USA UK employers pension paid to US citizen

[LindaMc]

I have a US client who received a large pension commencement lump sum payment from his former UK employer in 2012. The balance of his account will stay in the UK until he returns there one day.
I have no Form 1099 or HMRC reporting forms
Questions:
1 -Is this taxable in the US? If yes, should it be reported the same way a US pension is reported. Would it likely be 100% taxable?

2 -would the remaining balance (drawdown pension fund) be reportable on Form 8938 & TDF 90-22.1?

Thanks for your help.

 

[kirby]

1. If your client is a U.S. citizen then IRS taxes them on their worldwide income. You will have to read the uk-us tax treaty to see what is taxable.
2. Yes file both. Really big penalties for not filing these.

 

[DavidTreitel]

A commencement lump sum is taxable; but may have some basis. If there is basis you'd figure out the percentage under the general rule.

It may be subject to US early withhdrawal penalties if under age 59.5.

It is foreign source so there may be excess credits from any of the previous 10 years.

You may separately want to file an 8833 to exempt growth in the plan from current US taxation.

The prudent approach is to disclose the plan on both 8938 and FBAR; although not everyone takes this view.