, where the excluded foreign income is simply a result of pension or foreign social security, then Form 8833 is not required, per the IRS.  Please see the section titled "Exceptions" at the following IRS.gov webpage for confirmation of this fact:  https://www.irs.gov/individuals/international-taxpayers/claiming-tax-treaty-benefits

In short, this provides the taxpayer with a neat and easy way to "report" (or "disclose") foreign social security income without having to also file Form 8833 (which is not included in TurboTax).

Thus, the second option (of preparing a "substitute" Form 4852, rather than a direct entry on Form 1040, Line 21, may be more appropriate if claiming a tax treaty benefit with Sweden).  Excluding the foreign pension income from your federal tax return will also, and simultaneously, exclude it from taxation by the state of Hawaii.

Please note also that this answer does not address any Swedish tax issues, such as actual taxes owed to Sweden on these benefits, or on any tax return filing obligations there.  You are therefore encouraged to research these matters for yourself.

Thank you again for asking this important question.

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