Where to enter foreign pension income and foreign tax credits?

[ReneeM7122]

No, do not complete Form 4852.  This is a substitute 1099 or W-2 when your employer or payer did not submit a statement when they should have.  In the case of a pension from outside the US, there is no 1099 or W-2 to be had.  

To enter foreign pension in TurboTax online program, you will you would NOT treat it as "other income," rather, you will create a mock form 1099-R.

Within your Personal Tax section, Under Retirement Plans, select the IRA, 401(k), Pension Plans (1099-R).

• On screen, Your 1099-R, answer Yes and select Continue
• Next screen, Choose your bank or brokerage, select I'll type it in myself
• 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. 

If your foreign issue does not have an ID number, you can try entering nine 9s. If errors occur due to this entry, you can enter the pension under Miscellaneous Income. The following link provides the info for both entries:

https://ttlc.intuit.com/questions/3687929-where-to-enter-foreign-pension-income-and-foreign-tax-cred... 

@optx103

[optx103]

Thanks for the response. Yes, that last part is what I did when I got the aforementioned prompt. I was also under the impression that the program fills form 4852 when you choose substitute 1099-R. I'm just not sure how I can certify that I've notified the IRS that a UK company hasn't provided me with a US 1099-R, as if they're obligated to.

Anyway, in the past (different product) I was instructed to just enter info as if I had a 1099 (no substitute generation required), but that was filed on paper.

I'd prefer to go with the substitute to keep things better documented (I may be filing 2021 with a UK state pension lump sum), but the "other income" approach seems more straightforward, and was apparently endorsed as IRS-preferred by another TT advisor:

https://ttlc.intuit.com/community/retirement/discussion/the-irs-has-cha[product key removed]rement-f...

Presumably there's no real drawback in doing that unless the pension would qualify for a credit at the state level? 'Tis all a bit confusing.

[ipc1]

ReneeM7122,

When preparing a substitute 1099-R as you describe, entering all 9s gives error, however as suggested by other users 99-0999999 is error free, I tried this and yes, it is error free. See for instance:

Solved: Thanks John-I prefer the 1099s for the info & the ... (intuit.com)

With one user saying, “the e-file went through.” Which I take to mean that it was at least transmitted, but was it accepted by the IRS? Can TurboTax confirm that 99-0999999 will be accepted by the IRS for the Payer Federal ID entry?

[LinaJ2020]

Yes, it is accepted by the IRS.  If it does not generate any e file error, you will be fine.  

[ipc1]

Stepping through the Substitute Form 1099-R process, following the “Do you want to fill out Form 4852” step there is a screen with the text shown by the screenshot below. The Foreign Pension payer does not provide a 1099-R. Is it therefore reasonable to assume that it not necessary to call the IRS for assistance because they will not be able to provide any assistance to resolve this?

[AmyC]

Correct. The substitute form is trying to ensure only those that need to use it will. Line 9 of the form asks how you got your numbers. Line 10 asks what you attempted to get the 1099-R. Your answers will be direct and simple. See Form 4852, Substitute for Form W-2, Wage and Tax Statement, or Form 1099R, Distributions From Pensio... 

@ipc1

[Xian2]

thanks for all the tips...  I had foreign pension and noticed that using1099 MISC takes more taxes out (maybe additional Soc Sec taxes? as it seems to treat this as sole prop income) - then went back to use the supplemental 1099R  - had a hard time making it work with the Fed ID number until IPC1 up in post there made it clear .... thanks so much for that , would have been stuck without it

why is TT requiring this ID or not prefill it in case of substitute 1099R , can we make a change request to TT to fix this, I can't imagine that foreign income/pension is so rare and TT needs to provide better solution...

cheers

[eep_1948]

IRS Form 4852 Line 6 'Employer's or payer's TIN (if known)'  does NOT require the entry of a TIN or any other number, when the payer actually doesn't have one.   The IRS accepts Form 4852 with line 6 left BLANK.

In 2017 when TurboTax started choking on all zeros for Form 4852 line 6, I contacted an IRS help agent for advice. The agent instructed me NOT to enter a bogus TIN when the payer doesn't have one, just to make TurboTax happy.  He instead instructed me to just leave line 6 blank. 

The problem  is: TurboTax chokes when line 6 is left blank, signaling an error that prevents completing or e-Filing the return.

Advising users to report foreign pension income as 'miscellaneous' may allow TurboTax to avoid fixing this Form 4852 problem when the entire gross pension amount is taxable.   But what about when the gross pension amount is not all taxable, because of a cost basis? 

Every year I file Form 4852 because I do have a cost basis in the foreign pension.  The pension's gross distribution and taxable amount are reported on Form 4852 lines 8a and 8b respectively.  So every year since 2017 I have filed a PAPER federal return (while ignoring the TurboTax error resulting from blank line 6 on Form 4852) because TurboTax refuses to e-File the return, even though  Form 4852 is completed per IRS instructions.

