Do U.K. ISAs and SIPPs count as foreign trusts on a U.S. tax return?

SIPP and ISA treatment on US tax returns

ISAs are just saving accounts - not trusts. Tax deferral is not allowed on the U.S. side. ISA income should be reported on Form 1040 but you are not required to report an ISA as a foreign trust.

SIPPs are trusts to the same extent that every retirement account is a trust by nature.

SIPP are not foreign trusts - beware of redundant forms

Because of the U.K.-U.S. treaty, SIPPs are considered IRS-qualified pension accounts. Therefore, there is no need to report them as foreign trusts. Income in SIPPs can be deferred just like income in a U.S. IRA accounts.

We are often asked this question (is my SIPP a foreign grantor trust), as other tax preparers (often in the U.K) are notorious for preparation of redundant forms to justify high fees they charge for US tax returns. Ironically, along with forms 3520-a they commonly file form 8833 explaining that US retirement plans are IRS-qualified, although it has been determined that this obvious fact does not need treaty-position disclosure.

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