Where to enter foreign pension income and foreign tax credits?

[AmyC]

The difference between 1099-R and other income comes into play in the state section sometimes. Sometimes you have to enter it one way for the state and change it for federal. The substitute 1099-R is a great solution since it covers federal and state.

@Fredandirma  

@Sheila29  You can check another post of mine here.

[rapunzelX75]

Note, I see a lot of comments about entering all 9s or all 0s.  I tried entering all 9s for my foreign company pension and was rejected BUT then I entered 99 and then just consecutive numbers and it worked fine  I also did this a second time for a UK Government pension with different consecutive numbers and it worked fine.

[rapunzelX75]

Use 99 and then a stream of different numbers   eg 99 - 2245667 or similar.  Works fine.

[arvindpoothia]

As per Double Taxation Treaty between US and country 'A', pension earned in country A for services rendered to country 'A' AND taxed in country'A', is not taxable in the USA. But the FORM 1116 does not exempt that tax paid entirely.

It adds up US income & country 'A' income, calculates tax on total income(US+Foreign) at USA rate and DOES NOT give FULL credit of the tax paid in foreign country on foreign income!

That is violation of the treaty.

There has to be some way of handling this situation.

[Mike9241]

we don't know the country or whether you're an expat.

Basically, the US foreign tax credit is based on a ratio of net taxable foreign income to US taxable income times the US taxes. Since you say by treaty the none of the pension is taxable in the US, you should be getting zero FTC.  

line 1 of form 1116 (general category) would be zero because that only reports the taxable portion of foreign income 

thus line 7 would be zero

line 14 is available foreign taxes

line 15 is line 7 = 0

line 17 is line 15 + 16. assuming line 16 is zero line 17 =0

line 18 is your taxable income from 1040 line 15

line 19 divide line 17 by line 18 = 0

line 20 is your taxes reduced by certain schedule 2 credits

line 21 the FTC you allowed is line 19 times line 20 = 0

line 23 is zero assuming line 22 is zero

line 24 is the smaller of line 14 or 23 which would be line 23 or zero

[girigiri]

Hi:

If we enter annuity income in the "Miscellaneous section", how do we report it in Form 1116 to get credit for Foreign taxes paid on the annuity income in the foreign country?

[yurigul]

But for US tax purpose German SS shall be treated for US citizens as US SS per double taxation treaty, if I understood correctly the treaty (for sure it is correct for non-US citizens; but I do not know if "saving clause" changes this for US-citizens). A lower tax rate is applied to US SS vs. income from other pension types. For this reason reporting German SS on substitute 1099-R, as not SS-type pension, will lead to a higher tax. I could not find any option for making a substitute SSA-1099 to report German SS as SS-type pension. Do you know anything in this regard? How in the end you filed your German SS?

[yurigul]

But what to do with a foreign social security pension? I am a US citizen living in Germany. If I understand correctly the US-Germany tax treaty, German SS pension is taxed by US, but at the same (reduced) tax rate as US SS pension. And here is a problem of reporting it in TurboTax: (1) use of substitute 1099-R will lead to regular, i.e. higher, tax rate and generally speaking 1099-R is not the correct form for SS payments ; (2) I could not find an option for substitute SSA-1099. What should I do?

[LJC3]

As a resident of Germany, you are subject to German Tax law. Check the U.S. /German Tax Treaty. Your U.S. Social Security is subject to German taxation only and is entered on German the tax form where any German Social Security is entered. Convert your U.S. Social Security to Euros and add it to any German Social Security. If you are reporting a private German Pension on a U.S. 1040, enter it as Miscellaneous Income and file appropriate form to claim a foreign tax credit for any tax on the pension paid to Germany.

[ChasinSF]

So here is my question: When filling out the 1099-R for my Canadian teachers pension, it asks for gross distribution (Line 1) and taxable income (Line 2a). For the taxable income, should I enter the amount I actually received after the Canadian government took their 15% non-resident tax? E.g. say my gross was $10,000 and they took off $150, leaving me with $850, should I enter $850 in line 2a? I also am claiming the $150 on form 1116 for a foreign tax credit.

BTW I enter 55-5555555 as the Payer's Federal ID number and TT takes it fine.

[Xian2]

you can just add German SSA income to the normal SSA USA entry (if you get both, just add them manually)

Same is true for anyone with Canadian SSA, these are the only 2 countries that this works for.

btw, there is not a different tax for SSA, it just that not all SSA income is fully taxable, the amount taxable depends on you AGI and at most its 85% of SSA, less if you earn less total

I am not a TAX professional, just have my experience as tax prep volunteer

[Xian2]

re: Canadian tax withheld from foreign pension and what to enter as taxable in 2A

Taxable 2A income has nothing to do with the taxes you paid in Canada.

if you have made own contributions with AFTER Tax money into the pension, then a portion of the income is considered non-taxable, and that reduces amount goes into 2A, typically your own contributions are mentioned on 1099-R in different field.   The formulary to determine how much is taxable is called Simplified Method and a bit complex.  If you did NOT make any own pension contributions with after tax funds, then usually all income from Box1 is taxable and entered into 2A ....

I am NOT a tax professional, just have some experience as tax prep volunteer

[TexasTea]

@ChasinSF I'm also dealing with a Canadian teacher's pension (Ontario).  There is no "basis" in that pension (i.e. there were never any after-tax contributions to that pension) so the entire distribution is taxable, meaning that Line 1 and Line 2a are the same number.  So in your example $1,000 would be entered in both boxes.  Generally I get a US tax credit that is very close to the 15% tax that was withheld in Canada, but that's highly dependent on other aspects of your tax situation. 

[ChasinSF]

@TexasTea Thanks for the reply, my pension payments are also from the OTPP.  🙂

[TexasTea]

@ChasinSF do you get your OTPP direct deposit in a US bank account?  I have for many years, and up until last November it always arrived in my US bank before the end of each month.  But OTPP changed something starting last November and now my payments don't arrive until early the following month, eg. my December 2024 payment arrived in my bank January 2, 2025.  Under IRS rules that means the December payment belongs to the 2025 tax year, which creates a mismatch vs. the Canadian NR4 that includes that payment in 2024.   I'm curious whether you had the same experience?  Or does yours go to a Canadian account where I suspect it would have arrived by Dec 31?