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Level 3

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

I am US cit, husband is US green card holder, married filing jointly. Do we report his Swedish pension (it's the Swedish "social security" equivalent) and get foreign tax credit or not report at all because tax treaty seems to say it's taxable only in Sweden. See Article 1 para 2, 4, 5 and Article 19 - which says pensions "paid out under provisions of the social security or similar legislation of a Contracting State to a resident of the other Contracting State or a citizen of the United States shall be taxable only in the first-mentioned State." Not reporting at all seems financially better because reporting and getting a tax credit won't cover the high tax he pays in Sweden, and I'm concerned that Hawaii will also want to apply state tax. 

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New Member

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

There are some good existing discussions on this very topic (foreign pension income, that is), on a few of the other TurboTax AnswerXchange threads.  Here are some of those links, so that you can read them for yourself:

https://ttlc.intuit.com/questions/3175138

https://ttlc.intuit.com/questions/3642520


After doing some additional research on this subject, I essentially agree with those answers, writing as a CPA.  You can input a foreign pension into TurboTax (and thus report it on a US tax return) in one of two different ways.

One is to enter the foreign pension on Form 1040, Line 21.  You can do that mechanically in TurboTax through the "other income" interview of the program (i.e., through the pathway Federal Taxes -> Wages & Income -> Less Common Income).  If you do that, I might respectfully suggest shortening the description you input for Line 21, so that the wording will all fit on Line 21 and be readable to the IRS.  You could try something simple and straightforward, such as "Swedish Social Security" for example.

Two, a US taxpayer with a foreign pension amount can alternatively create a "substitute" Form 1099-R.  This will have the same practical effect as reporting the income on Form 1040, Line 21 (i.e., the tax is just the same), but it gives the IRS more detail, and allows the taxpayer to explain their foreign pension in somewhat greater depth.

If you choose this way, then you fill out Form 4852 (substitute 1099-R statement).  This form is available in TurboTax, and can be easily added to a tax return by first beginning a normal 1099-R entry, and then answering the program interview that you need to prepare a "substitute" 1099-R.  However, again, the end tax result is still the same.

However, if your spouse's foreign Social Security benefits are non-taxable by treaty, then you can simply fill out Form 4852, include the full gross distribution amount (in US dollars) of the benefits received in Box 8a, but then in Box 8b you would enter $0.  Normally, a separate tax treaty benefit claim needs to be included with your tax return (by filing Form 8833) to take such a treaty-based tax position.  However, where the excluded foreign income is simply a result of pension or foreign social security, then Form 8833 is not required, per the IRS.  Please see the section titled "Exceptions" at the following IRS.gov webpage for confirmation of this fact:  https://www.irs.gov/individuals/international-taxpayers/claiming-tax-treaty-benefits

In short, this provides the taxpayer with a neat and easy way to "report" (or "disclose") foreign social security income without having to also file Form 8833 (which is not included in TurboTax).

Thus, the second option (of preparing a "substitute" Form 4852, rather than a direct entry on Form 1040, Line 21, may be more appropriate if claiming a tax treaty benefit with Sweden).  Excluding the foreign pension income from your federal tax return will also, and simultaneously, exclude it from taxation by the state of Hawaii.

Please note also that this answer does not address any Swedish tax issues, such as actual taxes owed to Sweden on these benefits, or on any tax return filing obligations there.  You are therefore encouraged to research these matters for yourself.

Thank you again for asking this important question.

View solution in original post

19 Replies
New Member

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

There are some good existing discussions on this very topic (foreign pension income, that is), on a few of the other TurboTax AnswerXchange threads.  Here are some of those links, so that you can read them for yourself:

https://ttlc.intuit.com/questions/3175138

https://ttlc.intuit.com/questions/3642520


After doing some additional research on this subject, I essentially agree with those answers, writing as a CPA.  You can input a foreign pension into TurboTax (and thus report it on a US tax return) in one of two different ways.

One is to enter the foreign pension on Form 1040, Line 21.  You can do that mechanically in TurboTax through the "other income" interview of the program (i.e., through the pathway Federal Taxes -> Wages & Income -> Less Common Income).  If you do that, I might respectfully suggest shortening the description you input for Line 21, so that the wording will all fit on Line 21 and be readable to the IRS.  You could try something simple and straightforward, such as "Swedish Social Security" for example.

Two, a US taxpayer with a foreign pension amount can alternatively create a "substitute" Form 1099-R.  This will have the same practical effect as reporting the income on Form 1040, Line 21 (i.e., the tax is just the same), but it gives the IRS more detail, and allows the taxpayer to explain their foreign pension in somewhat greater depth.

If you choose this way, then you fill out Form 4852 (substitute 1099-R statement).  This form is available in TurboTax, and can be easily added to a tax return by first beginning a normal 1099-R entry, and then answering the program interview that you need to prepare a "substitute" 1099-R.  However, again, the end tax result is still the same.

