CRA interest payment on a departure return - how to report?

puzon23 · Post by **puzon23** » Thu Sep 22, 2016 7:15 pm

Hello all,

I just got an assessment on my wife's departure return. Since it took a long time, CRA paid her interest on the refund that was given to her. It is $9.94 so very little but I want to make sure that I report it correctly so I don't get in trouble for such a silly amount.

My question is about the Canadian return for next year. My understanding is that currently the interest paid to a non-resident (my wife) by a Canadian resident (CRA) who is dealing with one another at arm's length (my wife and CRA) the interest is tax exempt. This suggests that my wife DOES NOT have to file a Canadian tax return next year with this amount. BTW, she will not have any other income from Canadian sources.

Can someone please confirm this?

Also, I do understand that I have to report this interest on my joint 1040 form in US, which is fine.

Hope someone can confirm my understanding of this case.

Thanks!

nelsona · Post by **nelsona** » Fri Sep 23, 2016 12:18 am

Interest pais to non-residents is not taxable. if it was, it would be withheld at the treaty rate, so you would never file a Cdn non-resident tax return to report interest.

RAJUMONI · Post by **RAJUMONI** » Tue Oct 18, 2016 11:02 pm

I am a Canadian Citizen living in US on TN and my last year's tax was filed as Canadian resident till Nov 2015 and US non resident for Dec 2015. CRA accessed my return and confirmed as non resident from 2016 onwards. In 2016 I will file IRS return as joint with wife and US (Michigan) resident .
I have GICs in Canada and I have a peculiar situation that one of the Bank told me that they can't keep my GICs as US resident and so closed all my accounts and paid $1200 interest and issued T5. With other banks I already conveyed as non resident and so they willn't issue T5. Please help me with the following -

1. Do I have to file 2016 CRA return as non resident for the T5 amount $1200? What form to be filled up and how much has to be deducted (is it 25%)?
2. I believe I will report that CDN income converted into USD in 1116 to IRS. Can I get credit for CRA tax paid while reorting to IRS ? If yes how to do that?

Thanks for help in advance.

nelsona · Post by **nelsona** » Wed Oct 19, 2016 9:27 am

As a CDn non-resident, you no longer pay tax in Canada on interest. It simply gets reported on your 1040.
Since there will be no Cdn tax, there is no need for any credit to be given on form 1116.

RAJUMONI · Post by **RAJUMONI** » Wed Oct 19, 2016 3:00 pm

Thanks a lot for quick answer. Just to clarify -
1. I don't file any CRA return in 2016 even if I have T5s.
2. I report all my T5 and NR4 incomes in 1040 as interest and attach T5 & NR4 receipts.

I have another situation - that bank also closed by TFSAs in March 2016 because of US resident (Which was good BTW after reading this forum). I will not receive any T5 because that was TFSAs and so I asked the bank to send me a 2016 TFSA earning statement, which is about $1600. Please confirm me if I'm right -
A. I will report the TFSA earning $1600 in 1040 alongwith the other T5 and NR4s and I will attached the TFSA bank earning statement as proof of TFSA 2016 earning.
B. I will file 3520 and 3520A to IRS for the TFSA details. When do I have to file 3520 and 3520A for year 2016 ?

Thanks for your help in advance.

nelsona · Post by **nelsona** » Wed Oct 19, 2016 4:26 pm

1. Correct. Since you have informed your brokers etc that you are US resident, they will withhold any Cdn tax due on dividends and that will be final payment to CRA. All other income from investments is taxable only where you resident -- the US.

2. You report all income from all sources on 1040 in tha appropriate category for the income.

A. Yes, again in the appropriate categories.
B. At same time as 1040 is fine, but read the instructions for 3520. Also, you may have fatca reporting.