Where do I report a gain in a foreign pension account?

[Keo2]

I worked in the UK for several years, and as a result I have a pension fund there which I declare on a FBAR and my Form 8938 as an "Other Foreign Financial Asset". This year it has increased in value by ~$3k, and I want to know where to declare this gain? This is so I can fill in the box on the 8938 (Part  III, Line 1). I haven't been paid anything out of the account.

[pk]

@Keo2 , I am not sure I fully understand your issue -- if you are required to file FATCA form 8938, then you just enter the amount of the value of the contract   or  are you trying to update and existing form 8938 or what ?

If you are trying to enter a new form 8938, go to the search box and enter "form 8938"-- then from the drop down list click "jump to form 8938" --- thereafter TurboTax should walk you through entering the required details.

Is there more I can do for you ?

[fjpuentes1974]

Hola!

I have reported the Other Asset and the gain in the asset. I get an error since I can't input the gain in my F1040, in what Schedule of form can I include the gain in my foreign pension account ?

[MaryK4]

If your foreign pension's value showed a gain, you do not have to report it unless it was a Capital Gain Distribution.  A capital gain distribution is a payment from a mutual fund or an exchange-traded fund (ETF) of proceeds from the fund's sale of stocks or other assets.

You would only report the income on your tax return if you started receiving distributions.  

Just FYI, you may be required to file an FBAR and/or Form 8938. 

The FBAR Foreign Pension Plan reporting rules define a foreign pension as an account which must be reported.  Even if the account was opened and earned prior to becoming a U.S. Person and no distributions are being made, it still must be reported on the FBAR.

Certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return.  

See How do I file an FBAR report (FinCEN 114)? - TurboTax

@fjpuentes1974

[pk]

@fjpuentes1974 , while agreeing with the information provided by @MaryK4  on the general area, I am not sure  as to what  foreign asset  and gain thereof that you are trying to report.  Could  you tell more about the  foreign asset and why it should be reported  ( is it a financial asset such as bank account, a pension/savings account, stocks /bonds  etc  or  what  and  in which country) ?  Are you a US citizen/Resident ( Green Card) and is your tax home in the USA or foreign ?

[fjpuentes1974]

Hola!

Is a pension fund outside the US. I am not a permanent resident, however I am a US tax resident for 2019 and 2020. I have a work Visa, and lived in the US for the past 2 years.

I did not receive distributions from the pension fund, I am almost 20 years away from starting to get distributions.

Last year an accounting firm prepared my taxes, and they reported the growth in the account in in form 1040, schedule 1, Part I additional Income. line 8 other income. I tried to include it in the same way in the mac version of turbo tax but it does not seem to work. 

From the previous post it seems it should have not included it last year. I should include it this year, correct?

[pk]

@fjpuentes1974     First, as a US Resident for Tax purposes you are indeed taxed on your world income ( by the USA ) and given tax credit  for foreign income that was taxed by another taxing authority ( at source). However, what you are describing is a gain that is not available to you  i.e. a pension fund gains  are not available to you  till your retire and take pension -- is that not true in this case?   What country are we talking about ?   Don't fully understand why your accounting firm  had your gain in a pension fund  be  subject to US taxes.  Is this a national / govt. run  pension  or a private pension fund, is it tax favored, is it voluntary contribution or required contribution etc. etc.   Please provide more details on this  because I am not sure that it is taxable to the USA at this stage.  It is possibly reportable   on form 8938  per FATCA regulations.  So please ....

[fjpuentes1974]

Hola!

Is a pension fund managed by a private company. I will not receive distributions or have access to the gains until I retire after age 65. The fund is in Colombia. The private company that manages my fund does not have any special tax treatment, it does not have a tax fav.

I did report the balance in the FBAR web page as I did in 2019.

Thanks in advance for your insights.

[pk]

@fjpuentes1974 , the best I get  is that  the private pension scheme  in Columbia is similar to  self-directed  401 (k), except   (a) you can choose only a selected  number of private administrator and  type of investment; (b) your contribution of 4% is mandatory and so is the employer's 12%; (c)  it is like a defined contribution plan ; (d) distribution is not available till retirement age  ( national ); (e) there is no tax favored status.  In short it is  like a mix of the 401 and Social Security.    At this time I absolutely do not understand why your accountant  reported  the  gain ( which is again tentative and may be lost next year )as income -- it cannot be taxable   because it is NOT income.   You should not report this  for 2020 .  Also you should go back and amend your 2019  to get the  taxes  paid on this back ( for both federal and State ).  If you are going to use professional  tax  preparer / accountant  , please make sure they are aware of international tax situations and willing  to do research if they are not familiar with the subject.

Anything more I can do for you on this ?

[fjpuentes1974]

Thank you!

I have a question, is it absolutely necessary to go back and amend 2019? Or is it ok to just change it moving forward and leave 2019 as is ?

[pk]

@fjpuentes1974  of course you can choose to leave 2019 return as is