Where do I input UK Foreign Pension earned on the 2021 return?

[happykamper]

My client has less than $10k/year in UK pension money that automatically deposits into her checking account. The only paperwork she receives from the UK is Form P60 End of Year Certificate. Which is not really helping me.

Where would I claim this pension money on her tax return?

Would we even claim it at all?

I've been reading about FBAR, FTC, 2555, 8833, FATCA and 3520 and 8938 AND the Treaty... it appears that FBAR and FACTA are not needed.

As for info I am gathering about the tax treaty, this pension money is most likely taxed by the UK and would therefore not be taxed by the US...correct?

Has anyone ever dealt with this type of situation?

I just want to make sure I am quadruple checking this.

Thank you kindly!!

[sjrcpa]

Why wouldn't it be taxed by the US?

In the absence of an exclusion I'd say it is taxable pension income. If subject to UK tax, too, a Foreign Tax Credit is available.

[happykamper]

Thank you for your help!

Would I be filing this on any certain form? 2555 or 1116?  My brain is spinning from trying to reach a correct answer. 

I should preface this by saying I'm one of Walter's colleagues, Tish (I am a newbie AFSP tax preparer) using his ProSeries account to reach out to all of you experts! 

Another colleague has suggested entering the pension amounts on the Foreign Employer Comp and Pension (FEC) worksheet...and he said it would transfer the numbers to Form 1116 and 1040.  However, ProSeries does not seem to have this FEC worksheet. 

[happykamper]

Would I enter her pension on a W2 worksheet?  and then check the box: Foreign source income eligible for exclusion on Form 2555?

[George4Tacks]

It is not a w2.

Is the person a US resident living in the US?  If so enter it as pension income. If there is withholding from the UK, then go to work on the 1116. Foreign income exclusion is for Foreign EARNED income (wages,) not for pension.