Completing Form 3520 for distributions from foreign retirement plan

[sr41]

I worked in Norway for 3 years and my Norwegian employer contributed amounts towards a defined benefit type pension.  When I left many years ago and moved back to the US, it was converted to an annuity type contract for me, but I could not take distributions until I reached retirement age, death or disability.  I reached retirement age in 2023 and they began sending me monthly distributions.  I received some type of statement from them with information such as return on premier reserve, added yield, etc, but nothing that translates to information I would need to complete Form 3520, which asks about DNI of the trust, accumulated distributions etc.  The Form says I should get a Foreign Nongrantor or Grantor Trust Beneficiary statement and I have asked the Norwegian entity for information but have not received anything.  In the absence of that the Form says to fill out a default calculation of trust distributions, which refers you to Form 4970 and schedule J of Form 1041, with lots of information that I don't have. Any ideas about how to fill out a Form with no information?  the only info I have really is the amount of the distributions sent to my bank.   

[DaveF1006]

Yes, Foreign Pensions can be tricky and stiff fines could occur if not reported properly.  As a result, you need to make all reasonable efforts to comply with the reporting requirements for the pension.  

Complete Part 11 and part 111 of the 3520 the best you can with what information you have. You may attach an additional statement to your 3520 stating that you have tried to obtain as much information as you can about the trust but the Norwegian entity has not complied with your request. 

If you are unable to obtain a copy of a Grantor Trust Beneficiary statement, you will check in part 111 that you are unable to obtain one. You may mention this in the statement also. Select N/A for the non-grantor trust as pension plans are considered a Grantor Trust since you own the plan.

In part 111 of the 3520, after you enter the information in sections 24-28 and checked you do not have a Grantor Trust Beneficiary statement, Schedule A is easy to fill out. You will skip Schedule B and fill out Schedule C if line 37 has an amount greater than 0. In Schedule A when it asks how long this has been a trust, you will mention how many years you have paid into the pension plan. 

Based on what you told me, this is the first year you received the distribution. As you complete this section, I don't think you will need to fill out Schedule C  because line 37 will be a negative number, less than zero. There will be no need for Form 4970 or Schedule J of a 1041.

There are additional reporting requirements.  There is a FBAR reporting requirement if the balance of the plan exceeds $10,000 during the year. Your plan is a prime candidate for this type of report. You will report that here. Hopefully you have knowledge of your pension balance or it is listed in the statement sent to you.  This information is critical.

Also, if your pension plan has a balance of over $50,000 at any time during the year or $75,000 ( If filing single) on the last day of the year, you need to file form 8938. If you file Married Filing jointly, it's $100,000 and $150,000 respectively. 

To enter a 8938:

• open your tax return
• Go to Federal
• Other Tax Situations
• Other Tax Forms
• Prepare a report on foreign financial assets

Please reach out if you have additional questions.  We are here to help!!

[sr41]

Thank you!

[pk]

@sr41 , having read through your post and the response  by my colleague @DaveF1006  ( which I agree with as far as 3520 ), I have a different take on this.  From what decare as the whys and wherefore of this source and because it was tied to a retirement age, to me this pension/ annuity.  It had your contribution ( yes?)  and employer contribution plus growth.  Thus you should treat this as Foreign pension/annuity  and the distribution  is periodical.  Please  consider filling out a 1099-R  ( this will come in once you tell TubroTax that you have pension income -- fill out everything i.e.. distribution amount , taxable amount  ( foreign pensions often will have taxable amount same as the distribution amount ),  distribution code  7 ( normal distribution) and use a dummy  EIN for the payor   ( something like 23-1234567  ( just to keep the software happy).

Is there more I can do for you ?

[sr41]

Thank you for your reply.  Sorry to get into the weeds, but I looked at Form 3520 again and it turns out that line 37 under Schedule A is a positive number (Line 31 are the distributions I received, lines 33-36 are all 0, so line 37 is again what I received).  So I need to complete Schedule C, which is a problem because it refers you to Form 4970, which in turn requires you to fill out Schedule J of Form 1041.  To fill that out, I would need information on the trust itself, including its accumulated distributions and undistributed net income etc. which is information that I don't have (have requested more info from trust but haven't received any more info).  So I wondered if anyone else has encountered this and can some assumptions be made to figure out the tax I'm required to put on Form 3520?  Or just guess, random 5 to 10% tax?  Or not fill out the Form and hope that I don't get fined the $10,000?  I'd ask an accounting firm to help but without necessary info I don't know what they would do either.  Thanks again.

[pk]

@sr41 , you are making this extremely complicated.   forgetting the KISS principle.

All you are liable for is to pay taxes on a pension /annuity distribution at your marginal rate.

However, if you are convinced that you must follow your path, I would strongly suggest you seek professional help --- a tax professional; / tax attorney  whom is familiar with international taxation.  Perhaps you also need to familiarize yourself with  Tax treat between US and your "payor" country.

Good Luck

pk