You have two options to report a foreign pension (including a lump sum payment).
( The end tax result (in terms of United States tax rate and amount assessed) will be identical under both methods).
Option 1 (Best choice) : You can enter the foreign pension income on Form 1040, Line 8 as "other income" or "foreign pension."
- You won't need a Payer ID, state or zip code with this approach.
- The IRS wants the pension reported as income - unless your pension receives special tax treatment, it is perfectly OK to report it as Miscellaneous Income.
- To make entries on Line 8, go to the Other Reportable Income interview, the very last interview in Wages and Income (Federal Taxes tab > Wages & Income > Less Common Income > Miscellaneous Income).
- In TurboTax Online, enter "other reportable income" in the Search Box and then select "Jump to Other Reportable Income".
- If you choose this way, then you won't have to create a substitute Form1099-R, by filing Form 4852 and you won't encounter e-file errors over the Payer ID.
Option 2: Prepare a Substitute Form 1099-R and a Form 4852 to report that foreign pension on your tax return.
- In the Retirement Income interview for Pension Plans (Form 1099-R), check "I need to prepare a substitute Form 1099-R" and follow the instructions in the interview.
To report the amount of foreign taxes that you paid, follow these steps:
- Open up your tax return in Turbotax
- Click pick up where I left off
- Select Federal Taxes at the top of your screen
- Select Deductions and Credits
- Scroll down the page to the section titled Estimates and Other Taxes Paid and click Show More
- Select Start/Revisit to the right of the line Foreign Taxes
- Go through this section and enter the foreign taxes that you paid.
