Where to enter foreign pension income and foreign tax credits?

[reddragon1148]

My wife receives a pension from Germany (No fed tax id #).  The difference in CO State tax between creating a 1099R vs reporting the income under miscellaneous is around $400.  Creating a 1099R would be more advantageous!  However it appears that because I do not have a Fed tax ID # for the German pension, I can only paper file the return...is this correct?

[ThomasM125]

@reddgragon1148 This is correct, you can only e-file the tax return if you have a federal ID number for your form 1099-R entry.

[Xian2]

I have the same situation and last year filed on form 4852 as 1099R substitute (as Germany does not provide any 1099R) and used dummy Fed ID 99-0999999  - and explain in words what and why are you reporting. This let me file it last year. I plan doing the same this year (as well as for German Social Security I am collecting).

Have not heard from the TT Tax experts that this is the WRONG way of doing???

[reddragon1148]

Did you Efile or send in a paper copy?  According to the reply I got from an intuit Tax consultant, I would have to file by mail unless I use the Misc Income category.  What was surprising to me is that when I calculate CO tax using the Misc account category, we owe an additional $400 in state income tax.  Thanks for your reply!

John

[Xian2]

yes, as said I have the same situation that income tax is higher when filing as MISC, so I did the work around described and that let the return efile. I did not hear anything problematic from IRS (but maybe they did not review/inspect this) . That's why would be nice to get an opinion from TT Tax experts on this.

thanks

[MarilynG1]

Your Federal Tax would not change whether you entered your Foreign Pension as Miscellaneous Income or as Retirement Income (with a Substitute 1099-R), as the income is taxed the same.

However, if your state exempts some types of retirement income, your State Tax may be higher using the Miscellaneous Income entry.

Filing with a Form 4852 for a Substitute 1099-R sometimes did not allow efiling.  Either way is accepted by the IRS (save your documentation). 

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

If you paid Foreign Tax on your pension income, don't forget to claim the Foreign Tax Credit. 

[reddragon1148]

looks like there is a difference of opinion among the tax consultants re e filing or not if we use a substitute 1099R for foreign pensions.  The other issue with regard to higher state taxes if we file the foreign pension as misc income seems to be related to states not exempting misc income from taxes.  I plan on e-filing with a substitute 1099R.  Appreciate the replies!

[reddragon1148]

Thanks for the explanation on state taxes and misc income.  That seems to be the case with Colorado.  My fed tax did not change whether I categorized the pension as 1099R or misc income as you mentioned.

[krvanani]

I believe 1099-R or Misc income both are wrong approach. For my case I do not like to fill out fictitious Tax ID. I tried Misc income approach and pension shows up as earned income. gives me better refund however it is wrong to do that way IMO. Does not work as Foreign Income either as ends up with EITC and better refund but still wrong. In addition sub 1099-R creates a form 4852 which ia wron

[LoganathanB]

ou report your foreign pension under less common income.

• Open your TurboTax Desktop
•  
• Click on Wages and Income 
•  
• Click on the less common income
•  
• Click on Miscellaneous income
•  
• Click on other reportable income
•  
• Enter the foreign pension 

[betty_]

I have a UK pension earned when I lived in the UK. For over a year now, I'm living and working in the US in a different job. I'm not collecting the UK pension - it is just sitting where it was and I haven't touched it. Do I still need to report this UK pension on my US tax filing if I am not drawing an income from it? If so, what form - and can I do that via e-file or paper? Grateful for any help. Thanks!

[MarilynG1]

No, you don't have to report your UK pension until you begin taking withdrawals from it.

If your state of residence at the time allows a pension exclusion on all or part of your retirement income, you can create a Substitute 1099-R to report it (Form 4852).

You may or may not be able to Efile with this form.  Users have reported both outcomes.

If you state doesn't give a Pension Exclusion, the easiest way to report is as 'Other Miscellaneous Income' with a description of 'Foreign Pension'. 

You will be able to Efile and the income is taxed the same in either method.

If you paid Foreign Tax on your distributions, you can claim a Foreign Tax Credit, which is also able to Efile.

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

[sfehervari]

Yes, for the last few years, 99's have been accepted.  It is very frustrating this is not the case this year.  How USA centric this is.  Last year of using Turbo Tax?  Possibly!

[LJC3]

This is incorrect. On a substitute 1099-R, the tax withheld is converted to $US and treated as any other withheld tax. This will not be the same amount as the foreign tax credit. The foreign tax credit can be substantially less since its calculation is based on your total income. The final US tax rate on your total income is what is applied to the foreign pension as tax due and it is that amount that the IRS gives as a credit. The IRS does allow any balance of foreign taxes paid that were disallowed as a credit in a current year to be carried back one year or carried forward for up to ten years. This appears to be of little value since in the case of pensions, the foreign income is recurring causing an excess foreign tax credit balance which will never be used. I suspect that any foreign pension income reported on substitute 1099-Rs can be rejected by the IRS.

[sfehervari]

This year, 99-9999999 is not being accepted as a FED ID number in the 1099R for Deutsche Post (Germany).  I have tried this for several days now.  It must be fixed or auf wiedersehen to Turbo Tax!