Report foreign pension? (Sweden social security equivalent seems exempt as I read the treaty)

[wmczosno]

Thanks. I read the treaty. There is nothing about social security payment. However, there is a statement about  avoidance of double taxation.  I am not sure how to input the payment  and paid taxes and claim tax credit using turbo tax . This more technical problem then something else.

thanks again

[LinaJ2020]

International tax treaty-related issues are out of scope for advice.  Please consult a specialized professional for verification.

If you are certain about your entries, here are the steps:

In TurboTax online,

• Sign in to your account and select Pick up where you left off
• At the right upper corner, type in 1099r, then Enter
• Select Jump to 1099r
• Follow prompts
• 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.  

As to the Federal ID, try entering nine 9s.  If electronic errors occur due to 1099-R data entry, enter the pension under Miscellaneous income, see instructions below. As long as the IRS has the pension reported and included in total income, it is not problematic. 

• To your left, select Federal
• From the top, select Wages and Income
• Scroll down to last section -Less Common Income -select Miscellaneous Income, 1099-A, 1099-C- Start 
• Next screen, scroll down to Other Reportable Income- Start
• Follow prompts

If it is not taxable to you, to enter the exemption, follow here:

• report your full amount as instructed above. Then enter the treaty exempt amount as a negative amount (e.g. -5000) under Other Reportable Income as instructed above.  
• Download and fill in a Form 8833 from IRS to claim an exception.  https://www.irs.gov/pub/irs-pdf/f8833.pdf
• You cannot e-file.  You can still use the TurboTax program to prepare your tax forms, but you need to print them out and submit them by mail along with form 8833. 

@wmczosno

[karenkailua]

Thank you, this is great info. I used the Treaty claim the first year but the filing by mail was too much time and expense. I chose to report it as other income and take the Foreign tax credit, even though it was a little less favorable. It was nearly a wash when I figured in the cost of printing and mailing federal + three states, not to mention the aggravation factor.

It appears your solution of reporting the income as "other" and then reporting the same amount as a negative number avoids the 4852/substitute 1099r and thus the requirement to mail file. Although the 8833 also requires mail file, I thought if the treaty claim is for foreign social security you don't need that form? If that is correct I can e-file? 

[SusanY1]

When claiming an exemption from social security tax, the Form 8833 is not used but when claiming exemption from taxation of the income under the tax treaty upon distribution, Form 8833 is still the proper way to do do so.  

Since TurboTax doesn't support this form, it can't be electronically filed with our product.  

[karenkailua]

Oh my, THAT is an important distinction. Thank you! And, bummer, my e-file plan is foiled, again.  :( 

[feiwenw66563]

@SusanY1 I am a US citizen and working in Germany. My Germany's employer matches my pension contribution 2 times a year. I need your help for my questions below:

1. Do I need to report my calendar year's pension contribution to FBAR?
2. Do I need to enter the employer contribution as my income? What form I should use? Thanks

[DaveF1006]

In my original post, I declared that a Foreign Employer Contribution does not need to be reported as income. After additional research, I must revise that original answer.

Yes, the foreign pension account needs to be updated in FBAR reflecting the new balance as a result of the contribution  In addition, your contribution needs to be reported also and this should be included in with your foreign earned income you have already reported. Doesn't necessarily need to be accounted for separately.

If you choose to exclude your foreign earned income, this income is excludable along with your other foreign earned income you already reported. 

[Edited 05-05-2021|06:17 PM PST]

[feiwenw66563]

@DaveF1006 Thanks for correction. Does it have any option to report the employer's pension contribution to pay the tax when you withdrawal the pension? Similar like 401k with tax defer in US ? 

[DaveF1006]

Foreign pensions do not follow the same IRS as a US pension. The contribution must b reported as foreign income the year it is made is not eligible to be tax-deferred when it is withdrawn.

As i mentioned earlier though, since it is foreign income, it can be eligible for the foreign income exclusion if within the foreign income exclusion threshold.

[Y-FRA]

Dear @DaveF1006 , could you please comment on one more issue related to foreign pensions. When I complete Form 1116 to claim tax credit for a foreign pension, shall I treat this pension as passive or as general category income? IRS put annuities into a passive basket. But pension is quite a different animal and I could not find any IRS clarifications regarding the appropriate income category for this case in their publications and instructions related to FTC (they seems do not use the word "pension" in this documents at all while pensions are discussed in several other IRS documents) . Is treatment for social security type pensions and company pensions the same in regard of the income category? If somebody else could clarify this issue, I would also highly appreciate such help. 

[Xian2]

Hi - I am tagging along this valuable thread

My foreign Social Security is from Germany, according to the treaty it is taxable in the US ...and it states that "benefit is treated as it would be a benefit under US social security".... as such a max of 85% should be taxable only... is it correct to file 1099R with Form 4582 and explain how I am applying 85% only?

thanks

[DaveF1006]

@Xian2  No, although the substitute 1099R (or 4852) is one method, I have seen too many mistakes using this method so let me give you a pain-free method to report.

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 German Social Security taxable at 85% due to tax treaty between US and Germany.  Then in amount, report the social security income at 85%.

  >

[Xian2]

Dave "oh oh six" - thanks so much for quick reply...

I actually already have another income from Germany that I reported last year on the 4952. At that point I had also tried with the MISC income , but had noted that more taxes were withheld that using the 4952. Not sure why, maybe they added soc security taxes or something else....

It seems as TT still adds more taxes when reported as MISC, so I don't mind doing the 4952, can you share what to watch out in that mode....

thanks

Christian

[MarilynG1]

If you enter a fictitious 1099-R in TurboTax to report foreign pension income, you have to use a 'fake EIN' which may not allow you to Efile.  Remember that the IRS gets copies of 1099-R's; they won't have one for you, so you may get a letter from them. 

If you use Form 4852 (Substitute for 1099-R), you will have to file by mail.

Reporting as Less Common Income > Miscellaneous Income > Other Reportable Income is a more accurate way to report.

Retirement Income reported on a 1099-R and Miscellaneous Income are taxed the same; at your individual tax rate.  There is no added/subtracted social security taxes (or other taxes). 

Be sure to take the Foreign Tax Credit if you paid tax on this income to another country. 

Click this link for more discussion on Reporting Foreign Pension Income.