Where to report employer pension contributions

What does the feie have to do with claiming a treaty position?

What does the feie have to do with claiming a treaty position?

Well the FEIE distinguishes between the employee and employer contributions to a pension. The employee contribution is earned income, the employer contribution is not treated as earned income. So I'd argue that it is also not "income for personal services", it is an employee benefit.

Treas. Reg. §1.402(b)-1(a)(1) states:
"Section 402(b) provides rules for taxing an employee on contributions made on his behalf by an employer to an employees' trust that is not exempt under section 501(a). In general, any such contributions * * * shall be included as compensation in the gross income of the employee * * *."

If the contributions are included in income as compensation, why wouldn't they be considered derived from personal services?

I agree that the contributions don't meet the definition of foreign earned income because that definition specifically excludes 402(b) contributions.  However, the fact that income does not fall within the definition of foreign earned income does not prevent it from be income derived from personal services. 

Well you are certainly going to be filing an 8833 for any gains within the pension plan and as Guya says there is uncertainty about the rules so I'd file an 8833 for the employer and employee contributions as a CYA strategy. Anyway if you can use FEIE and the treaty or FTCs to exclude the contributions from taxation you will probably be better off if you return to the US as you'll have a tax free basis......but probably a more complicated accounting situation.

I'm also trying to find the answer to this question.

I've opted to have x% deducted from my salary each month and matched by a similar sized (up to a maximum) contribution by the employer into a pension plan.

I've found this in the double tax treaty which I interpret as being able to exclude both contributions from my taxable income:

Happy to hear if I have misunderstood!


(a) Where a citizen of the United States who is a resident of the United Kingdom exercises an employment in the United Kingdom the income from which is taxable in the United Kingdom and is borne by an employer who is a resident of the United Kingdom or by a permanent establishment situated in the United Kingdom, and the individual is a member or beneficiary of, or participant in, a pension scheme established in the United Kingdom,

(i) contributions paid by or on behalf of that individual to the pension scheme during the period that he exercises the employment in the United Kingdom, and that are attributable to the employment, shall be deductible (or excludable) in computing his taxable income in the United States; and

(ii) any benefits accrued under the pension scheme, or contributions made to the pension scheme by or on behalf of the individual's employer, during that period, and that are attributable to the employment, shall not be treated as part of the employee's taxable income in computing his taxable income in the United States.

This paragraph shall apply only to the extent that the contributions or benefits qualify for tax relief in the United Kingdom.

Well you are certainly going to be filing an 8833 for any gains within the pension plan and as Guya says there is uncertainty about the rules so I'd file an 8833 for the employer and employee contributions as a CYA strategy. Anyway if you can use FEIE and the treaty or FTCs to exclude the contributions from taxation you will probably be better off if you return to the US as you'll have a tax free basis......but probably a more complicated accounting situation.

I guess if you want to file the 8833, it can't hurt. Just seems like a waste of time and effort to me. I see no uncertainty (for contributions by the employee, contributions by the employer, or gains within the pension) in the waiver provided in the regulations.

I guess if you want to file the 8833, it can't hurt. Just seems like a waste of time and effort to me. I see no uncertainty (for contributions by the employee, contributions by the employer, or gains within the pension) in the waiver provided in the regulations.

I envy you your certainty.....I don't share it. I believe that if you don't file an 8833 for the gains you are taking an unnecessary risk that could have very nasty consequences.

I'm also trying to find the answer to this question.

I've opted to have x% deducted from my salary each month and matched by a similar sized (up to a maximum) contribution by the employer into a pension plan.

I've found this in the double tax treaty which I interpret as being able to exclude both contributions from my taxable income:

Happy to hear if I have misunderstood!


