Anything Wrong With this? (Foreign Pension)

[optx103]

Greetings,

After perusing some discussions of reporting foreign pension income, I'm leaning toward the simpler (IRS-endorsed?) method of "other income" (example). However, I'll also be claiming a foreign state pension and it might be better at least next year to separate them and put the amounts on 1040 line 5a, especially if there's any state tax implication.

The recommendation of some Turbotax advisers here is to generate a substitute 1099-R/form 4852, but discussions elsewhere suggest this is aimed more at reporting negligence by US businesses, and it doesn't seem like the best way if avoidable. Particularly when you're representing that you've tried getting a 1099-R and worked with the IRS to that end (non-applicable).

So, how about filling out the 1099-R dialog without choosing a substitute 1099? I did this in years past at the direction of another program, but those were paper-filed, with no 1099's required unless requested by IRS. So would this work even with a "dummy" TIN (whether zeroes, ones or nines), and be legitimate for e-filing? Thanks!

[MarilynG1 · Accepted solution]

When you choose 'Substitute 1099-R'  with a Form 4852, you will need to mail your return.

If you create a 'dummy 1099-R' and use a fake Payor ID number, you may be able to Efile, but may be contacted by the IRS for a copy of your 1099-R, as you suggested. 

You could create a second 'Other Income' item, since you enter a Description of the type of Income you received (i.e., French Pension, Canadian Pension).

If you know your state does not tax certain pension income, it's understandable why you may want to have all pension income reported as such in your Federal return, to make the state adjustment.

Most states don't tax their own state pensions and possibly other types of pensions, such as military pensions, but your foreign pension income would probably not be excluded, unless they just don't tax any pension income up to a certain amount.

You may want to contact your State Dept. of Revenue to verify this.

However, if you know that your state will tax your pension income, if it is included in your AGI as 'Other Income', it will be taxed by your state and no worries about the IRS later. 

Also consider whether you paid any Foreign Tax on your pension, and are going to claim a Foreign Tax Credit.  If so, you may want to use the 'Other Income' method, since 1099-R's don't report foreign tax. 

Click this link for more info on Reporting Foreign Pension Income. 

[optx103]

This thread was apparently marked as spam and was temporarily out of commission, so sorry for the delay.

It seems that in past years some folks had luck e-filing with a dummy TIN (and at least one said they e-filed with form 4852 after a program update), but it would be interesting to know how many got IRS correspondence vs. those reporting it as miscellaneous/other income. I think I will go with the latter for this year at least. Thanks for the input.

[ThomasM125]

Since the IRS will not get a form 1099-R from the pension company, as long as the income is taxed properly on the federal and state return, you can use either method to report your foreign pension income. So, you may want to report it both ways just to make sure they give the same result, then use the Other Income method if you want to e-file your tax return.