At the risk of being somewhat off-topic, as it relates to US - UK taxation, I am trying to find out what if any are the requirements for reporting the existence of foreign pension to the IRS.
My wife and I have three UK pensions, two of them are Defined Contribution pensions and one is a Defined Benefit pension. There is a U.S.-U.K. Tax treaty that describes how pensions are treated for tax purposes, "containing the conventional provision that pension and social security benefits are taxable only in the recipient's country of residence at the time of distribution." (There is a short article at http://www.watsonwyatt.com/us/pubs/insi ... cleID=8818 and IRS has a link at http://www.irs.gov/irb/2005-18_IRB/ar10.html). So that covers how the money is taxed, i.e. basically, no tax until retirement.
But am I required to report to the IRS that I have a foreign pension, when I am neither contributing nor receiving any money from it?
Inotherwords, if you have a Canadian RRSP you have to file a Form 8891 every year. Is there equivalent requirement for a UK pension?
I am already familiar with the Dept. of Treasury "TD F 90-22.1" form.
IRS requirements for reporting foreign pensions
Moderator: Mark T Serbinski CA CPA
I sent the above question to the IRS, the answer appears to be no, the pension's existence does not need to be reported if your are not taking any distributions.
--- Here is the full response ---
Hello. Thank you for your inquiry dated June 22, 2007. We apologize for
the delay in responding to your inquiry. You want to know whether you
have to file an annual report to the Internal Revenue Service (IRS)
when you have a United Kingdom pension in which you are not making
contributions or receiving distributions.
Your United Kingdom pension distribution is subject to U.S. taxation.
The United States-United Kingdom Income Tax Treaty does not have a
requirement to file an annual report to the IRS when you are neither
receiving nor contributing money to a pension.
Following is an excerpt from the Treasury Technical Explanation of
Article 17 (Pensions, Social Security, Annuities, Alimony, and Child
Support) of the United States-United Kingdom Income Tax Treaty.
This article deals with the taxation of private (i.e., non-government
service) pensions.
Paragraph 1 provides as a general rule, in subparagraph (a), that the
State of residence of the beneficial owner has the exclusive right to
tax pensions and other similar remuneration. While the term "pension"
generally would include both periodic and lump-sum payments, paragraph 2
of the Article provides specific rules to deal with lump-sum payments,
so they are not subject to the general rule of paragraph 1.
Relation to other Articles.
Subparagraph 1(a) is subject to the saving clause of paragraph 4 of
Article 1 (General Scope).
Following is an excerpt from Article 1, paragraph 4 of the treaty.
Paragraph 4 contains the traditional saving clause found in U.S. tax
treaties. The Contracting States reserve their rights, except as provided
in paragraph 5, to tax their residents and citizens as provided in
their internal laws, notwithstanding any provisions of the Convention to
the contrary.
For the complete text of the treaties, go to
www.irs.gov/businesses/international/ar ... 39,00.html.
Based on the information you have supplied, I have attempted to answer
your question(s); but you should know that my answer does not
constitute an official ruling by the IRS, and it should not be used as such. If
you want an official ruling from the IRS, you should follow the
instructions provided in Revenue Procedure 2007-1, which is available at most
IRS offices and some libraries. You will be charged a fee. However,
Revenue Procedure 2007-7 states that the IRS will not, in most cases,
issue advance rulings concerning the interpretation of tax treaties.
Taxpayers who disagree with the IRS interpretation of a treaty may file a
claim with the U.S. Competent Authority according to the instructions set
forth in Revenue Procedure 2002-52, which are available at most IRS
offices and libraries. There is no fee for requests for Competent
Authority claims. Your request for Competent Authority consideration should be
addressed to:
Director, International
Attn: Office of Tax Treaty
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224.
Copies of IRS Revenue Rulings, Revenue Procedures and other official
IRS guidance may also be found at:
http://www.irs.gov/newsroom/article/0,,id=98257,00.html.