(a) Where a citizen of the United States who is a resident of the United Kingdom exercises an employment in the United Kingdom the income from which is taxable in the United Kingdom and is borne by an employer who is a resident of the United Kingdom or by a permanent establishment situated in the United Kingdom, and the individual is a member or beneficiary of, or participant in, a pension scheme established in the United Kingdom,

(i) contributions paid by or on behalf of that individual to the pension scheme during the period that he exercises the employment in the United Kingdom, and that are attributable to the employment, shall be deductible (or excludable) in computing his taxable income in the United States; and

(ii) any benefits accrued under the pension scheme, or contributions made to the pension scheme by or on behalf of the individual's employer, during that period, and that are attributable to the employment, shall not be treated as part of the employee's taxable income in computing his taxable income in the United States.

This paragraph shall apply only to the extent that the contributions or benefits qualify for tax relief in the United Kingdom.

You also need to be aware of the saving clause when reading the treaty....this case is one of the few exceptions to it. Also make sure you understand how gains are treated as opposed to income....look at Article 18....and that you have come to a conclusion for which items you want to claim treaty exemption, which can be covered by FEIE or FTCs and how you do that.

Oh okay. So the treaty exemption needs to be specifically claimed rather than both contributions left off the form?

I'll have a read through the saving clause.

I envy you your certainty.....I don't share it. I believe that if you don't file an 8833 for the gains you are taking an unnecessary risk that could have very nasty consequences.

So you think that gains derived in a pension are not income derived with respect to a pension?

Just to be clear, not filing the 8833 doesn't mean you are not claiming the treaty position.  You claim the treaty position by not including the income on your tax return.  You are just not required to disclose explicitly that you are claiming the treaty position.

Just to be clear, not filing the 8833 doesn't mean you are not claiming the treaty position.  You claim the treaty position by not including the income on your tax return.  You are just not required to disclose explicitly that you are claiming the treaty position.

So assuming that the pension plan falls in scope of the treaty, I don't expose myself to any undue risk by just excluding the contributions from my reported income?

So assuming that the pension plan falls in scope of the treaty, I don't expose myself to any undue risk by just excluding the contributions from my reported income?

I don't believe that you would be exposed, but apparently others think you may be exposed.

Just to be clear, not filing the 8833 doesn't mean you are not claiming the treaty position.  You claim the treaty position by not including the income on your tax return.  You are just not required to disclose explicitly that you are claiming the treaty position.

It may be good to look at Internal Revenue Code § 6114, which states -

(a) In general Each taxpayer who, with respect to any tax imposed by this title, takes the position that a treaty of the United States overrules (or otherwise modifies) an internal revenue law of the United States shall disclose (in such manner as the Secretary may prescribe) such position—
(1) on the return of tax for such tax (or any statement attached to such return), or
(2) if no return of tax is required to be filed, in such form as the Secretary may prescribe.

Form 8833 instructions say: "Taxpayers use this form to make the treaty-based return position disclosure required by Internal Revenue Code section 6114." The form itself says "Failure to disclose a treaty-based return position may result in a penalty of $1,000."

It is a matter of 5-10 minutes to complete Form 8833. Why not do it?

It may be good to look at Internal Revenue Code § 6114, which states -

(a) In general Each taxpayer who, with respect to any tax imposed by this title, takes the position that a treaty of the United States overrules (or otherwise modifies) an internal revenue law of the United States shall disclose (in such manner as the Secretary may prescribe) such position—
(1) on the return of tax for such tax (or any statement attached to such return), or
(2) if no return of tax is required to be filed, in such form as the Secretary may prescribe.

Form 8833 instructions say: "Taxpayers use this form to make the treaty-based return position disclosure required by Internal Revenue Code section 6114." The form itself says "Failure to disclose a treaty-based return position may result in a penalty of $1,000."

It is a matter of 5-10 minutes to complete Form 8833. Why not do it?

You only included 6114(a).  Code §6114(b) continues:

b) Waiver authority The Secretary may waive the requirements of subsection (a) with respect to classes of cases for which the Secretary determines that the waiver will not impede the assessment and collection of tax.

The Secretary of the Treasury has provided for waiver of this requirement in various circumstances, including relating to personal services and pensions (see the regulation quoted above).  I don't have any issue with filling out the form.  It is just not necessary to fill out in this circumstance.