Taxable amount for 1099-R when residing overseas

Forum|Forum|1 year ago
March 9, 2025
6 replies
40 views

I am preparing taxes for my mother who lives overseas, in a country with a tax treaty with the US.

There should be a way for Turbo Tax to determine that the taxable amount for pension payments is zero, in the same way that you determine it's 0 for Social Security payments, if the taxpayer lives in one of those tax treaty countries.

Currently I have to override the "Taxable Amount" and manually enter 0 and then I fail the error check: "Taxable amount should not be zero if there is no prior year excess traditional IRA contribution on line 4 of the IRA Information Worksheet."

JamesG1

Level 15

What is the nature of the IRS form 1099-R? What code is reported in box 7?

The tax treaty is with which country? Please clarify.

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dvwilkieAuthor

Level 3

Thanks for helping. The tax treaty country is the UK. There are two 1099's, one has a "4" in Box 7 and one has a "7". But the same event (death of spouse) drove the pensions to go to my mother. The tax treaty clearly exempts annuities and pensions (and Social Security) from being taxed in the non-resident country.

Thanks!

SusanY1

Level 15

The proper way to report these is not to zero out the tax in 2b, but to take a credit on the tax return for income "re-sourced by treaty".

This is done in the Foreign Tax Credit (Form 1116) section of TurboTax. This requires completing the UK tax return first, to determine the amount of the tax credit that is eligible to be taken on the US tax return for the income. If the UK return is complete, you can enter the amount of the income that was taxed as well as the tax paid in this section.

If it isn't yet complete, you may wish to file an extension to extend the due date of the return until after the tax information is available.

For more information about filing the Form 1116 in TurboTax see Claiming the Foreign Tax Credit. For information on how to file an extension, see How do I file an IRA tax extension.

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