Can anyone tell me why my Grandmother (widow of an Ex US Air force Majour) is being taxed on her widows pension even though she is none-resident in the US (she lives in the UK)

Any help or information on who to talk to would be greatly appriciated by me and My Gran

If she is a US citizen receiving US income that is taxable, she will be taxed anywhere in the world. And even if she is not a citizen US income is taxed at point of receipt and subject to tax treaties that would allow a deduction if she paid tax on the income in UK.

Sorry for the Delay,
She is not a US Citizen (UK) and is a permanant resident in the UK. I belive she recives a widows pension from the US Air force (DOD) and as her husband was a civil servant also one from the Govt. She dosn't pay taxes on one but dose on the other.

What I'm really after is who can I talk to on her behalf to find out if this is correct or not. She has heard of the Status Of Forces Aggreement but could not explain it very well.

Any help is as ever greatly appriciated.

ARTE ET MARTE

Maybe you could contact the Retired Affairs Office at RAF Mildenhall and ask if they can help.

A nonresident alien is subject to U.S. income tax only on certain income from sources within the United States. You mother fits that definition. She is required to report and pay taxes on taxable income received in the US, subject to tax treaties. Each bilateral tax relationship creates unique rules of credits and deductions that a taxpayer may take. I know that the DFAS pension is taxable income and as such DFAS must deduct the required withholding. I do not know if the other pension is taxable, or if the amount would put it below the threshold, but that may mean that taken together your mother may owe taxes.

Tax treaties usually provide the citizens of one country do not pay taxes twice on the same income, but that they pay in combination the highest rate.

I am far from an expert on this part of the tax code. Here are some IRS links to review.

http://www.irs.gov/businesses/.../0,,id=96414,00.html

http://www.irs.gov/businesses/.../0,,id=96392,00.html

http://www.irs.gov/businesses/.../0,,id=96477,00.html

http://www.irs.gov/businesses/.../0,,id=96454,00.html