You should first make sure that you need to include this foreign pension in your US income. Many countries have tax treaty agreements that cover retirement payments.
For a complete list see https://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z.
As a general rule, the pension/annuity articles of most tax treaties allow the country of residence to tax the pension or annuity under its domestic laws. If this is true for your country, you would include the pension income in your US return. However, you may not need to pay foreign taxes on this income.
In some cases, government pensions/annuities or social security payments may be taxable by the government making the payments. There also may be special rules for lump-sum distributions. You need to look at each treaty carefully.
To enter foreign pension in TurboTax online program, you will need to create a substitute form 1099-R.
Here are the steps:
1. Sign into your account and select Pick up where I left off or Continue.
2. Type 1099-R in the search bar and select Jump to 1099-R
4. On screen, Your 1099-R, answer Yes and select Continue
5. Next screen, Choose your bank or brokerage, select I'll type it in myself
6. On the screen Tell Us Which 1099-R You Have, check the box
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 99-9999999.
If electronic errors occur due to 1099-R data entry, enter the pension under Miscellaneous income, see below instructions. As long as IRS has the pension reported and included in total income, it is not problematic.
To enter a foreign tax credit on form 1116, go to:
Source:LinaJ2018
I tried to delete it but didn't have the option.
The instructions to select "I need to file a substitute form 1099" is almost at the end and was not obvious. I spent white a while trying to find where to select that before finding it. Could that be made clearer please?
@GranthamCooke I have a simpler solution.
I agree that that is an option, but I remember Kosetife explained some time ago that following that way the foreign pension will be reported on Line 8 of 1040 Tax Return Form as miscellaneous income instead of being reported on line 5b). For IRS it´s the same because the pension will be taxed in the same way. It will have the same tax impact.
The problem comes up for those like me that live in a State that offer pension exclusions if the taxpayer is older than 65 or disable and his or her total yearly income is below 150k. Why the problem? because the software system will allocate the pension on Line 26 of, in my case, NJ 1040 Tax Return Form instead of Line 20 a) for pensions, and I will not be allowed to get the exclusion.
As far as NJ is concern, the NJ Taxation Regulatory Service issued a Certificate on 12/28/2023 in response to my query on the matter indicating that foreign pensions may be excludable if the taxpayers meet the two conditions I mentioned above. So, NJ allows exclusion for foreign pensions. So, I have to report it on Line 20a) of NJ 1040 Tax Return Form.
With all that said: Can I do so by using TurboTax software online? If I follow the way kindly explained by Expert Dave1006 can I get my foreign pension reported at my State Level on Line 20a) for pensions or the system will automatically report it at State level on Line 26 as a miscellaneous?
Any comments will be very important for many taxpayers like me that are facing the same situation.
Thanks very much.
Betty
@BettyL , in my view ( and a google search will show that this is the preferred way), foreign pensions and annuities should be reported as pension i.e. using 1099-R form. Since this no exist for foreign payors, you choose the income group that includes 401k, pension etc. -- this will make TurboTax prompt for name , address of the payor, the distribution, taxable amount ( for foreign pension this would be all taxable), distribution code ( usually 7 for normal distribution ) and of course the EIN of the payor ( you can use a dummy code of 23-1234567 just to keep the software happy -- any auditor will know this is dummy ). This will put the taxable amount on line 5b of 1040, where it belongs. This would al.so mean that this pension amount t would be picked up by the state return ( or should be ), since the software has no way to know that this pension is not domestic.
The other method would put it on shedule-1 as "other taxable income -- which it is not
Is there more I can do for you ?
pk
Dear pk
first of all thank you for your prompt and accurate answer. It clarifies me on the way to do my foreign pension reporting in order to have it on line 5b) and -above all- on the pension line ( line 20a) of New Jersey 1040 Tax Return Form, allowing me to get the pertinent exclusion at State level.
I’ll try to do the e-filling tomorrow and I’ let you informed . Once again thank you a lot for your time reading and asserting my query.
When I do this I can't get past account #, is there a fix for that?
First of all, delete what you have already started. Then report your foreign pension in this manner.
@Peacefull from your answer I am not sure whether this allowed you to proceed with the prep. and filing.
Do you need more help ?
Dave I am about to start my ta return and I also are one of those that have a foreign social security income that because the Payor country doen not have any bilateral / totalization agreement with the US , my foreign social security income is fully taxed in the US
Having said that and taking into account what you said a year ago that the best way to report foreign social security income or foreign pension is as Miscellaneous, and then describing what pension or social security is and the country which the income come from, the problem that I am facing now is that the system doesn’t allow me to find and filing form 1116 related to Foreign Tax Credit because the system doesn’t recognized anything in Miscellaneous as foreign sourced and consequently doesn’t allowed me to jump to link such form . Do you know how to do to be able to filling Form 1116 and also to link with Foreign Tax Credit Carryforward form just to be able to used such credits for my foreign source SS income ?
