Various upcoming retirement streams from US and 1040NR filing impact.

Hello,

Very glad to have found this resource - there are some very knowledgeable people here who I hope will be able to point me in the right direction for at least some of my questions.

Some background: I am a 63 yo UK Citizen living in the UK but previously worked in the US on a Green Card for about 20 years. My Green Card was voluntarily surrendered and all paperwork filed over 10 years ago. I'm lucky enough to have a 401(k), an employer Pension (monthly annuity) and a Rollover IRA (all pre-tax contributions) from my time working in the US. I have also qualified (40 qualifying quarters) for US SS Benefits. I am aware of the WEP that may reduce my US SS Benefits. I'm trying to get my head around the whole situation with regards to Tax jurisdictions and not paying more taxes than I need to.

So far, I believe I have understood that I can transact partial conversions of the 401(k)/Rollover IRA to a Roth IRA over several years. This will be taxable in the US only, so long as HMRC doesn't deem it as a periodic payment. I've read that this is not an iron-clad position but consensus is that as long as it is not a regular payment/amount it "should" be ok. I would rather not do a full lump sum conversion of the whole 401(k) amount in one go as it would cost me more in tax due to crossing tax thresholds.

I've also read that periodic payments, such as my US Pension (monthly annuity) and SS Benefit payments are taxable only in the UK.

I understand that my SS Benefits can be paid straight into my UK Bank by the SSA if I set it up that way. But I don't think I can set-up my US Pension (monthly annuity) that way - Fidelity currently administers it and I will get a definitive answer from them at some stage. Hopefully someone here can share their experience of receiving a US Pension into the UK.

So, I believe that for a year that I transact only a Roth IRA conversion I would file a corresponding 1040NR and pay the appropriate Tax.
But when I start receiving US Pension (monthly annuity) and/or US SS Benefits how do I report those on the 1040NR? If that year I do not transact a Roth conversion do I have to file a 1040NR and report the US Pension (monthly annuity) and/or US SS Benefits even though they are not US taxable? Further, how does that change in a year that I do transact a Roth IRA conversion?

I hope all that makes sense. Thanks in advance.
Tim

Hello,

Very glad to have found this resource - there are some very knowledgeable people here who I hope will be able to point me in the right direction for at least some of my questions.

Some background: I am a 63 yo UK Citizen living in the UK but previously worked in the US on a Green Card for about 20 years. My Green Card was voluntarily surrendered and all paperwork filed over 10 years ago. I'm lucky enough to have a 401(k), an employer Pension (monthly annuity) and a Rollover IRA (all pre-tax contributions) from my time working in the US. I have also qualified (40 qualifying quarters) for US SS Benefits. I am aware of the WEP that may reduce my US SS Benefits. I'm trying to get my head around the whole situation with regards to Tax jurisdictions and not paying more taxes than I need to.

So far, I believe I have understood that I can transact partial conversions of the 401(k)/Rollover IRA to a Roth IRA over several years. This will be taxable in the US only, so long as HMRC doesn't deem it as a periodic payment. I've read that this is not an iron-clad position but consensus is that as long as it is not a regular payment/amount it "should" be ok. I would rather not do a full lump sum conversion of the whole 401(k) amount in one go as it would cost me more in tax due to crossing tax thresholds.

I've also read that periodic payments, such as my US Pension (monthly annuity) and SS Benefit payments are taxable only in the UK.

I understand that my SS Benefits can be paid straight into my UK Bank by the SSA if I set it up that way. But I don't think I can set-up my US Pension (monthly annuity) that way - Fidelity currently administers it and I will get a definitive answer from them at some stage. Hopefully someone here can share their experience of receiving a US Pension into the UK.

So, I believe that for a year that I transact only a Roth IRA conversion I would file a corresponding 1040NR and pay the appropriate Tax.
But when I start receiving US Pension (monthly annuity) and/or US SS Benefits how do I report those on the 1040NR? If that year I do not transact a Roth conversion do I have to file a 1040NR and report the US Pension (monthly annuity) and/or US SS Benefits even though they are not US taxable? Further, how does that change in a year that I do transact a Roth IRA conversion?

I hope all that makes sense. Thanks in advance.
Tim

I don’t know the answers for sure and my experience is from a USC-UKC living in the UK perspective.

I alternated lump sum IRA to Roth conversions between myself and my wife and only paid US taxes on the conversions. We detailed what we were doing on our HMRC self assessment returns and never had HMRC question the returns.

Even when not doing Roth conversions we file an IRS return that includes our US pensions and SS payments. Not sure that if you are not a USC that you can get away with not filing an IRS return as the IRS will get copies of the associated SSA and US pension tax documents. With SSA payments they go directly to our UK bank and on our IRS return it is listed on the appropriate line on the 1040 with the taxable amount as zero.

