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@Terry53029 wrote:

I believe that is tax exempt. Here is a link to our tax treaty with Russia:

https://www.irs.gov/pub/irs-trty/russia.pdf

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This actually depends on a number of factors:

1. Whether the recipient is a tax resident of Russia at the time of payment;

2. Whether the recipient is a Russian or US citizen or both; and

3. Whether the pension is a private pension, government pension, or social security.

To the extent treaty exemption does not apply, foreign pensions are generally subject to US tax as annuities under §72.  Generally, you will need to look to whether the taxpayer has established any basis over the years and that will entail assessing whether the pension was a §402(b) nonexempt employees' trust or foreign grantor trust, which are taxed differently for US tax purposes.  There are special considerations if the taxpayer was a nonresident at some point in time.

Just to throw a spanner in the works, it is not unusual that clients do not understand the technicalities to comply with the appropriate reporting and filing requirements and may have exposures in terms of trust filing and PFIC.