This is incorrect. On a substitute 1099-R, the tax withheld is converted to $US and treated as any other withheld tax. This will not be the same amount as the foreign tax credit. The foreign tax credit can be substantially less since its calculation is based on your total income. The final US tax rate on your total income is what is applied to the foreign pension as tax due and it is that amount that the IRS gives as a credit. The IRS does allow any balance of foreign taxes paid that were disallowed as a credit in a current year to be carried back one year or carried forward for up to ten years. This appears to be of little value since in the case of pensions, the foreign income is recurring causing an excess foreign tax credit balance which will never be used. I suspect that any foreign pension income reported on substitute 1099-Rs can be rejected by the IRS.
