Retirement from England - anything I should watch for?

[BulldogTom]

Client is going to start receiving retirement payments from England.  She says the first 45K payment is tax free to her in the UK and the monthly payments that follow will be taxed.  Anything special about this transaction I should know about?

Looks to me like the 45K will be taxed as ordinary income in the US and the monthly payments will be eligible for the FTC. 

Never had a foreign source retirement income client, so any help is greatly appreciated.

Tom
Newark, CA

[joanmcq]

Rad the tax treaty with the UK.   It depends on what type of retirement it is as to where it is taxed. Does she live in the US or UK?

[Abby Normal]

May be FBAR filing requirements, too. I have an Irish pension and Greek Social Security and I've just been putting them on line 21 for US citizens living in US.

[Catherine]

I also put foreign pensions (UK, Switzerland) on Line 21.  Yes read the tax treaty; lots of good info in those.  Yes foreign tax credit is likely.  If the ONLY holding is a pension, it is likely that the FBAR (FACTA; whatever they're calling it this week) is NOT actually required.  Pensions are paid out to recipients but are generally NOT in the person's control, segregated by their name, and most likely there is no "account balance" the person ever knows of. Those disclosure requirements are for accounts the client has *some* measure of control over.  For pensions, the only control they likely have is submitting a new address to send payment to; there is NO control over the account itself.  So, no reporting requirement.

[B. Jani]

I have few clients with UK pension. Always put on line 21. Also UK pension issue Annual statement in April as year end and sometimes shows tax withheld and paid in UK. They have April year end and not December.

If person is US citizen and live in US and get social security here, social security payment will be reduced by UK pension by some calculation.

[BulldogTom]

Clients have been in the US for over 10 years (That is how many tax returns I have done for them).  They were here longer, but I don't know how much longer.  We have discussed FBAR and they don't have enough cash in the bank in UK to require reporting.  She is a nurse, and was a nurse in the UK.  Apparently, the first lump sum payment is tax free to her because of her occupation.  After that, she will get a regular monthly payment that will be taxable to the US.

Thanks for your responses.

Tom
Newark, CA

[Abby Normal]

Often the pensions get paid into a foreign bank account and the recipient transfers money to their US account. I ask for the foreign bank statements every year to make sure they didn't go over the 10,000 USD, and I remind them to keep that foreign account balance low.