Reference: Publication 901, U.S. Tax Treaties.
--- Here is the full response ---
Hello. Thank you for your inquiry dated June 22, 2007. We apologize for
the delay in responding to your inquiry. You want to know whether you
have to file an annual report to the Internal Revenue Service (IRS)
when you have a United Kingdom pension in which you are not making
contributions or receiving distributions.
Your United Kingdom pension distribution is subject to U.S. taxation.
The United States-United Kingdom Income Tax Treaty does not have a
requirement to file an annual report to the IRS when you are neither
receiving nor contributing money to a pension.
Following is an excerpt from the Treasury Technical Explanation of
Article 17 (Pensions, Social Security, Annuities, Alimony, and Child
Support) of the United States-United Kingdom Income Tax Treaty.
This article deals with the taxation of private (i.e., non-government
service) pensions.
Paragraph 1 provides as a general rule, in subparagraph (a), that the
State of residence of the beneficial owner has the exclusive right to
tax pensions and other similar remuneration. While the term "pension"
generally would include both periodic and lump-sum payments, paragraph 2
of the Article provides specific rules to deal with lump-sum payments,
so they are not subject to the general rule of paragraph 1.
Relation to other Articles.
Subparagraph 1(a) is subject to the saving clause of paragraph 4 of
Article 1 (General Scope).
Following is an excerpt from Article 1, paragraph 4 of the treaty.
Paragraph 4 contains the traditional saving clause found in U.S. tax
treaties. The Contracting States reserve their rights, except as provided
in paragraph 5, to tax their residents and citizens as provided in
their internal laws, notwithstanding any provisions of the Convention to
the contrary.
For the complete text of the treaties, go to
www.irs.gov/businesses/international/ar ... 39,00.html.
Based on the information you have supplied, I have attempted to answer
your question(s); but you should know that my answer does not
constitute an official ruling by the IRS, and it should not be used as such. If
you want an official ruling from the IRS, you should follow the
instructions provided in Revenue Procedure 2007-1, which is available at most
IRS offices and some libraries. You will be charged a fee. However,
Revenue Procedure 2007-7 states that the IRS will not, in most cases,
issue advance rulings concerning the interpretation of tax treaties.
Taxpayers who disagree with the IRS interpretation of a treaty may file a
claim with the U.S. Competent Authority according to the instructions set
forth in Revenue Procedure 2002-52, which are available at most IRS
offices and libraries. There is no fee for requests for Competent
Authority claims. Your request for Competent Authority consideration should be
addressed to:
Director, International
Attn: Office of Tax Treaty
Internal Revenue Service
1111 Constitution Avenue, NW
Washington, DC 20224.
Copies of IRS Revenue Rulings, Revenue Procedures and other official
IRS guidance may also be found at:
http://www.irs.gov/newsroom/article/0,,id=98257,00.html.
Reference: Publication 901, U.S. Tax Treaties.
I thought we had already put this to rest: you had son=me incorrect advice from some expert, which I had corrected.
But thanks for the IRS input, this is twice in a month that I have sen them give a correct answer, which is more than I have seen in six years.
But thanks for the IRS input, this is twice in a month that I have sen them give a correct answer, which is more than I have seen in six years.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
I retract my previous compliment!!!?
the response you got didn't really answer your question, did it?
"The United States-United Kingdom Income Tax Treaty does not have a
requirement to file an annual report to the IRS when you are neither
receiving nor contributing money to a pension."
Of course it doesn't.
The treaty also doesn't have the requirement that you report your foreign bank accounts on the TD form either, but you sure as hell have to. The treaties never say what you have to do, they only tell IRS what THEY can or cannot do.
What a load of nonsense!!
Welcome to the IRS.
If your question was whether you need to file Form 3520, why did they not answer that? Or did you not ask them that question?
The answer you got dealt only with TAXATION, not reporting. For example, RRSPs are not taxable by the treaty -- everybody knows that -- but they sure are reportable on 3520, even though the treaty doesn't say they are.
