I have been reading almost all the threads (from 2018) on how to report foreign pension (mine is from Japan, all taxable, with no cost basis involved). It was a bit of a challenge reading through all the threads up to the present 2023. So many varying opinions that I didn't know who and what is correct.
So here is my synopsis on 3 approaches so far to date (Mar 2023):
Approach #1:
Use the substitute 1099-R form (aka Form 4852). The challenge is on the Payer TIN entry it seems and I correctly think that inputting a bogus TIN is not the right approach and could possibly trigger some kind of exception. I also think using the 1099-R, main or substitute, approach assumes distribution is from a US source, of which foreign income is not. This is evident by the way it asks for information that is a bit US-centric.
Approach #2:
Using the foreign earned income through the "Less Common Income" section > Foreign Earned Income & Exclusion > Did You Make Any Money Outside the United States? Yes > What Form(s) Was Foreign Income Reported On? > Enter Your Foreign Earned Income > then enter your employer's information.
This approach does not make sense to me. First off, pensions or retirement distributions are not considered as earned income. Secondly, it asks for an employer name which does not exist as it's not earned income from work done. I don't think this is right approach either.
Approach #3:
Enter as Miscellaneous Income > Other Income. Enter foreign pension amount and detailed description of the source(s) and country. This is what I think as my best approach, relatively speaking. Since I believe that foreign pension is also taxed in my state anyway, and without a cost basis on my end, this is probably my best approach. Not perfect, but relatively easier and a better approach for me in my specific situation.
Let me know if my analysis and approach makes sense. I am open to any further feedback, comments and opinions if there is anything major that I might have overlooked.
Thanks,
Bernard