We also have distributions from our IRAs and have Wise USD bank accounts linked to our IRA accounts so the payments are extremely easy to transfer to our UK bank account. Our US pensions still go into our US bank but I expect they could also be directed to our Wise USD accounts.

Thanks for the reply durhamlad.

Would you be kind enough to share how you are detailing your Roth conversions on your HMRC SA?

I'll have to do more research on the other aspects of my situation. I may well follow up on this thread though for my wife who IS a USC so your situation is more applicable.

Thanks for the reply durhamlad.

Would you be kind enough to share how you are detailing your Roth conversions on your HMRC SA?

I'll have to do more research on the other aspects of my situation. I may well follow up on this thread though for my wife who IS a USC so your situation is more applicable.

In the HMRC SA section for "Any Other Information" I would put:

"During the 2021 calendar year, I did a Roth Conversion in respect of my Vanguard Pension
Fund of $xx and, since this is a lump sum from a US plan, it is subject to US tax only
and exempt from UK tax and has therefore not been included in this return."

My wife and I started Roth conversions the year we retired in 2010, and 2021 was the last year we did a conversion. We are now 100% Roth IRAs for our retirement accounts. In 2010 we also did rollovers of our employer 401k plans to IRAs which were non taxable events. UK tax year 2017/18 was the first year we did a Roth conversation while tax resident in the UK, so that is 2 conversions each, in alternative years.  I mention this to point out the effort I made to make the lump sum conversions non-periodic.

Very helpful - thank you, durhamlad.

I don’t know the answers for sure and my experience is from a USC-UKC living in the UK perspective.

I alternated lump sum IRA to Roth conversions between myself and my wife and only paid US taxes on the conversions. We detailed what we were doing on our HMRC self assessment returns and never had HMRC question the returns.

Even when not doing Roth conversions we file an IRS return that includes our US pensions and SS payments. Not sure that if you are not a USC that you can get away with not filing an IRS return as the IRS will get copies of the associated SSA and US pension tax documents. With SSA payments they go directly to our UK bank and on our IRS return it is listed on the appropriate line on the 1040 with the taxable amount as zero.

We also have distributions from our IRAs and have Wise USD bank accounts linked to our IRA accounts so the payments are extremely easy to transfer to our UK bank account. Our US pensions still go into our US bank but I expect they could also be directed to our Wise USD accounts.

Hi durhamlad - so in those years when you do a Roth conversion, which is US taxable AND have regular US Pension distributions, which are UK taxable, how do you separate them on your 1040? Maybe it's obvious but I'm a bit rusty on the ins and outs of a 1040 and I'm just trying to get my head around it. Thanks in advance.
Tim

Hi durhamlad - so in those years when you do a Roth conversion, which is US taxable AND have regular US Pension distributions, which are UK taxable, how do you separate them on your 1040? Maybe it's obvious but I'm a bit rusty on the ins and outs of a 1040 and I'm just trying to get my head around it. Thanks in advance.
Tim

Every regular US pension  has a 1099R issued by the company managing the pension and every IRA distribution or Roth conversion has a 1099R issued by the company managing the IRA. Pensions are entered on line 5 and IRA distributions on line 4 of the 1040. Social security is entered on line 6.

Hoping durhamlad or anyone else with experience can answer this follow-up to my original question:
When converting multiple partial Trad IRAs to a Roth IRA over a number of years as durhamlad explains, does each conversion start a new 5 year timer on withdrawals (of those converted funds) from the Roth IRA? E.g. If as a 64 year old in 2024 I set up a Roth IRA and I then immediately do a conversion into it for say $20k and then in 2026 I do another conversion of say $30k, when 2029 comes (5 years since Roth IRA set up and funded) can I withdraw the full $50k, tax and penalty free, or only the $20k from the 2024 conversion and have to wait until 2031 for the remaining $30k?

Many thanks in advance.

Hoping durhamlad or anyone else with experience can answer this follow-up to my original question:
When converting multiple partial Trad IRAs to a Roth IRA over a number of years as durhamlad explains, does each conversion start a new 5 year timer on withdrawals (of those converted funds) from the Roth IRA? E.g. If as a 64 year old in 2024 I set up a Roth IRA and I then immediately do a conversion into it for say $20k and then in 2026 I do another conversion of say $30k, when 2029 comes (5 years since Roth IRA set up and funded) can I withdraw the full $50k, tax and penalty free, or only the $20k from the 2024 conversion and have to wait until 2031 for the remaining $30k?

Many thanks in advance.

I believe you only need to have opened ANY Roth IRA 5 years previously.  Once that 5 year mark is reached with the first Roth, and you are over 59.5 years old then creating new Roths with conversions does not reset that 5 year clock.

Your replies are much appreciated as always durhamlad. Cheers