The Solution: Why not just fix TurboTax, so that it accepts form 4852 with line 6 remaining blank, per IRS instructions? How difficult can it be to fix this software problem, which has persisted for years?  Why does TurboTax continue to require a fictional TIN to be entered, contrary to IRS directions?  If it's good enough for the IRS, why isn't it good enough for TurboTax?

[eep_1948]

This is a follow-up message, not a reply. 

To date (1/14/2022),  I have conferred with several IRS agents regarding IRS Notice CP80, which I received via an automated IRS mailing. The CP80 notice, dated 12/20/2021, states 'We've credited payments and/or other credits to your tax account for the tax year shown above.  However, we haven't received your tax return.' 

The notice also advised that my 2020 return may need to be re-submitted.

During conversations with these IRS agents, I learned that:

1) the IRS PROBABY does have my paper 2020 return, but it may not be processed yet - I was advised to wait for further IRS correspondence.

2) if I had e-Filed my 2020 return, I probably would not have received a CP80 notice.  And irs.gov 

https://www.irs.gov/newsroom/irs-operations-during-covid-19-mission-critical-functions-continue

states that 'If you filed electronically and received an acknowledgement, you do not need to take any further action....'

3) If I had filed my Foreign Pension TAXABLE Income (I do have a cost basis in the pension) as 'miscellaneous income' instead of filing Form 4852, the IRS could have responded with a letter requesting clarification - the agents recommended filing Form 4852 instead of entering the pension as 'miscellaneous income'.

4) I should not create fictitious TIN numbers simply because TurboTax is unable to process a Form 4852 per IRS instructions.

Conclusion: For Foreign Pension Income with pension cost basis , the IRS recommends filing form 4852 with line 6 remaining blank.  However TurboTax is unable to process the return per these IRS instructions. 

Why not just fix TurboTax so that it does process form 4852 as instructed by IRS?

[optx103]

I wholeheartedly agree, but 1) Intuit is a large for-profit corporation that's most interested in what the majority will pay for. Foreign pensioners are a distinct subset of the population, so perhaps not a big priority.

And 2) Maybe it's time for that national, equitable tax prep option (as complex and graduated as the process might be), especially now that Intuit and HRB have left the Freefile Alliance, but that will take an act of Congress in a somewhat divided and conflicted nation...

[Xian2]

I have been using TT for 20 somewhat years....  how more loyal can customers be..... TT should fix these issues (I am using the Premier download version) - I assume TT experts and TT employees are monitoring the blogs.. can someone please respond and comment on how to get this issue fixed by TT !!!!

also to the community watching this - I am wondering if any of you have additional issues with foreign income... while this thread is about a foreign pension... I also receive a Foreign Social Security equivalent... I cant find any thread discussing how to report these... especially as Social Security income should not be taxed more than 85% ... any suggestions?

cheers

[Kosetife]

If your foreign pension is a foreign social security pension ( not a distribution from a foreign annuity or pension plan fed by a financial fund nor a distribution from a foreign profit sharing plan , insurance contract etc) and is not backed up by a bilateral treaty to avoid double taxation, means that it’s taxable and must be reported in Form 1040 line 8 and Schedule 1 line 8z. No doubt about it. 

Furthermore it’s not necessary Form 4852 to substitute nothing because that form is referred to those pension I wrote between brackets above , that have nothing to do with foreign social security pensions that are not distributions but payments from the social security administration or agency of a foreign country . 

[Kosetife]

I think you don’t . See my messages under name Kosetife . 

[Kosetife]

States that give tax breaks for pension income refers those breaks to US pension not foreign ones . 

When a bilateral treaty exits to avoid double taxation on Previsional matters, is referred to Federal level not to State level . 

Bilateral treaties on the matter are not applicable at State level . 

Furthermore even without any treaty a US citizen and permanent resident that have a foreign retirement income can claim foreign tax credit when filing his or her tax return if there is a income tax that was withheld at source . I do hope this will help to understand what we are talking about . 

[LJC3]

A foreign pension can be entered using a substitute 1099-R or by entering it as other income and then taking the foreign tax credit. This is well documented in this community. What hasn't been noted though is the fact that the foreign tax credit using the "other income" method will be less than the actual foreign taxes paid. The substitute 1099-R method will apply the full amount of foreign tax paid on the 1040. In my case there was a $200 difference in credited taxes. The 1099-R method is definitely preferable as long as you don't mind mailing your return. Trying to enter a Payer Id using a combination of 9's and 0's on a substitute 1099-R does not usually work if you're attempting to file your return electronically.