Dear Sirs, I have my retirement pension or my Social Security from Colombia but is exempt from taxes ,because i already paid from my salary the social security. Thanks.

[joseamanriqueuri]

What i have to do.

[AmyC]

You need to show the income as received and then mark that it is foreign pension and not taxable, if treaty based.

You need to convert the amount paid into US dollars. Follow the directions the IRS gives in

Yearly Average Currency Exchange Rates | Internal Revenue Service.

Here are you steps:

First, show the income was received: 

To enter your foreign pension in TurboTax online program, you will need to create a substitute form 1099-R.

1. Login to your TurboTax Account 
2. Click on the Search box on the top and type 1099-R
3. Click on Jump to 1099-R
4. Answer Yes to "Did you receive any 1099R forms?"
5. Scroll down and select "I'll type it in myself"
6. Select "I need to prepare a substitute 1099-R" and follow the prompts

As to the Federal ID, if your foreign issuer does not have the ID number, try entering nine 9s.

Next, you need to remove the income IF it is not taxable by entering a negative value on line 21. Please check 

this link to the tax treaties to determine if you are indeed allowed a deduction. Currently, Colombia is not listed.

If it is indeed treaty -based,

Follow these steps:

1. Select Federal
2. Select Income & Expenses
3. Click to Show All
4. Scroll down to the last one Less Common Income
5. Miscellaneous Income, 1099-A, 1099-C
6. select START
7. scroll to the bottom to Other Reportable Income.
8. click START
9. select YES
10. Enter description, treaty based exemption
11. then a negative number. 
12. click Continue
13. Description, pension offset or similar
14. click Done

You can do this by filing Form 8833- Treaty Based Return Position Disclosure.  TurboTax does not directly support this form, but you can use TurboTax to prepare your tax return to print and mail with Form 8833 attached.  (You can access the form HERE.)

You may be able claim a tax credit for the foreign tax paid, please see Instructions for Form 1116.

@joseamanriqueuri  Edited 01/17/2022 (12:16 PST)

[Opus 17]

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@AmyC wrote:

You need to show the income as received and then mark that it is foreign pension and not taxable. 

You need to convert the amount paid into US dollars. Follow the directions the IRS gives in

Yearly Average Currency Exchange Rates | Internal Revenue Service.

Next, you need to remove the income since it is not taxable by entering a negative value on line 21.

Follow these steps:

1. Select Federal
2. Select Income & Expenses
3. Click to Show All
4. Scroll down to the last one Less Common Income
5. Miscellaneous Income, 1099-A, 1099-C
6. select START
7. scroll to the bottom to Other Reportable Income.
8. click START
9. select YES
10. Enter description, treaty based exemption
11. then a negative number. 
12. click Continue
13. Description, pension offset or similar
14. click Done

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See the answer here from LinaJ.

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/where-do-i-input-the-foreign-pen...

From the IRS:

Foreign Social Security Pensions

Absent application of a particular treaty provision, foreign social security pensions are generally taxed as if they were foreign pensions or foreign annuities. They are not eligible for exclusion from taxable income the way a U.S. social security pension might be unless a tax treaty provides for an exclusion.

Most income tax treaties have special rules for social security payments. Generally, U.S. treaties provide that social security payments are taxable by the country making the payments. However, a foreign social security payment may also be taxable in the United States if you are a U.S. citizen or resident, as a result of the saving clause. And remember, not all treaties have the same provisions for foreign social security pensions, so always refer to the specific treaty at issue.

Regardless of the tax treatment of the pension or social security benefit in the home country, it is only tax-exempt in the US if there is a tax treaty in place with that country.  There is no tax treaty with Columbia, so the income is taxable in the US.  

https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

The first step is correct (report the income on a substitute 1099-R using the correct currency conversion rate) but the second step is wrong.  

And if there was a tax treaty with the home country, it is not claimed by entering a negative income item, the exemption must be claimed on form 8833.

If you paid tax on this income to Columbia in 2021 (not in the past), you can claim a credit for foreign taxes paid on form 1116.