UK State Pension and tax

[This is only a marginal tax issue -- there does not seem to be anywhere for wrinklies problems. Mod -- please feel free to repost somewhere more appropriate]

Been having problems with my UK state pension application. Although I previously lived in the UK for 20+ years on ILR, I worked only about 5-6 years, mostly part-time. DH is still in the UK and became eligible for his state pension last summer. As I intend to return to the UK in early 2013, he thought it best for me to get in my pension application at that time. Long story short, I ended up having to phone the Edinburgh Pension Service last October and was told my pension was paltry (as I expected) but I am eligible to claim based on DH's eligibility and that they would postdate my payments to last June when he starting getting his pension. Further complication: I would have been eligible at age 60 but never bothered to apply then mostly to avoid US tax problems. However, the Pension people have now paid "my" overdue pension to our UK account -- but apparently not the amount based on DH's pension. (He is now trying to sort this out)
Presumably, I will need to report this on my US 2012 tax return -- which we had wanted to avoid by asking them to start my pension payments in January 2013. I am also concerned about the Windfall Elimination Provision which includes reporting any foreign (untaxed in US) pensions to the Social Security Administration, who will "adjust" the amount of US benefit paid. Do I report the figure for my actual UK pension or do I have to report the amount based on DH's pension?
Their phone number is always busy and the answer to my email was simply to refer me to the website. 
Anyone run into this kind of thing?

I'm interested in the responses to this as I'm not certain either, given my wife will be in a similar situation, with both of us receiving a UK OAP and US SS.  I would expect that an individual's WEP is dependent on their own receipt of UK pensions, not of their joint receipt with their spouses.

WEP would be based on earnings not subject to SS tax. If you received a credit, or made voluntary NI contribution's during your working life then this would need to be permutated. 

We believe the US law has the effect that WEP is applicable only to pensions which accumulate by reason of money into a pension account, and not to a state pension credit system. Our colleagues from the cross border planning group dealing with US-Canada issues have won several cases held in private to this effect. However it's been reported by an Israeli USC that the Soc Sec fellows in Maryland decided to ignore his court ruling and to apply the WEP again anyway, only to be taken to court again and lose again (twice). We are still trying to find an easy solution and we don't recommend not telling the IRS about it. At the moment we're taking care to brief the SS persons carefully on first disclosure to them and hoping they will agree without fuss. Feel free to contact me privately.

We believe the US law has the effect that WEP is applicable only to pensions which accumulate by reason of money into a pension account, and not to a state pension credit system. Our colleagues from the cross border planning group dealing with US-Canada issues have won several cases held in private to this effect. However it's been reported by an Israeli USC that the Soc Sec fellows in Maryland decided to ignore his court ruling and to apply the WEP again anyway, only to be taken to court again and lose again (twice). We are still trying to find an easy solution and we don't recommend not telling the IRS about it. At the moment we're taking care to brief the SS persons carefully on first disclosure to them and hoping they will agree without fuss. Feel free to contact me privately.

I understood that it is the SS administration that you inform when applying for SS, and they calculate the WEP, not the IRS.

Of course you need to be reporting the overseas pensions that you are receiving on your IRS tax returns, but the IRS will not look at the SS income you report on your tax return and determine that WEP has not been applied. Do you have experience of the IRS reporting someone to the SSA for not having WEP applied? ( you may well be correct, I'm just reporting what I've read elsewhere)

I understood that it is the SS administration that you inform when applying for SS, and they calculate the WEP, not the IRS.

That was my understanding as well, durhamlad. I have every intention of notifying the SSA (although not sure which amount they want) and also will have my CPA include it on my tax returns.

We are still trying to find an easy solution and we don't recommend not telling the IRS about it.

My reading of the robnw post was the "it" he refers to above is the UK State Pension itself (still tell the IRS about your being in receipt of funds from a UK State Pension). I could be wrong, and if robnw could clarify his comment, it would be of great help. If the interpretation is correct, it would also confirm his firms stance as regards the declaration of the UK State Pension to the IRS as regards the treaty (a much discussed topic a while back). I believe the concensus reached was it should be declared, although not everyone was completely convinced. I believe it should be declared, but my opinion is truly not worth much.

I also would be interested in this.
I report my small UK state pension on my US return as per the advice of my accountant. For me, all it means is that I get fewer Foreign Tax credits than I would if I did not report it.
The SSA and WEP at your initial disclosure does seem to be a trap for the unwary. SSA Maryland gave me varying advice, including 'you only get WEP'd once'. It would have been very beneficial to have had professional advice.
An additional bummer - as I recall, the amount of back payment of your UK pension is considered to be a 'lump sum' by HMRC. It's untaxed and might mean you have to file a UK tax return to pay tax on it. Having been put on their list, it also might mean they require you to file them in the future, for a few years at least. (I should say that my experience was a UK state pension based on my own NI contributions; no spouse was involved. and I'm a UK resident)
It doesn't sound like you have a 'foreign' element, ie., that you're 'combining' US social security in the determination of your UK state pension - but if you are, get ready for truly surreal dealings between the DWP local pensions office and their overseas division.
If I had it to do over, I would get every word of advice I could and understand the whole field before beginning to take any pensions.

An additional bummer - as I recall, the amount of back payment of your UK pension is considered to be a 'lump sum' by HMRC. It's untaxed and might mean you have to file a UK tax return to pay tax on it. Having been put on their list, it also might mean they require you to file them in the future, for a few years at least. (I should say that my experience was a UK state pension based on my own NI contributions; no spouse was involved. and I'm a UK resident)

The Pension Service have been persuaded to put off my back payment (about 10 years) until April 2013 and they will work up the tax owed on that.

As for the WEP, I finally got through to a 'live' person today. Her answers to my questions were fairly vague and basically she said I can photocopy my Award Notice from the Pension Service and send it to my local SSA office along with a letter of explanation. Then they will determine what the damage will be.  I can foresee letters being written to my representative and senator before this is finished.