Hello, aboffice! Thanks for reaching out!

For guidance on how to report this 1099-R, we suggest reviewing this article, as it is addresses how to report the commonly employed distribution codes.

Hope this helps!

I guess I wasn't very clear. It is a code 7 normal distribution and I know how to report that. I guess I should have ask how you file? I'm not sure if they pay tax on it here, in Mexico or both. Thanks

In general, US citizens file Form 1040 and pay US income tax on their worldwide income.

This is a citizen of Mexico who worked along time ago in the US, paid into a retirement fund and has now retired BACK in Mexico. Never a US citizen.

Thanks. Your opening sentence was not clear about citizenship of which country. I see you have changed it now.

Start with the US Mexico income tax treaty.

Or @itonewbie may know this off the top of his head.

@sjrcpaThanks for flagging me.

@abofficeIf your client's aunt is a green card holder, the pension to the extent taxable under normal rules would be subject to US tax and her aunt may claim a credit on the Mexican return for US taxes paid.  Otherwise, the pension is taxable only to Mexico, where she is a tax resident, based on Article 19(1)(a) and (2) but she must submit W8-BEN to claim the treaty exemption.  In the event it should have been treaty exempt but no W8-BEN was filed before the distribution, a 1040-NR may then be filed for a refund claim.