I am a Canadian citizen and resident, non-USC. Back in 2008 I received some stock shares as part of my compensation from the Canadian company I worked for at the time. The shares were for the US parent company, listed on the NYSE, denominated in US$, and held by Smith Barney (now Morgan Stanley) brokerage.
At the time I received them, I did not file a W8-BEN to identify myself as a non-USC Canadian taxpayer. Consequently, the IRS withheld 30% from the small quarterly dividend that I received. Since the amount was trivial (the total annual dividend was < $60 before withholding), I never bothered to correct this. I also did not disclose this income on my Canadian taxes.
I now realize that I should have filed a W8-BEN to reduce or eliminate the IRS withholding, and disclose the foreign dividend income on my Canadian return as 'interest or other investment income', and claim an FTC for any remaining IRS withholding. That still seems like a lot of paperwork for a trivial amount.
Now, however, I would like to sell my shares. The Morgan Stanley website issues me the warning that "Our records indicate that your account is either missing certain tax documents required by the Internal Revenue Service (IRS) or additional tax documentation is required. Failure to complete your tax certification may result in your inability to transact online, or could subject you to additional backup withholding." I assume this is the W8-BEN they require.
My plan is to sell my shares early in 2015, before the first dividend check is issued. There should be no capital gains (a small capital loss) in US$, although there could be a small capital gain in CAN$ if the CAN$ keeps falling. My questions are:
1) If I complete my tax certification, including my Canadian SIN number, will the IRS inform the CRA of my previously unreported US dividend income?
2) Will the IRS inform the CRA of the selling of my shares (and any capital gains)?
3) Under the reciprocity of the US - Canada FATCA agreement, will Morgan-Stanley be required to disclose my account information to the CRA, including any capital gains and the previous dividend income?
Any opinions would be greatly appreciated.
US Dividends - Never filed a W8-BEN
Moderator: Mark T Serbinski CA CPA
Many Canadian Banks do not issue tax receipts for interest payments less than $50.00. CRA states that you are still responsible for reporting it. How many people with small savings accounts go back through their previous year's monthly statements, adding up every $2 or $3 interest payment just do they can report it to the CRA? Not many, I'll bet.