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US citizen has Irish military pension - how to report?

One TaxAide "client" (a married couple, both US citizens) that I've had for years with a nice, simple, SS + some interest return showed up today for their appointment and told me "oh by the way, [wife] has started a getting an Irish pension".

Turned out years ago wife worked some time for the Irish military and paid into its contributory pension plan. Either they tracked her down or she tracked them down after hearing she might be entitled to a pension and she started drawing it in 2010.

She got a lump-sum back payment of approx $9000 in June and then started getting *dollar-denominated* checks of around $125/month (the pension is constant in euros so of course the dollar amount fluctuates). They didn't (to their knowledge) get any sort of 1099-R for it (not surprising! :) and didn't bother to bring along the forms they did get.

I did the return as if the full $9000 + (6 * $125) was taxable (which left them owing $237) and gave them a completed 4868 and told them to send it in with a $237 check and put the return on extension. I also told them to get me a copy of the Irish pension forms they did get and that I'd spend some time looking into it and that if it turned out to be VERY straightforward I'd be willing to do the return, otherwise I'd turn over whatever info I was able to find and tell them to see a pro.

Some questions I have...

  • Are they going to be stuck using a pro going forward? This aside, their return is truly trivial and it would be nice to be able to keep doing it for them so they can get it done for free (sorry guys :)

  • Is there any chance that any of this could be non-taxable? I imagine that if whatever documentation the Irish pension board sent her doesn't show the contributions made there'll be no choice but to treat it as 100% taxable?

And even if contributions are shown, they would have been made in punts (or whatever the pre-euro Irish currency was called) years ago and so there's no way to know what the actual dollar amount of the contributions were.

I suppose Ireland could report there were total contributions of X euros (with it having done some punt-to-euro conversion), but then what rate to use to convert that to a dollar amount? And is that even allowable since you'd be using a current exchange rate, not the exchange rate at the time of the pension contributions?

  • Any relevant tax treaties in play?

  • In software (TaxWise, specifically), how would this be reported? One could try to use same 1099-R analogue the software has you use to report pensions in general, but (presumably) there's not going to be a payor EIN to put down on the 1099-R "form". Does that mean they'll be permanently barred from e-filing?

Thanks for any info/pointers!

Reply to
Rich Carreiro
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I'd ask them about contributions and use what they tell me

don't Know. There is a treaty regarding a Canadian Old Age Pension. I seem to remember that it is treated as an old age pension.

Probably.

I have two Tax Aide clients who have Quebec (Canada) pensions. Neither has a Canadian Government pension. They come in with their T-? (a Canadian version of the 1099) in $Cdn, the conversion rates. Neither thinks that they mad contributions. They have to paper file because Tax-Wise wont accept a 1099 with out an EIN number that looks like an EIN number.

I know that this is out of scope for Tax Aide. I advise the client and tell them that they may be called on it. I will complete a paper return because I don't think that persons with incomes just above the filing level should have to pay a preparer more than their liability, My standard offer to little old ladies (most of my clientele) to visit them in prison does not apply.

Reply to
Avrum Lapin

It falls under Article 19 paragraph 2(b) of the treaty between the two nations. See below. It is taxable by the US as pension income.

  1. a) Any pension paid by, or out of funds created by, a Contracting State or a political subdivision or a local authority thereof to an individual in respect of services rendered to that State or subdivision or authority shall be taxable only in that State. b) However, such pension shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State.

There was some old ruling relating to a UK or German pension that allowed the taxpayer to use the simplified method to exclude their employee contributions. I don't have the citation but I see no reason why the taxpayer shouldn't be allowed to make the calculation seeing as the income is treated as taxable pension income.

Reply to
Alan

Maybe I can help on this front. I just tried the following in TaxWise, and it passed diagnostics for e-filing. Just link from lines

16a and 16b of the 1040 to a scratch pad. (You'll wind up with two scratch pads.) Put the amount there and it will add to the amounts from 1099-R's.

Of course, I didn't transmit it, so I don't know if IRS will bounce it because there's no corresponding 1099-R.

Phil Marti VITA/TCE Volunteer Clarksburg, MD

Reply to
Phil Marti

If the IRS eFile system rejects it can you just put it in Other Income and eFile it?

Reply to
removeps-groups

I have used that method for reporting a foreign pension for three years straight, and have also included a preparers note saying something like "Line 16 Foreign pension No 1099-R" It e-filed without any problems.

Remember to make a corresponding entry in your state return if required.

Reply to
Don Priebe

Does the IRS ever bounce returns because they show more income in any location than the 1099, W-2, etc. information that the IRS has?

Reply to
Pico Rico

NO! Never.

If such a return gets selected for audit, it's for some other reason.

Reply to
D. Stussy

My Schedule C's always show more income than the 1099's, because not everyone is required to send me one.

Reply to
Stuart A. Bronstein

My income (legitimately) rarely matches my 1099's. The IRS has NEVER sent me a letter unless the mismatch might result in more taxes being paid (it never has).

Reply to
Ron Rosenfeld

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