Pension Cashout and 1116

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MSS1976
Posts: 28
Joined: Wed Mar 16, 2011 2:53 pm

Pension Cashout and 1116

Post by MSS1976 »

Hello,

1) I am a Canadian resident, dual US/Can citizen. In 2013, I cashed out a small pension from a Canadian University. Is this considered a "lump-sum" distribution for 1116 purposes? Or general income?

2) Also, where do I report this pension cash out on the 1040? I read somewhere that the IRS gives extra scrutiny to returns with more than $400 in the miscellaneous income category (due to concerns with the self-employment tax). Is there a way to specify that this is a foreign pension?

3) Do I use the exchange rate on the day the pension was cashed out?

Thanks Again :D
nelsona
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Post by nelsona »

1. Gen limit income
2. Um.... Pension income 16a/16b. Its is all taxable.
3. Yes.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
MSS1976
Posts: 28
Joined: Wed Mar 16, 2011 2:53 pm

Post by MSS1976 »

Great! Thanks so much.
charlie12
Posts: 10
Joined: Thu Feb 21, 2013 12:11 pm

Post by charlie12 »

I am a US resident. In December of 2012 I elected to take a pension cash out from my Canadian municipal plan and the check with the tax withholding was cut on December 10, 2012, but I did not receive it and cash it until January 16, 2013. Do I use the exchange rate on the day that the check was issued for both the full distribution and the tax withheld or on the day that I actually cashed the check and received a payout in US dollars?

Second, Tax Act has a form FEC (Foreign Employer Compensation and Pensions) but I'm not sure if this is what I need to fill out and file in addition to reporting it on Line 16 a and b?

Any help would be appreciated. Thanks
nelsona
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Post by nelsona »

The rate shouldn't really matter, since you will use the same exchange for both the income and the tax. Technically, you recieved the money on dec 12.

Just to be certain, was the NR tax withheld EXACTLY 25%, or 15%? You should have an NR4 form issued to you.

The taxact form is their own, I would use it only IF it auto populates 16a/b. If not just "fake" a 1099-R.

The income is gen limit for 1116 purposes and is fully taxable in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
charlie12
Posts: 10
Joined: Thu Feb 21, 2013 12:11 pm

Post by charlie12 »

Thanks for your prompt response.

Yep...NR4 is exactly 25% withholding and I'll see if I can undo the FEC form.

Time to pay up as the 1116 credit is less than the actual tax withheld.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Yes, at the 25% NTR taxrate, you rarely get the full credit.

You are taking a huge tax hit on this income this year (do you also have state tax?) but at least you will be done with that account.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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