Section 217 filing rules 2013

[Adnor]

My partner filed a return under 217 for a refund on a small Canadian pension payment he received in 2013. This amount was taxed at 25% After many months CRA is now saying he can't use the Tax Credits because his pension payment was a lump sum. Does section 217 only provide the Canadian Tax Credits for non-residents who receive monthly pension payments, and not for those receiving one payment?

[nelsona]

The type of pension income has no bearing on the use of "Tax Credits" (please define what that is). What does affect 217 election credits is what other income income he had, and if the pension income was "too little" percentage of your world income.

So, a little more detail: what was the pension amount, and what was the total of all other income that he had for 2013, foreign and Cdn.

And was 2013 the year of his move to US?

[nelsona]

While you are formulating your answer, I think I know what has happened.

Tell me if this is correct.

When he reported his pension, he was NOT 90% of his world income. When this is the case, the non-refundable tax credit he can claim is limited to 15% of the pension income. That coincides with the NR withholding rate for periodic pension payments: 15%.

So, what the CRA agent was telling you was that if the pension had been a periodic (mothly), then he would likely get back close to all of the 15%. Let's say 14%, leaving 1% for CRA.

But because the pension is lump-sum, he will get back the same amount of tax (14%), but since he paid 25%, he is leaving back 11%.

So, its not that lump-sums are treated differntly that monthly payments, its just that they are witheld lower, and that withholding more closely matches what 217 would calulate as your refund, in year when your 217 income is not 90% of your world income.

[Adnor]

The Canadian pension payment was about 20,000 Canadian gross. He received about 14,500 Canadian after the tax was withheld. His world income was the same as the pension, no other income. He has lived in US for 19 years.

[Adnor]

Since his only income was the pension payment, what is the percent of the Canada Tax Credits he should claim?

[Adnor]

It was a Union Pension and the amount was 21,000 Canadian. The CRA agent says he can't use any of the Canada Tax Credits shown on the tax form he filed and the reason she gave was because it was a lump sum payment.

[nelsona]

he should be able to claim all the non-refundable tax credits: personal amount, age amount id applicable, even spousal amount if your income was low enough. he can even claim medical expenses. That shoud have brough th etaxble portion of his pension down to 1000-2000, at whicch point the tax is abot 23%. he should have gotten at leasdt $4000 back of his $5000

Did he fill in all the correct forms Schedule A, B, C, etc? Often 217 claims are rejected because of missing documentation. Are you sure he reported all income (interst, social secutity, cap gains, IRA payouts, etc?). Did you sue software, like ufile.ca, beause those are pretty reliable.

But it should NEVER be because the pension income was of the 'wrong" type.

The only thing that it could be is that CRA does not consider this a true pension.

What Code was shown on his NR4 for this income?

[nelsona]

If you don't mind, could you write exactly what CRA wrote on the assessment denying your credits?

[Adnor]

He filed electronically and he mailed in the form but kept no copy so we don't know the code but it was a Union Pension Plan Payment. He has asked CRA to send him a letter so we can see what their determination was based on.

[nelsona]

You didn't keep a copy of the tax slip the Union sent? And didn't keep a copy of his tax return. That seems strange.

What did he file "electronically"? The NR4 form? then it is still in his account. I would suggest you find a copy, since it will be the basis for any appeal.

Any other strange things he did?

[Adnor]

He filed the Tax forms electronically and sent the NR4 by mail as requested. I thought he tried to get the efile to save a copy for him but he says it did not save s copy for him. Can he request CRA to send him copies of his return and the NR4?

[nelsona]

His electronic version of his return would have a report on which field of his NR4 form was populated. he can retrieve a copy of his return, surely.

What software did he use?

The NR4 form had at least 2 copies.

Is this typically how he files his taxes? IRS would love to get a hold of him.

Did he remember to repot the income on his 1040? How is that process going?

[Adnor]

He used the Revenue Canada efile system. He just called CRA to request a copy of the return and they are willing to comply. He did not receive anything from the Pension Plan that had 2 copies. So maybe that was not the NR4, but it was a statement of the payment. We have a copy of that statement.

[nelsona]

Very confusing. Non-residents of canada cannot use CRA e-file.

If taxes were withheld, then there had to be an NR4, and it is always in duplicate, since CRA reminds one (and IRS does the same) to keep a copy.

So, how about IRS. what did you use for Cdn taxes to get foreign tax credit?

This story is getting fishier by the miute.

As you can see, I'd like to help, but there's got to be some effort on your part.

So, what did it say on this "statement of payment"

[nelsona]

I'd be curious how you came to know of the 217 election, as that is pretty sophisticated, and yet somewhat simpler steps like recordkeeping didn't seem to register with you?