After reviewing multiple posts, I tested the following method to report my foreign pension with tax-treaty exemption for reporting purposes only. It works well with TurboTax (TT). I want to confirm whether this is acceptable by the IRS.
Option 1: Report pension as non-taxable income in 1040 Line 5a, leave 5b as 0 (zero).
Create a dummy 1099-R with TIN 99-0999999, Distribution Code: 7.
Enter pension amount in Box 1, 0 (zero) in Box 2a.
Use Form 4852 to explain the substitute 1099-R, with the description:
Gov’t Public Pension – Treaty Exempt (U.S.-XX Tax Treaty, Article 17).
Explain why no 1099-R: No 1099-R for Gov’t Public Pension – Treaty Exempt, Reporting Only. Form 8833 is waived as reporting the income from public pension.
Option 2: Report it as taxable income in 1040 Line 5b.
Follow the same steps as Option 1 to create the dummy 1099-R.
Fill in Box 2a with the same amount as Box 1.
In Less Common Income → Miscellaneous Income → 1099…/Other Reportable Income, enter the amount as a negative entry, with the description:
Offset Taxable Income from Gov’t Public Pension – Treaty Exempt (U.S.-XX Tax Treaty, Article 17), No Form 8833 Required.
Option 2 was recommended by several individuals, while I have not seen any suggestions for Option 1.
Question:
Is Option 1 acceptable by the IRS? Has anyone used either option to report foreign pension (tax-treaty exempt) without filing Form 8833 successfully, without facing an IRS audit?
Highly appreciated!
