Needs help in entering foreign pension distribution

[nhkyn]

Hi,

I received a $24,000 pension lump sum from the UK, with $18,000 taxable. After $6,000 was deducted at source, $17,900 was credited to my bank account in USA in 2024.

I left the UK several years ago.

I'm entering this distribution in 1099-R:

• Box 1 Gross distribution: $24,000
• Box 2a Taxable amount: $18,000, Total distribution: $17,900
• Box 7 Distribution code: Which code should I use?

There's no box for the foreign tax amount of $6,000 deducted at source. Should I enter it in Box 8 Other and make a comment?

How do I claim credit for the tax deducted in the UK to avoid double taxation?

I will appreciate any help or suggestion.

Thank you,

Nurul Islam

[pk]

@nhkyn ,  Salam Aliquom

(a) Are you a US person ( citizen/GreenCard/ Resident for Tax purposes ) ?  If not US citizen, then citizen of which country ?  If you are on  work visa -- Resident for  Tax Purposes , which visa ?

(b) Your  pension distribution  you said is lump sum  , does this mean a total distribution ?    Why is the taxable amount different from gross distribution ?  Is this   because of your own contribution or what ?

(c) Was this your first year of pension -- is this because you are no longer a UK resident, because of age or what ?

(d) Are you currently in the USA or in the UK ?

I am trying to understand the  whole situation, specifically for treaty considerations,  taxability of the pension amount etc.   Obviously  and based on your answers, there may be more  questions to answer.

I will circle back once I hear from you --yes ?

pk

[nhkyn]

Hi,

I worked at a UK hospital from 1993 to 1995 with a fully funded pension plan from the hospital. Since 1996, I’ve been in the USA and became a citizen in 2007. I waited until retirement age for full benefits. In the UK, 25% of pension fund distribution is tax-free, like Social Security benefits in the US. I never withdrew money from the fund.

I hope this answers your questions. Feel free to ask more.

Thank you,

NI

[pk]

@nhkyn ,  

1.   Since your pension is from  National Health,   is this  public funds pension -- this is because  most treaties , including UK, publicly funded pension  and/or social security  equivalent is generally taxable ONLY by the  distributing country.  If that applies  here   ---  you should have some documentation to show whether this is true  in your case  --- then  this income is taxable ONLY by the UK  ( and therefore  Tax at source ).

2.  In any case   for US 1099- R , the taxable portion generally is  gross less  recipient/employee contribution ( allocated or otherwise ).

 Could you confirm that your employment during those years was for the NHS -- and therefore the pension should be  marked as public funded.  And not for a private hospital system.

[nhkyn]

Hi,

I worked with the NHS, and my pension is fully government-funded and taxable only in the UK. However, completing Form 1099-R increases my tax amount because it lacks a box for foreign tax paid like Form 1099-DIV. This raises my IRS tax by about $4000. How can I request credit to offset this?

Thank you for your help.

Sincerely,

NI

[DaveF1006]

Here is how to report this. 

1.  Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5.  As you go through the screens, when it asks "Tell Us About Your Foreign Taxes" select none of these apply.
6. When it asks if you wish to take the deduction and credit, take the credit.
7. Continue through until you reach a screen that says "No other income or expenses" Say no
8. Continue through until it asks the income type, say Passive Income
9. Next add a country pick UK.
10. Other Gross Income say UK Pension income  and the Gross Amount of the income
11. Continue through the interview until it asks for the foreign taxes you paid, here record the amount of foreign taxes you paid..  
12. Now you are done reporting the foreign taxes. Just keep going through the section without making any more entries. You will have finished reporting your gross income from pension and the foreign taxes paid.