However, if your spouse's foreign Social Security benefits are non-taxable by treaty, then you can simply fill out Form 4852, include the full gross distribution amount (in US dollars) of the benefits received in Box 8a, but then in Box 8b you would enter $0.  Normally, a separate tax treaty benefit claim needs to be included with your tax return (by filing Form 8833) to take such a treaty-based tax position.  However, where the excluded foreign income is simply a result of pension or foreign social security, then Form 8833 is not required, per the IRS.  Please see the section titled "Exceptions" at the following IRS.gov webpage for confirmation of this fact:  https://www.irs.gov/individuals/international-taxpayers/claiming-tax-treaty-benefits

In short, this provides the taxpayer with a neat and easy way to "report" (or "disclose") foreign social security income without having to also file Form 8833 (which is not included in TurboTax).

Thus, the second option (of preparing a "substitute" Form 4852, rather than a direct entry on Form 1040, Line 21, may be more appropriate if claiming a tax treaty benefit with Sweden).  Excluding the foreign pension income from your federal tax return will also, and simultaneously, exclude it from taxation by the state of Hawaii.

Please note also that this answer does not address any Swedish tax issues, such as actual taxes owed to Sweden on these benefits, or on any tax return filing obligations there.  You are therefore encouraged to research these matters for yourself.

Thank you again for asking this important question.

View solution in original post

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Level 3

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

Very detailed answer -- thanks so much! Who can look at the Sweden treaty and give me a sanity check on whether I'm correct that the treaty with Sweden says it's non-taxable? Most of the answers about foreign pension discuss how to report it and then get the foreign tax credit. Yet, everyone says "depends on what your country's treaty says". The only thing I've found in my research pointing to not even reporting it (other than doing the disclosure by 4852) is for France.
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Level 2

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

But how do you find the EIN number for Sweden? (I’m particularly interested the EIN for Denmark.) Form 4852 cannot be e-filed if the EIN is missing from the W2.
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Level 3

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

Last year I was advised to use all 1's (xx-xxxxxxx) and it worked. I also read you can use all 9's but some said that worked and some said it did not work.
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Level 3

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

Last year I was advised to use all 1's (xx-xxxxxxx) and it worked. I also read you can use all 9's but some said that worked and some said it did not work.
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Level 2

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

Your suggestion appears to do the trick, tack så mycket!
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New Member

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

Hello karenkailua:

Thank you for your kind words.  In looking at the (1994) tax treaty between the United States and Sweden:

https://www.irs.gov/pub/irs-trty/sweden.pdf

I would agree that Article 19 (Pensions & Annuities) of that treaty tells us that the Swedish equivalent of Social Security is taxable only by Sweden, even where the recipient of such benefits may currently reside in the United States.

That would eliminate double-taxation of the pension benefits, but doesn't mean that the benefits are entirely tax free -- as they still remain taxable by Sweden.  I don't personally know enough about the Swedish tax laws to know at what rate that tax may be; but my guess is that your husband can probably find that out, as well as figure out which tax form(s) to file in Sweden, given his language ability, and some internet research.

Thanks again.

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Level 3

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

Yes, definitely taxable by Sweden, and they take the tax out before he even gets his pension payment.
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Level 1

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

Hello,

Anybody can help?

I am a US citizen.  I have to report  social security payments from Poland. This payment are subjected to a 14% tax in Poland.  I believe i can claim a  foreign tax credit since there is an agreement between two countries eliminating double taxation.  

I cannot report it on form 4852  because of the lack of recognizable  TIN . Additionally, I did not know how to report the tax paid (i tried to report taxes  as a  federal tax withheld, which may have been wrong)

The second option, i think,  is to report the payments on 1099 -MISC as the interest payment  and claim the foreign tax credit on form 1116 .
 Thanks. Mike
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Level 3

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

TIN is not required for Form 4852, but you will have to mail in the return and can't e-file.  It does work, however, and using Form 4852 as a substitute Form 1099-R  is the only correct way to report this type of income as I understand it.

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Level 1

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

Thanks! However, I am not sure where to declare  the tax paid , maybe on the form 4852 line 8h (local income tax withheld) and the money received declare as a gross distribution income line 8a (on the same form)

mike

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Expert Alumni

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

Do not report the Foreign Tax Paid on your form 4852.

 

The amount of taxes you paid, to a foreign country, for income you are reporting on your US tax return, you add that information into TurboTax in

 

  • Deductions & Credits
  • Estimates & Other Taxes Paid
  • Foreign Taxes

If you are excluding the income from US tax you cannot tax a credit or deduction for Foreign Tax Paid.

@wmczosno

 

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Level 1

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

Hi,

i tried this path as well. The problem  I encounter was  that i had to report  the foreign security  payment on the form 1099-INT, BOX 1 as the interest income , what is de facto not true since it is not the interest income, and the  income tax  paid in the  in Box 6   (which which make sense for me ) and linked the form  1099-INT to the form 1116 -foreign tax credit.

So my question is- should i use the form 1099-INT to report the SS income or  use another form to report  the income and link that form to the foreign tax form 1116 for the credit claim.

Thanks for your help 

Mike

 

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Level 3

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

Read the tax treaty with the country in question.  These issues may be addressed there.

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