Sorry you didn't get an answer to your question (from IRS), but let that be a lesson to you.
Your tax dollars at work.
the response you got didn't really answer your question, did it?
"The United States-United Kingdom Income Tax Treaty does not have a
requirement to file an annual report to the IRS when you are neither
receiving nor contributing money to a pension."
Of course it doesn't.
The treaty also doesn't have the requirement that you report your foreign bank accounts on the TD form either, but you sure as hell have to. The treaties never say what you have to do, they only tell IRS what THEY can or cannot do.
What a load of nonsense!!
Welcome to the IRS.
If your question was whether you need to file Form 3520, why did they not answer that? Or did you not ask them that question?
The answer you got dealt only with TAXATION, not reporting. For example, RRSPs are not taxable by the treaty -- everybody knows that -- but they sure are reportable on 3520, even though the treaty doesn't say they are.
Sorry you didn't get an answer to your question (from IRS), but let that be a lesson to you.
Your tax dollars at work.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Sadly, you are quite right.
Even though they IRS wrote "The United States-United Kingdom Income Tax Treaty does not have a requirement to file an annual report to the IRS when you are neither
receiving nor contributing money to a pension." That is not relevant.
I think the question may the following,
Do I need to file, IRS form 8833 "Treaty-Based Return Position Disclosure Under Secton 6114 or 7701(b)" ?
Publication 519 (2006), "U.S. Tax Guide for Aliens" says under point 2 of exceptions below
9. Tax Treaty Benefits
Reporting Treaty Benefits Claimed
If you claim treaty benefits that override or modify any provision of the Internal Revenue Code,
and by claiming these benefits your tax is, or might be, reduced, you must attach a fully
completed Form 8833 to your tax return. See Exceptions, below, for the situations where you are
not required to file Form 8833.
[snip]
Exceptions. You do not have to file Form 8833 for any of the following situations.
1. You claim a reduced rate of withholding tax under a treaty on interest, dividends,
rent, royalties, or other fixed or determinable annual or periodic income ordinarily
subject to the 30% rate.
2. You claim a treaty reduces or modifies the taxation of income from dependent
personal services, pensions, annuities, social security and other public pensions,
or income of artists, athletes, students, trainees, or teachers. This includes taxable
scholarship and fellowship grants.
[snip]
Penalty for failure to provide required information on Form 8833.
If you are required to report the treaty benefits but do not, you may be subject to a
penalty of $1,000 for each failure.
So it looks I will have to try sending another question.
Even though they IRS wrote "The United States-United Kingdom Income Tax Treaty does not have a requirement to file an annual report to the IRS when you are neither
receiving nor contributing money to a pension." That is not relevant.
I think the question may the following,
Do I need to file, IRS form 8833 "Treaty-Based Return Position Disclosure Under Secton 6114 or 7701(b)" ?
Publication 519 (2006), "U.S. Tax Guide for Aliens" says under point 2 of exceptions below
9. Tax Treaty Benefits
Reporting Treaty Benefits Claimed
If you claim treaty benefits that override or modify any provision of the Internal Revenue Code,
and by claiming these benefits your tax is, or might be, reduced, you must attach a fully
completed Form 8833 to your tax return. See Exceptions, below, for the situations where you are
not required to file Form 8833.
[snip]
Exceptions. You do not have to file Form 8833 for any of the following situations.
1. You claim a reduced rate of withholding tax under a treaty on interest, dividends,
rent, royalties, or other fixed or determinable annual or periodic income ordinarily
subject to the 30% rate.
2. You claim a treaty reduces or modifies the taxation of income from dependent
personal services, pensions, annuities, social security and other public pensions,
or income of artists, athletes, students, trainees, or teachers. This includes taxable
scholarship and fellowship grants.
[snip]
Penalty for failure to provide required information on Form 8833.
If you are required to report the treaty benefits but do not, you may be subject to a
penalty of $1,000 for each failure.
