This discussion has been locked. No new contributions can be made. You may start a new discussion here
Reporting is the simplest question of all but there is much more than that you'd need to find out.
To answer your first question, you should, by right, report that on the line for pension. Since ProSeries doesn't provide for a notation for foreign pension (unlike Lacerte and ProConnect Tax), you won't be able to e-file without an EIN. One way to get around that would be to use the Canadian RRSP input screen to record the distribution.
To determine whether the distribution may be exempt under the treaty, you'd need to know exactly what kind of pension it is.
If it can't be exempted, you'd need to establish your client's basis according to US tax law and principles, which will including reviewing your client's tax position on the prior year returns and determining whether it involves years prior to the establishment of US tax residency (that may precede the acquisition of US green card).
Since foreign pension plans are generally considered trusts for US tax purposes and investments such as ETF and mutual funds within these plans constitute PFICs, which are subject to a punitive tax regime, you will need to review the historical details to determine whether the plan(s) should be classified as nonexempt employees trust(s), grantor trust(s), or a hybrid of both. If your client did not comply with the compliance requirements, make the relevant elections, or pay the applicable taxes, your client could have significant exposure for reporting requirements and tax liabilities, especially since SOL is tolled for incompliance.
I would tread carefully as the IRS has gotten very good, over the years, at connecting the dots when it comes to international tax compliance as well as enforcement. Information such as international pension could give them reasons to look a bit closer. You should, therefore, be aware of the underlying issues to help your client understand and mitigate any related risks and potential exposures.
Still an AllStar
it is not distribution from Pension Plan (like 401K, 403b etc, not investment in Trust and not required to declare under FBAR, FACTA). It is earned pension on the basis of number of years of service with State Electricity Board like PG&E. As per tax treaty any pension payment from Government for number of years of service is tax exempt, but not very clear about pension earned from Public entity.
These are distributions from pension plans, just not qualified pension plans for US tax purposes. That's why you can't apply the same rules as you do with US qualified plans. Foreign pension plans are often investments-linked and are most often trusts (both domestically and under US tax law). Question is whether it's a grantor trust and who the grantor is. You mentioned that the distributions are based on years of service; I suppose that is a DB plan then.
State Electricity Boards in India are generally statutory boards from what I understand. I also believe there are court cases in India that ruled whether they are part of the state for employment purposes. If you have already done your research and concluded the state electricity board your client received pension distributions from constitutes part of the state government, agency, or instrumentality based on Indian law, I would agree that Article 19(2)(a) should apply.
Still an AllStar
Thanks for well explanations the situations. You are right, State Electricity board and some corporations under State control but not consider State Govt for pension benefit and agencies have to pay pension from their own funds (not from State Treasury) like Teachers or other State departments retirees. On Pro-Series tax Software, can not enter pension amount on line 4d of form 1040.. Only can enter on Schedule 1, Part 1 (Additional income) on Line 8, other income with explanation " Foreign pension income"