Danish retirement income and TurboTax Deluxe

[haraldsted-aol-c]

I am a US citizen and just retired. I get the unearned Danish Social pension (Folkepension) and Danish ATP pension (Danish Labour Market Suplementary Pension Scheme ATP (which you pay into while working)".  I heard from this blog to enter both incomes as 1099-R on my US tax return.  Do I also need to include IRS form 8833 for the ATP or Social pensions (or get an IRS fine of $1,000)?  I paid tax to Denmark on the Social Pension.  Do I need to use IRS form 1166 for that? I am using TurboTax Deluxe for my tax return. Are these forms available on TurboTax? If not, do I get the forms from irs.gov and attach them to the TurboTax tax return?  If I can get credit for the tax I paid in Denmark for the Social Pension on form 1166, can I use the credit to offset any income tax I may owe the IRS or only on Danish Pension or ATP Pension taxes I may owe?  Anything else I need to do?

Sorry for the long questions but I am new to this. I don't have any bank accounts, private pensions or annuities in/from Denmark. I live permanently in the US now. I am a US citizen but my parents were Danish so I could work in Denmark for 11 years. I think the tax situation would be different if I worked for a US company there(?)

Thank you!

A. K. H. 

[DaveF1006]

It depends. To clarify, did you work for as Danish employer for a private firm or for the Danish government?

@haraldsted-aol-c 

[haraldsted-aol-c]

Hello Dave, 

Sorry for the delayed reply. 

I worked for private companies, not the Danish government. I worked for a bank and Scandinavian Airlines.

[DaveF1006 · Accepted solution]

It depends. These treaties are nebulous at best but in reading over the US/Denmark tax treaty I do see a reference in the treaty in Article 18 Section 2. In this article it states, "Notwithstanding the provisions of paragraph 1, payments made by a Contracting State under provisions of the social security or similar legislation of that Contracting State to a resident of the other Contracting State or to a citizen of the United States shall be taxable only in the first mentioned State" The first fore mentioned state that is mentioned here is Denmark. 

Also, if you look at Article 18 Section 1, "Except as provided in subparagraph b), pension distributions arising in a Contracting State and beneficially owned by a resident of the other Contracting State shall be taxable only in the State in which they arise. This would be Denmark.

Based on the treaty provisions, I would file form 8833 excluding both the Danish Social Pension and the Danish ATP pension based on these treaty positions. Here is a form 8833 for you to download and fill out. Make sure that you list the treaty based position and the Article numbers and sections that I just mentioned above. In fact, you may wish to quote the treaty position word for word as it appears in the treaty under Article 18 sections 1&2.

Unfortunately Turbo Tax does not support form 8833. You will need to download the form and then include this with your tax return.  You will not be able to electronically file your return  so you will need print and mail your return.  Turbo Tax will give you the complete mailing and filing instructions when you choose the option to mail your return.

In addressing the last question, you will not file a Form 1116 to claim the foreign tax credit since you are not declaring your Danish Social Pension on your US return because of the terms of the treaty. I hope I addressed your questions and concerns.

@haraldsted-aol-c 

[haraldsted-aol-c]

I will do that.  Thank you so much Dave! You are awesome.

Annette

[haraldsted-aol-c]

Hello Dave,

I am ready to send in my 1099-R's and form 8833, thank you again for your help.

On the 1099-R where it says TIN number, do I just leave it blank? Turbotax won't let

me finish the tax return with it blank though.  If I put in 99-0999999 it will accept it. 

Should I use that and put a note on the form 8833 about it? I don't know that it needs

to accept it if I'm mailing it in anyway(?)

Also, I saw there is a substitute form for a missing 1099-R:  IRS form 4852.  Do I use that

or is the 1099-R plus the form 8833 sufficient? It looks like the form 4852 is only for companie

in the USA(?)

Thank you! 

Annette 

[ThomasM125 · Accepted solution]

You can leave the TIN number blank as the foreign company won't have one. You also don't need to bother with the form 4852 since you are dealing with a foreign company. The form 1099-R plus the form 8833 is sufficient to show the IRS what you are doing.

[haraldsted-aol-c]

Thank you so much Thomas!

Annette