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Chea Romine
Chea Romine, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 197
Experience:  CPA, Managing Partner of medium sized CPA firm specializing in all areas of tax and accounting.
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Which line in 1040 should I report pension income received

Resolved Question:

My parents are US Citizens and receiving pension income from India state government. Taxes are deducted at source prior to receiving these payments. 

Should they be reporting this income in their US Tax return

If so, which line in 1040 should they report pension income received from foreign country ? 
Where to specify foreign taxes paid on that income to get US tax credit ?

Any guidance on entering this information in TurboTax would be appreciated.
Submitted: 5 years ago.
Category: Tax
Expert:  Chea Romine replied 5 years ago.

Chea Romine :

Yes, they must report the income on their 1040. Report the income on line 16 just as if it were a US pension. Then you must fill out form 1116 Foreign Tax Credit and they will get a credit for all the taxes paid overseas.

Let me know if you need more clarification.

Customer:

1. Should I fill out one copy of 1116 for each parent although they are filing jointly ?

Customer:

2. What should be the category of income in Form 1116 ?

Customer:

3. What exchange rate should be used ? Can i use the year end exchange rate published by US Treasury for FBAR ?

Customer:

4. Can I combine the tax paid on foreign pension along with tax paid on foreign interest on the same Form 1116 ?

Customer:

5. Should 1099R be filled (although not received) OR just enter the total amount on Line 16 without substantiating with 1099R ?

Chea Romine :

1. Just one is fine
2. Retirement
3. Here is the IRS website to get the exchange rate. http://www.irs.gov/businesses/small/article/0,,id=130524,00.html
4. No separate types of income should use different 1116.
5. No you can just enter into line 16.

Customer:

On #2: Income categories to choose from in the form: Passive, General, Section 901(j), re-sourced by treaty, Lump-sum. I have to pick one. Which one do I pick for pension ? and which one for foreign interest ?

Chea Romine :

General for pension and passive for interest.

Customer:

I am still working on the return and may need more clarification on this topic. Bear with me until April 17th before I accept the answer. Thank you.

Chea Romine, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 197
Experience: CPA, Managing Partner of medium sized CPA firm specializing in all areas of tax and accounting.
Chea Romine and 2 other Tax Specialists are ready to help you
Expert:  ShawnA replied 5 years ago.

Hello. My specialty is focusing on YOUR Financial needs. Financial Planner/Business Owner for 20 years. CPA,PFS,QFP,GMMA.

 

What clarification do you still need?