I have been pulling my hair out over how to report income from a foreign pension and taxes paid on same, to avoid double taxation on the same income. I am a dual citizen, living in the U.S. Most likely, I have also caused plenty of confusion as well, but I am at my wits' end right now.
Several methods have been suggested, but they don't seem to either work or, from my perspective aren't even something that makes sense or are downright questionable. For instance, using a "dummy 1099," which calls for dreaming up information when no 1099R Form is available. Or, claiming a FTC on Form 1116 when reporting the foreign income under "Miscellaneous" for instance. FTC can be claimed only when said income is reported under "Foreign income," I think.
Now, below, see an excerpt from a Tax treaty between the U.S. and my country of birth. This document can be found on the IRS website.
a) pensions and other similar remuneration derived and beneficially owned by a resident
of a Contracting State in consideration of past employment shall be taxable only in that State;
and
b) pensions and other payments under the social security legislation of a Contracting
State and, where that Contracting State is the United States, other public pensions, paid to a
resident of the other Contracting State or a citizen of the United States shall be taxable only in
the first-mentioned State.
Then, there is the Form 8833, which TT does not support, incidentally (see link to it below):
https://www.irs.gov/pub/irs-pdf/f8833.pdf
On page 3 of the above document it states:
Positions for which reporting is waived include, but are not limited to, the following. See Regulations section
301.6114-1(c) for other waivers from reporting.
• That a treaty reduces or modifies the taxation of income derived by an individual from dependent personal
services, pensions, annuities, social security, and other public pensions, as well as income derived by artists,
athletes, students, trainees, or teachers;
• That a Social Security Totalization Agreement or Diplomatic or Consular Agreement reduces or modifies the
income of a taxpayer;
Summa summarum, in Conclusion; if what is written above is true and legally valid then, doesn't that suggest that:
1. I am not under any legal obligation to even report said income from a foreign pension (as per what is written on page 3 of IRS Form 8833)
2. Income and paid taxes from my country of birth can be considered excluded from the IRS tax code and both the income and taxes are solely under the jurisdiction of my country of birth
Looking at "2." above does me make ponder though that I should still report the pension under Foreign Earned Income Exclusion (FEIE) to the IRS as it is considered part of income from sources worldwide and needs to be reported (this would seem to contradict what Form 8833 states). BUT, how do I do just that? I tried already and it doesn't seem to work, OR, if it does, I get hit by additional Federal taxes. Given that my pension is heavily taxed in my country of birth, it would seem that I get penalized by said income!
Would some help me save my sanity?!
JJ
