According to the IRS, pensions and annuities from foreign countries may not be taxable in the United States. Well this is largely dependent upon the tax treaty that the United States has with the country in question. So is foreign pension tax preparation required for you? You should consult with an experienced tax preparer in that area.
The IRS Code says that as a general rule, yes. The country of residence can tax the pension and/or annuity. However this is based on the articles of most tax treaties with other countries. But there are some countries where we do not have a tax treaty. Still, there are others where the tax treaties don’t allow the country of residence to tax the pension or annuity under its domestic laws. This is true unless a treaty provision specifically amends that treatment. Some treaties, for example, provide that the country of residence may not tax amounts that would not have been taxable by the other country if you were a resident of that country.
In some cases, government pensions/annuities or social security payments may be taxable by the government making the payments. There also may be special rules for lump-sum distributions. You can read more about this in IRS Publication 525. If you received a foreign pension, you first must determine whether the foreign pension is taxable by examining the treaty between that company and the U.S. Business & Financial Solutions can help you with this. Our firm offers experienced tax preparers for foreign pensions and annuities.
Additionally, As a result of IRS offshore compliance initiatives, recently enacted legislation, and new informational reporting requirements, tax preparers and U.S. participants in foreign pension plans must carefully evaluate how a foreign-based retirement plan is structured.
Many U.S. citizens who have repatriated or who currently reside and work in foreign countries need help in this area. They may have retirement assets in the country for which they are stationed, or participate in a foreign plan of some sort. These taxpayers should evaluate income tax reporting requirements, and use a tax preparation firm with experience in information requirements and strive to minimize income taxes and penalties.
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Contact our firm and speak with one of our tax experts for a clearer idea on how to handle pensions and annuities while abroad, or if you are retiring from a foreign pension or annuity plan.
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