Originally Posted by skibum267
#1;I have a client who retired from the RAF in the UK (government pension) in 2013. He was a UK resident all his life. He took a lump sum distribution in July, then received subsequent monthly payments. He moved to the US in July as well. What is the taxability of the pension on his US income tax return?
#2;He is married to a US citizen.
#1;in general he does not need to pay any tax on his UK pension income under US-UK tax treaty I GUESS, particularly foreign(nations wirh tax treaty with US) military pension.Under the tax treaty , he needs to pay tax o nit to UK(aslongas it is taxable pension to UK taxing authority(ies)) not to IRS/state in US.
If there is NOtax treaty with the US, then Just as with domestic pensions /annuities, the taxable amount generally is the gross distribution minus the cost (investment/contributions in the contract). Income received from foreign pensions /annuities may be fully or partly taxable, even if you do not receive a F1099 or other similar document reporting the amount of the income. So, as he lives in the US and receives a pension paid by a payor from UK,he must claim his desired treaty withholding exemption on the form, and in the manner specified by UK. IfUK and/or UK withholding agent, refuses to honor the treaty claim, h eneeds to make the treaty claim on his income tax return, or other prescribed form, filed with UK.yo can talk to a intl tax repress at IRS if you want.
#2;then aslongas he is treated as a US resident, he needs to rpeort his world wide icnome and U S source incoem (if he eanred in nUS) to US and his sttae dept of rev.He needs to file 1040 NOT 1040NR with the IRS.