How to handle UK State Pension and UK Ministry of Defense Pension

[EU118]

How do we report UK State and UK MOD Pensions to IRS and how do we enter them into TurboTax?

Wife and I are US citizens and US Virginia residents paying taxes in US on worldwide income.  Total AGI for 2021 will be above $200,000.

Wife gets a UK State Pension and a UK Ministry of Defense (MOD) Pension (prior UK citizen).  Together those pensions are equal to $9700.  These are paid monthly as long as she is alive.  UK doesn't tax these under US/UK Double Taxation protection rule.

After reading many posts on this subject regarding reporting and Turbo Tax entries we have questions:'

1.  These foreign pensions can be reported individually on 1099-R we build ourselves or entered as MISC income.  Correct?

  A.  Advantage or disadvantage to either method?

2.  Are either or both subject to US taxation?  Can they be reduced or eliminated from taxation by entering negative amounts on MISC income section  in TurboTax as some have indicated because they are below $10,000 and/or not taxed by residents living in the UK.  Need reference if they can be reduced or eliminated.

3.  Any relieve in the US/UK tax treaty for this specific type of pension?  Read it but it's confusing?  

[DaveF1006 · Accepted solution]

I would enter these under miscellaneous income rather than entering as 1099R because there is no EIN to enter. I know there are Turbo Tax posts that suggest entering all 9's but I am not confident this will work. These posts indicate that if entering all 9's do not work, enter as miscellaneous income instead, thus this is my recommendation.

Because of the complexities of various treaty arrangements, we cannot comment on the taxability of these pensions.  Generally the short answer is that these would be taxable because they weren't taxed in the UK but as I read through the articles I listed below in the links provided, there could be caveats within the agreement that may suggest otherwise.  

The best thing i can offer for you know is to read this IRS document for further guidance.  Also here is a link referencing the UK/US Treaty arrangement. 

[EU118]

Thanks.  I'll use Misc income category to avoid potential problems.

UPDATE:  I submitted my return and the IRS accepted it.  

Facts:

-  US Citizen

-  US Resident

- Have US and UK income

-  Recieve UK State Pension

-  Receive UK MOD Civil Service Pension

-  Reported both of these separately under MISC income listing them as UK State Pension and UK MOD Civil Service Pension

-  Completed Foreign Tax Credit Form (Fed 1116) to receive a credit for income tax paid to UK HMRC on all UK income during US calender tax year.  UK tax year is April 5th to April 5th so adjustments must be made to account for this.  UK tax attorney indicates under US/UK tax Treaty, UK State Pension is not taxed in UK but must be reported and taxed in US by IRS because it is taxed by the country in which I'm a resident (US).  Rather confusing but makes sense.