How to add a foreign pension

[partnach]

reporting foreign pension income'

[HelenC12]

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. 

1. In the program, from the left side menu, select tab Federal.
2. Select the Wages & Income tab from the top of the screen and Continue.
3. Scroll down to Less Common Income ( very last  section on the screen) and show more.
4. Select Miscellaneous Income, 1099-A, 1099-C and Start
5. On the next screen, scroll down to Other income not already reported on a Form W-2 or Form 1099 and select Start to enter your foreign pension information

To enter a foreign tax credit on form 1116, go to:

1.  At the right upper corner, in the search box , type in foreign tax credit and Enter 
2. Select Jump to foreign tax credit 
3. Start with screen Foreign Taxes and select Continue  to follow prompts.

Source:LinaJ2018

[DawnC]

Can you clarify what your question is @GranthamCooke?   

[GranthamCooke]

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?

[DaveF1006]

@GranthamCooke I have a simpler solution. 

1. Federal>wages and income
2. less common income>show more
3. Miscellaneous Income, 1099-A, 1099-C>start
4. Other reportable income>start
5. Answer yes to the first screen
6. Next will be a dialog box asking for the description of the income. Type in  My Foreign Pension Income and report the amount. 

[j1750pl]

Best answer.

Thank you!

[j1750pl]

The most complete answer of them all!

Best!

[BettyL]

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

[pk]

@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

[BGL50]

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. 

[Peacefull]

When I do this I can't get past account #, is there a fix for that?

[DaveF1006]

First of all, delete what you have already started.  Then report  your foreign pension in this manner.

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Then give a brief description of the income and the amount listed..
8. Once this appears in a summary screen, click on the Add Miscellaneous Income Item and then call it  Foreign Pension and then the amount.

[pk]

@Peacefull  from your answer I am not sure  whether this allowed you to proceed with the prep. and filing.

Do you need  more help ?

[Kosetife]

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 ?

[pk]

@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.