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Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I am a US Citizen residing in the UK since 1977. I have worked

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I am a US Citizen residing in the UK since 1977. I have worked for two US airlines, while based in the UK. I am now drawing two airline pensions, sourced in the US via PBGC.
Both pension benefits are paid into my US bank accounts, some of it remitted to the UK when needed. The UK tax authorities claim I should pay tax on these pension benefits in whole in the UK because I am a resident of the UK. The IRS claims I should pay tax on the same penion benefits in whole because I have a US passport.
There is a tax treaty in place to avoid double taxation, but none of the contraction states seem to need to recognize the treaty according to Article 1 of the US/UK tax treaty, leaving both contracting states to do as they wish.
How can that be and how should I go about it?
Submitted: 5 years ago.
Category: Tax
Expert:  Lev replied 5 years ago.


Hi and welcome to Just Answer!
Both taxing authorities are correct. As a UK resident you are fully responsible for UK income tax on all your worldwide income.
As you are US citizen - you are required to report all your worldwide income on your US tax return. Because you are a bona fide resident of the UK - you may claim a foreign earned income exclusion. However your pension income is not earned income and may not be excluded.
However - if the same income is taxed in both countries - you may claim a credit for foreign tax paid on your US tax return - thus effectively will avoid double taxation.
Let me know if you need any clarification of help with reporting.

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