Help!-How to handle Defined Benefit Pension (with required contributions) on 1040 & FBAR?

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
Cangrad
Posts: 14
Joined: Thu Feb 23, 2012 10:46 pm

Help!-How to handle Defined Benefit Pension (with required contributions) on 1040 & FBAR?

Post by Cangrad »

I am a U.S. citizen living & working in Canada and filing Canadian resident taxes. In 2020, I began participating in my employer's Defined Benefit Pension Plan which, along with employer contributions, has required, fixed employee contributions by deduction from paychecks. The plan is officially characterized as a "defined benefit contributory plan", and it is a Canadian registered pension plan. How do I handle reporting this plan on my U.S. taxes and FBAR, especially considering the recent IRS guidance of Rev.Proc. 2020-17, issued in March 2020?

1. Can I (and if so, should I) exclude my required contributions to this plan from the earned income I report on my 1040 Line 1 (Wages, salaries, tips, etc.)?

2. Does this Defined Benefit Contributory Pension Plan need to be reported on 1040 Schedule B Part III # 8 as a foreign trust to which I transferred funds?

3. Do I need to list this defined benefit contributory pension plan on my FBAR? If so, does it get listed in Part II with my bank accounts, or does it get listed in Part IV?

4. Do I need to file Form 8833 to take advantage of any U.S.-Canada treaty positions relative to this pension plan?

5. Are there any other forms I need to file with regard to this pension, or anything else I need to know?

Any help you can provide will be greatly appreciated!
Bubba Gums
Posts: 47
Joined: Tue Jul 15, 2014 7:20 am

Re: Help!-How to handle Defined Benefit Pension (with required contributions) on 1040 & FBAR?

Post by Bubba Gums »

1) Yes, Yes.

2) No, Your employer transferred funds. It is not a trust and you are not a beneficiary.

3) No, it is not a "Financial account." You do not make investment choices, obtain income or have any signatory authority. Many examples are listed in FBAR, pension is not one of them.

4) I would.

5) You should disclose it on Form 8938 if it is above the threshold.
Cangrad
Posts: 14
Joined: Thu Feb 23, 2012 10:46 pm

Re: Help!-How to handle Defined Benefit Pension (with required contributions) on 1040 & FBAR?

Post by Cangrad »

Thanks for taking the time to reply, Bubba Gums! Your responses were very helpful. I'm still a bit confused though about whether I must report the defined benefit contributory pension plan on 1040 Schedule B Part III # 8 as a foreign trust to which I transferred funds. One of the Pension Report documents on my employer's website says that the Registered Pension Plan "represents a legal trust containing pension assets" and that "pension plan assets are invested in the Pension Master Trust." Also, a mandatory amount is withdrawn from my paychecks to contribute to this pension plan.

So, based on this wording in the Pension Report, should I then consider the pension plan as a foreign trust, or am I misinterpreting the language in the document?

Also, if I am permitting funds to be withdrawn from my paychecks to contribute to this pension fund, is it indeed the employer who is considered to be the one transferring the funds, and not me?

Thanks again for any further help you can provide!
Post Reply