The Pension Poltergeist: How Benefits Can Summon the IRS

Retirement isn’t an exorcism—it’s an invitation. The moment you apply for Social Security or pension benefits, the IRS may rise from the crypt to review your past filings, foreign accounts, and compliance history. 

You’ve worked hard, paid your dues, and now it’s time to collect. But the IRS doesn’t vanish when your paycheck does. In fact, retirement benefits—especially those with international ties—can trigger fresh scrutiny from the IRS’s compliance systems.

Why Retirement Isn’t a Safe Haven

• Social Security Applications: When you apply, your identity is cross-checked against IRS databases. If your Social Security number is linked to unfiled returns, foreign income, or mismatched data, it can trigger a review. 

• Foreign Pensions: Receiving retirement income from abroad—such as a UK SIPP, Canadian RRSP, or Italian INPS—can raise FATCA and FBAR flags. These accounts may require Form 8938 or Form 3520 reporting. 

• Delayed Filings: If you skipped filing in earlier years or failed to report foreign assets, the IRS may use your pension application as a reason to reopen those skeleton-filled closets. 

How the IRS Detects Ghosts

• AI Pattern Detection: The IRS uses algorithms to match pension income with prior filings. If your reported income suddenly spikes—or if foreign pension income appears without matching disclosures—it can trigger an audit. 
• Public Records & SSA Coordination: The Social Security Administration shares data with the IRS. A retirement claim can reveal marital status, dependents, or foreign residency that contradicts your tax filings. 

Common Triggers for Retirees

• Unreported foreign pension income 
• Missing Form 8938 or FBAR for retirement accounts 
• Claiming dependents without proper documentation 
• Filing as single while public records show a spouse 
• Receiving benefits while living abroad without proper disclosures 

What to Do Before You Apply

• Review Your Filing History: Make sure past returns match your current situation. Amend if needed. 
• Disclose Foreign Assets: File Form 8938 and FBAR if thresholds are met. 
• Coordinate with SSA: Ensure your Social Security records match your tax filings. 
• Consult a Specialist: Especially if you have foreign pensions, trusts, or dual citizenship.