@Kosetife while @DaveF1006 answers you full questions ( especially since he has been dealing with this and very effectively), I just wanted to add that generally form 1116 is based on "avoidance of double taxation " clause in the tax treaty in effect between US and that other country. So my assumption here is that the taxability of foreign Social security / pension is based on an in effect tax treaty.
I agree 100 % because IRS is clear stating that foreign sourced social security pension must be tax treated like foreign pension or foreign annuities, meaning to say are fully taxed unless a bilateral totalization agreement between the foreign country and the US exists stating otherwise .
My query is that with that in mind for the IRS is indistinct that be reported : (i) on line 5b) as a pension , (ii) on line 6b ) as a social security or (iii) on Line 2 Schedule - line 10, 8z as miscellaneous / other income , because is 100 % taxed the same in the three options .
The point is that if it’s reported on line 5 b) or 6 b) it’s necessary to inform the Form 1099 R for the first or Form xxx for the second and most of the foreign Payor don’t issue such documents . This could create confusion to the IRS because on top of that by filing online TurboTax system doesn’t allow to attach or enclose an explanatory note to clarify the matter .
Furthermore many of us that receive a monthly foreign social security pension do not get it through any distribution because it’s a direct payment from a foreign government agency similar to US Social Security Administration .
Thus, the easiest and less bureaucratic way to report it , is as Miscellaneous / Other Income as I said above because it can be written “ Foreign Social Security Pensión from xxxxx” including instead of xxxx the country name .
After all this I said , can anybody let me know how to fill out Form 1116 related to Foreign Tax Credit because indications online states that one must “Jump to link it” but I don’t see in my computer screen and on my cell screen either from where I must to jump . I don’t see the way to access to such Form 1116 , it’s no clear enough in TurboTax system .
Furthermore is not clear either to find Form 8962 related to Advance Premium Tax Credit to fill it out and also Schedule B (Form 1126) related Foreign Tax Carryover Reconciliation Schedule in order to carryforward the unused Foreign Tax Credit of previous years and to use it now in 2024 Tax Return .
Anybody that can elaborate on this will be appreciated and useful for all of us in this TurboTax community . Thanks in advance .
To access the Foreign Tax Credit section.
Form 8962 is used to calculate and reconcile the Premium Tax Credit (PTC), which helps eligible individuals and families cover the cost of health insurance purchased through the Health Insurance Marketplace. Here is where to access that information.
As far as Schedule B. I assume you mean Schedule B Form 1116. This is generated in step 8, in the steps I listed above for the Foreign Tax Credit. It will appear based on how you enter the carryover information in Step 8 above.
David I know that you know a lot about tax return and how to used in the best possible way TT e-filling system. Following your advice this year I decided to report my Foreign Social Security Pension on Line 8 of Form 1040 / Schedule 1 as Miscellaneous / Other Income . I have the problem that regarding Form 1099 MISC the system requires me to put the Federal EIN but because I’m my case the Payor is a foreign one it’s equivalent EIN has more digit that the digit that have the US Payors . So, the system doesn’t accept neither the EIN of my foreign Payor nor [removed], nor [removed] nor any other dummy number like [removed]. Furthermore the e-filling doesn’t accept either the zip code of my Foreign Payor because obviously the system only is focused on US zip codes. Incredible . Is there any way to prepare the Form 1099 MISC for Foreign Payors ? Which is thd solution ? Perhaps to attach an explanatory note but I was told by somebody of this chat that TT e-filling doesn’t allow to enclose / attach any note at all. What happen if I to “tools” and I delete the Form 1099 MISC ? Then if IRS request some clarification I would reply with an extensive and well grounded explanatory letter by certified mail and that is it. What fo you think ? Thanks in advance
In addition to my previous message when you see (removed ) I had written ([removed]) , ([removed]) and ([removed]).
Sorry I write numbers but the posted message says removed instead . Why ? Anybody knows ?
The program removes information it thinks is personal. To file, use can use a foreign address but zip code change to 00000. Use a fake EIN of 99-9999900. If your state has a retirement benefit, you may want to use the 1099-R entry to report the income. Entering it as "other income" is fine for the federal. You don't want to enter it as a 1099-MISC.
To report it as Miscellaneous Other Income:
To enter it as a 1099-R, a normal entry for normal pension follow these steps: