Tax on US Social Security Retirement Benefit

ceng

Hi, I'm a  British citizen living in the UK. Back in the early 80's I worked in the USA for a few years. Now that I am retired I submitted an application to the US Social Security Administration to find out if I was entitled to any retirement benefit. To my surprise they have come back and said 'yes' I can receive a small benefit from them.

My question is, how do I treat this for tax purposes? Is it taxed only in the UK or do I need to submit a tax return to the IRS in the US? Any guidance would be appreciated.

poseidon1

Best move this to the Cutting Tax forum, where some of the contributors have knowledge of the UK / USA double tax agreement, and the territorial priorities relating to the taxation of pension benefits each side of the 'pond'.

Marcon

ceng said:

Hi, I'm a  British citizen living in the UK. Back in the early 80's I worked in the USA for a few years. Now that I am retired I submitted an application to the US Social Security Administration to find out if I was entitled to any retirement benefit. To my surprise they have come back and said 'yes' I can receive a small benefit from them.

My question is, how do I treat this for tax purposes? Is it taxed only in the UK or do I need to submit a tax return to the IRS in the US? Any guidance would be appreciated.

https://www.taxaccountant.co.uk/income-tax-on-us-pensions-and-social-security/ is aimed at dual US/UK citizens but provides helpful reading.

Bostonerimus1

File a W-8BEN with the IRS and claim the tax treaty US tax exemption on SS paid to a UK resident and citizen, Article 17 paragraph 3. You should then include your US SS on the foreign pages of your HMRC self assessment. If the US Social Security Administration does withhold any tax because this is an overseas payment you can claim it back by filing a 1040NR.

QrizB

I was going to tag Bostonerimus but he's already here

EdSwippet

Bostonerimus1 said:

File a W-8BEN with the IRS and claim the tax treaty US tax exemption on SS paid to a UK resident and citizen, Article 17 paragraph 3. You should then include your US SS on the foreign pages of your HMRC self assessment. If the US Social Security Administration does withhold any tax because this is an overseas payment you can claim it back by filing a 1040NR.

Mostly. However, you don't file a W8-BEN with the IRS, only with the payer, and then usually only if requested. I don't recall if SSA asks for it, or if they just handle the treaty automatically.

ceng

Thanks to everyone for their input. 

Looks as if it may be worth submitting a W-8BEN to the US SSA, even though they may not strictky need it. 

Then for paying tax, I only need to add the US income to my self assessment for HMRC and I only need to contact the IRS if US tax is mistakenly taken off my benefit payment.

Is my understanding correct?

Bostonerimus1

ceng said:

Thanks to everyone for their input. 

Looks as if it may be worth submitting a W-8BEN to the US SSA, even though they may not strictky need it. 

Then for paying tax, I only need to add the US income to my self assessment for HMRC and I only need to contact the IRS if US tax is mistakenly taken off my benefit payment.

Is my understanding correct?

Sounds good. Definitely file the W-8BEN and claim the tax treaty tax exemption, but SSA might well ignore than and withhold 30% tax on 85% of your SS payments. If that happens you'll have to file a 1040NR to claim it back.