Form 1116

[juham2013]

I have provided all figures and information for my tax returns EXCEPT what is written below.

I am a citizen of the U.S. (I am a dual citizen, actually) and started receiving "employment pension based on social security legislation" from a European country. This pension is very similar to social security payments that I am receiving here in the U.S. Now, an elementary question I have is in which income category does this fall? I think it is "Passive income" rather than "General income." Could you provide your thoughts on this?

Another question I have is (I am using Desktop version of TT Home & Biz), why does for 1116 require I also provide "gross income from all sources" (Part I, line 3e)?   Doesn't TT automatically include this number?

Awaiting feedback!

JJ

[pk]

@juham2013 , yes  pension is generally passive ( for purposes of form 1116 ).  However,   based on  treaty conditions  the "Social  Security" Equivalent may or may not be taxable by the USA.  Also to get  foreign tax  credit, generally there must be  bilateral  treatment  between the US and that other country.

So please tell me more about the "pension" -- name , characteristics, private / public etc.  And the country from which you are getting that income stream.  Is 2024 your first year  for this pension ?

Also note that  except for a few states ( having their own treaties ), most do NOT recognize tax treaties between US and another country.

Note that for tax purposes , US  has ONLY two types of tax payers --- US Person ( Citizen/ GreenCard /  Resident for Tax purposes )  and Non-Resident Alien ( NRA).

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

[juham2013]

For privacy concerns I am not going to divulge the country,  but it is part of the EU and I know for a fact that a bi-lateral tax treaty exists with the U.S.  The pension is called "Employment pension based on social security legislation."  It is not private,  but similar to social security here.   2024 was the first year.

My state does not have any state income tax so that is a moot point. 

I am a US citizen and also citizen of my native country, so, dual-citizen.

Cheers,

JJ

[juham2013]

A response from an Accountant:

"For a foreign pension on your Form 1040, you will report the income in the following way:

Line 5a - "Pensions and annuities": You would generally report foreign pension income as part of your "pensions and annuities" on Line 5a of Form 1040.

Schedule B - Interest and Ordinary Dividends (if applicable): If the foreign pension income includes any foreign interest or dividends, you may need to include that on Schedule B.

Form 8833 (if applicable): If there is a tax treaty between the U.S. and the country where the pension originates, and that treaty provides for any exemptions or special treatment, you may need to file Form 8833 to claim the benefits of the tax treaty. This is often the case if the treaty allows for partial or full exemption from U.S. taxation.

Important Notes:

Foreign Tax Credit: If you paid taxes to the foreign government on the pension income, you may be able to claim a foreign tax credit on Form 1116 to avoid double taxation.

Form 1040, Line 5a is the standard place to report pension income from both U.S. and foreign sources."

I may, indeed, need to retain the services of an accountant although I prefer filing electronically,  not mailing in returns.

It was suggested to me by a "Live expert" on Sunday that I go for their "Full Service" which costs around $400, to obtain definitive and legally valid answers to get my taxes done right.  She gave up after spending almost 2 hours on the phone with me.   Time is money and I don't have weeks to devote to this sort of mundane business.

[pk]

@juham2013 , I understand and sympathize  on your frustration.  If this  foreign pension and  the foreign taxation is the only issue, I personally cannot  provide you a specific  and generally (legally ? correct answer . This is because , even though I deal here mostly with tax treaties, not having looked at the language of the treaty inn question  and the technical explanations from both sides ,  there is no ground for me to stand on.   All I can say is that generally, payments made from public funds are usually taxable ONLY in the payor country.  Also generally  Treaty position declaration form 8833 is  not required  for  individuals  in such conditions.

You are always welcome to   send me the information via PM  ( this is not visible to community in general) . However, you must not provide any PII -- Personally Identifiable Information.

That is the best I can do for you .

pk