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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
Can you clarify what your question is @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?
@GranthamCooke I have a simpler solution.
Best answer.
Thank you!
The most complete answer of them all!
Best!
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 ?
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