USS pension and Form 3520

Marty, thanks for that.  I was thinking I was probably not the only US citizen receiving a USS pension.

If you don't mind, would you tell me how you handle question 8 on Schedule B, where it asks if you receive distributions from a foreign trust?

Just my opinion, but I'd probably tick trust and write next to it something like "foreign pension", there doesn't seem to be an appropriate choice

Marty, thanks for that.  I was thinking I was probably not the only US citizen receiving a USS pension.

If you don't mind, would you tell me how you handle question 8 on Schedule B, where it asks if you receive distributions from a foreign trust?

Question 8 on schedule B is marked 'No'.

The distributions were entered on 1040,  line 16, with a note as to names of the pension companies (I know there's a debate as to what line to put it on).

My experience with IRS - in London and the US, on the day shift and night shift, in the domestic and foreign departments - was the same as yours. I never, ever got the same answer twice. (My favorite answer was 'what works best for you...?').

Question 8 on schedule B is marked 'No'.

Oops my answer was for the FATCA form.

I don't think UK employer sponsored pension plans where you don't control the assets are relevant for Sch B Part III. Other plans like SIPPs might need to be included.

The question for line 8 seems pretty straightforward: In 2011, did you receive a distribution from,......a foreign trust? Yes or No. If “Yes,” you may have to file Form 3520.

In the further instructions for line 8, that may becomes "If you received a distribution from a foreign trust, you must provide additional information."

Other than 3520, where do you provide the information? 3520 isn't filed with your return, it's sent separately to Ogden, UT., similar to the FBAR being sent to Detroit. Unlike FBAR, it's IRS, not Treasury. Does the information included on 8938 about the pension constitute "additional information"?  

I am very concerned that the recent discussions on pensions, trusts, treaty claims, etc. have gone way beyond the scope of this forum.  It is clear that individuals are taking the word of posters over obtaining tax advice from qualified professionals, who may be able to (1) tailor answers and (2) provide a shared liability.  I caution everyone to remember they are obtaining advice from strangers on the internet and much of what has been recently discussed is (1) highly debated in the tax industry and/or (2) not necessarily consistent with advice that a tax professional would give. 

I know we have a group of very proficient laypersons but I fear certain topics have done more harm then good (unintended of course).  I also fear this is why most of the board's tax professionals are largely no where to be seen on these topics any longer (myself included).

I am not intending to cause offense, as I know this board provides quite a lot of sound advice and has a lot of helpful members.  However it is not a bad thing to remind folks that some topics are not best suited for a public forum.

I found this interesting summary

http://www.nysscpa.org/taxstringer/2012/march/cassidy.htm

I agree with Sara.....being a major culprit. The penalties for getting this stuff wrong are nasty and a professional should give you peace of mind....that's what you are paying for. The subtleties of the way the IRS sees various UK retirement plans could lead to mistakes which I believe Sara is trying to point out. It's nice when the grown ups come along to tell us kids to stop messing about or we will hurt ourselves. I use this board as place to learn and not as a substitute for professional advice. I think the continual use of "IMHO" and "this is just my opinion" is a measure of the uncertainly inherent in many posts, but I appreciate Sara's concern and words of caution.

So "IMHO" and this is just for discussion purposes :-) maybe UK pensions recognized under the treaty are not classified as foreign trusts after all when it comes to filing your 1040, but are they then something like non-qualified foreign pensions with the IRS does not look through to the underlying structure, which would explain the "NO" answer of Marty's CPA to Sch B Q8 and 3520s disappear in a puff of treaty language.

Here are Lizzit and Guya on the subject

http://www.taxalmanac.org/index.php/Discussion:First_Year_Arriving_in_US

I believe we have been making the treatment of UK employer sponsored pensions more complex that it needs to be. So if the UK pension fulfills the definition of a pension scheme under the treaty here is what I believe. Again just an opinion.

The UK pension isn't relevant for Schedule B Part III, it does not need to be included on FBAR, but should be included for FATCA.

Gains inside the pension are exempt from US tax under Article 18 of the Treaty. I think that there's no need to file an 8833 to claim this exemption, but maybe one should be filed just in case.

The saving clause means that distributions from UK pensions are US taxable and you should enter the taxable amount on 1040, line 21.  If you are not a UK tax resident you can claim exemption from UK tax using US-Individual-2002.

Form 8938 still confuses me. How is a foreign pension to be described in Part II and the answer to Q13 here

http://www.irs.gov/businesses/corporations/article/0,,id=255061,00.html

just strikes me as very open ended.

Nun, please explain why you think that my pension is not relevant for Schedule B, Part III. 

Just to set your mind at rest, I am just becoming more and more confused about this whole business, and will probably be getting professional advice. My income normally falls below the tax threshold (this year happens to be an exception).  I thought my financial situation was very simple, but now it seems to have become ridiculously complex.

Nun, please explain why you think that my pension is not relevant for Schedule B, Part III.  

Just to set your mind at rest, I am just becoming more and more confused about this whole business, and will probably be getting professional advice. My income normally falls below the tax threshold (this year happens to be an exception).  I thought my financial situation was very simple, but now it seems to have become ridiculously complex.

Yes it's easy to get into an "Alice in Wonderland" situation with cross-border taxation. Sara Smiles is rightly concerned that we be careful and I regret if anything I've written has caused confusion. I have made statements that at the time I was convinced were correct, but then on further research and thought I changed my mind. I have no tax qualifications, just a interest and a desire to learn and try to share with other enquiring minds, so please take everything with a grain of salt. Having said that I think on the whole these discussions are educational, but they are no substitute for professional advice. So with that in mind here is what I think about Schedule B Part III for UK employer sponsored retirement plans that are pension schemes under the treaty.

Question 7 is about FBAR and UK pension schemes that are traditional defined benefit plans where you don't have signature authority or an account value are not reportable for FBAR.

Question 8 is about foreign trusts and I don't think it's applicable to "treaty pension schemes" as the IRS sees these foreign pensions as employees’ trusts within the meaning of section 402(b) and they have no 3520 filing requirement.

Here is a discussion where Lizzit and Guya (tax gurus) talk about this. Read it carefully and you will see that professionals don't always agree about the details.

http://www.taxalmanac.org/index.php/Discussion:First_Year_Arriving_in_US

Please check this with your professional and maybe tell us what they say.