How to claim US-China tax treaty for Chinese pension (article 17)?

Forum|Forum|6 years ago
June 5, 2019
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I am a US resident/Chinese citizen. I received pension from my prior employer in China. According to US-China tax treaty article 17 (https://www.irs.gov/pub/irs-trty/china.pdf), I think the Chinese pension is not taxable in US.

However, I don't know if the pension is still reportable? Do I need to enter this pension in the tax return somewhere? How can I claim this treaty... If so, where?

I also tried to read up on Form 8833 (https://www.irs.gov/pub/irs-pdf/f8833.pdf), it sounded to me that pension is exempt from reporting using this form. Can someone please confirm? Thanks so much!

TurboTax Premier Mac

PopeyeTheSalior

Let's first verify if you qualify for the tax treaty benefit. Please read : According to the US-China tax treaty, pensions paid by the People's Republic of China for services performed for China are exempt from U.S. income tax unless the recipient is both a citizen and a resident of the United States.These exemptions do not apply to income or pensions for services performed in connection with a business carried on by the People's Republic of China or its subdivisions or local authorities. Please also see https://www.irs.gov/pub/irs-pdf/p901.pdf page 28

If you meet the criteria, you would report the foreign pension by creating a substitute Form 1099-R. In TurboTax desktop MAC program, here are the steps:

1. Open your tax file,

2. Across the top, select Federal Taxes/Wages & Income/I'll choose what I work on

3. Scroll down to Retirement Plans & Social Security/IRA,401(k), Pension Plan Withdrawals (1099-R), select Start

4. On screen, Tell Us Which 1099-R You Have, make your selection and check the box I need to prepare a substitute 1099-R and follow the prompts to enter info.

As to the Federal ID, if your foreign institute does not provide an ID number, please try entering nine 9s. If there is an electronic error occurs, remove the above entries and enter the pension under Miscellaneous income. Please see instructions below. Please note that per IRS, as long as the pension is being reported and included in total income, whether entering as a substitute 1099-R or a Miscellaneous entry, it is not problematic.

1. Across the top, select Federal Taxes/Wages & Income/I'll choose what I work on

2. Scroll down to Less Common Income/Miscellaneous Income, 1099-A, 1099-C- Start

3. Next, selectMiscellaneous Income- Other reportable income, select Start to enter info

In order to enter the tax treaty exemption and allow the program to reduce your taxable income, you would enter the exemption amount as a negative figure. Please follow:

1. Across the top, select Federal Taxes/Wages & Income/I'll choose what I work on

2. Scroll down to Less Common Income/Miscellaneous Income, 1099-A, 1099-C- Start

3. Next, selectMiscellaneous Income- Other reportable income, select Start to enter info as a negative amount

A

Anonymous

@TurboTaxLina Thank you for answering my question. The pension I received is from Chinese Government. I read the IRS article you referenced and I believe the pension is exempt because I'm a Chinese with US residence (not a US citizen). I was trying to follow your instructions but had 2 questions: 1) Is there an IRS guidance that entering substitute 1099R is the same of Miscellaneous income? 2) Can you please clarify why I should enter an negative amount in Miscellaneous Income? It seems counter-intuitive. Thanks again! Really appreciate your help!