So it looks I will have to try sending another question.
My question to the IRS was basically the same as the original post in this thread. Which was
"My wife and I have three UK pensions, two of them are Defined Contribution pensions and one is a Defined Benefit pension. There is a U.S.-U.K. Tax treaty that describes how pensions are treated for tax purposes, "containing the conventional provision that pension and social security benefits are taxable only in the recipient's country of residence at the time of distribution." (There is a short article at http://www.watsonwyatt.com/us/pubs/insi ... cleID=8818 and IRS has a link at http://www.irs.gov/irb/2005-18_IRB/ar10.html). So that covers how the money is taxed, i.e. basically, no tax until retirement.
But am I required to report to the IRS that I have a foreign pension, when I am neither contributing nor receiving any money from it?
Inotherwords, if you have a Canadian RRSP you have to file a Form 8891 every year. Is there equivalent requirement for a UK pension?
I am already familiar with the Dept. of Treasury "TD F 90-22.1" form."
"My wife and I have three UK pensions, two of them are Defined Contribution pensions and one is a Defined Benefit pension. There is a U.S.-U.K. Tax treaty that describes how pensions are treated for tax purposes, "containing the conventional provision that pension and social security benefits are taxable only in the recipient's country of residence at the time of distribution." (There is a short article at http://www.watsonwyatt.com/us/pubs/insi ... cleID=8818 and IRS has a link at http://www.irs.gov/irb/2005-18_IRB/ar10.html). So that covers how the money is taxed, i.e. basically, no tax until retirement.
But am I required to report to the IRS that I have a foreign pension, when I am neither contributing nor receiving any money from it?
Inotherwords, if you have a Canadian RRSP you have to file a Form 8891 every year. Is there equivalent requirement for a UK pension?
I am already familiar with the Dept. of Treasury "TD F 90-22.1" form."
Continuing with my question to the IRS, which is "I have a UK pension account. I am not retired, I receive no income from it. Do I need to report it in anyway, with my annual IRS tax return? Please ignore the "TD F 90-22.1" requirement when responding."
------------------
My (flawed?) logic regarding form 8833 in the earlier post is.
My pension plan is not a US pension plan, therefore if were not for the UK-US tax treaty, any interest or dividends accumulated within the plan would be subject to the normal US taxation rules.
However, since there is UK-US tax treaty that contains specific rules for pensions, the money accumlated in the pension plan is not taxed until it is distributed to me at retirement.
(One would hope the matter would end there.)
However what IRS Publication 519, that I quoted, appears to be saying is "if the reason that your pension accumulations are not subject to taxation is based on a tax treaty, then you must file a 8833 to claim the benefit, except in one of the following situations - you claim a treaty reduces or modifies the taxation of income from ... pensions, ..."
Which is as clear as mud to me.
------------------
My (flawed?) logic regarding form 8833 in the earlier post is.
My pension plan is not a US pension plan, therefore if were not for the UK-US tax treaty, any interest or dividends accumulated within the plan would be subject to the normal US taxation rules.
However, since there is UK-US tax treaty that contains specific rules for pensions, the money accumlated in the pension plan is not taxed until it is distributed to me at retirement.
(One would hope the matter would end there.)
However what IRS Publication 519, that I quoted, appears to be saying is "if the reason that your pension accumulations are not subject to taxation is based on a tax treaty, then you must file a 8833 to claim the benefit, except in one of the following situations - you claim a treaty reduces or modifies the taxation of income from ... pensions, ..."
Which is as clear as mud to me.
US Treatment of UK pensions
Dear benryan - I know it has been a few years but did you ever get any clarificationon if you needed to file a 3520 / 3520-A for your UK pensions? I have a similar situation (I have UK employer sponsored defined benefit and defined contribution pensions, plus a SIPP). I have received conflicting views..."no" I dont need to do them because they are employer plans and/or they are protected under the UK US treaty...and "yes" because technically they are foreign trusts no matter what.