US Citizen lives in Australia. Which country should she pay tax to on the US pension?
PaulMcG1st August 2016 23:11 GMTI've been filing both U.S. and Australian taxes for about 12 years now, and my method is as follows:
All U.S. pension income, IRA distributions, etc. are paid into my U.S. credit union account.
I have a direct debit set up with OFX (previously OzForex) to transfer a set monthly amount to my Australian bank from my U.S. credit union account.
I keep a detailed spreadsheet with each pension, IRA distribution tied to the exchange rate on the day it is paid.
I do my U.S. tax return in March/April or earlier each year, using the foreign earned income exclusion, and paying my taxes on the pension/IRA income from my U.S. credit union.
I declare all my U.S. pension/IRA income in my Australian tax return in July/August the same year and get a Foreign Income Tax Offset on tax owed, calculated using the exchange rate on the day the U.S. tax is paid.
Admittedly this is a bit of a pain, but it has worked for me, and does require very detailed record keeping. I have spreadsheets detailing both U.S. and Australian income going back 12 years.