Canada tax question - US pension

[cimit]

Hi,

I am a Canadian citizen. I transferred from Canada to the US with my employer back in 2007 on an L1B and remained in the US from May 2007 - November 2009. I returned to Canada with the same employer at that time, and just worked for the Canadian entity. My 2009 taxes were completed so that I was now considered a Canadian resident as of November 1, 2009. I have filed my 2009 taxes for both Canada and the US, and in 2010, only filed Canada tax forms since I had no US sources of income to report. I have not earned any income in the US from my employer or any other sources since I left in 2009.

During my employment in 2007 while in the US, I was entitled to a company pension plan as part of my compensation which they contributed to on my behalf (DBPP). The vesting period was 3 years and my time with the company in Canada counted towards that. So I only had to work 1 year in the US and then I was vested. Due to the economic situation in 2008, the company stopped contibuting to the pension plan and started to make plans to disband it soon after. While the regulatory papers were being prepared, we could not withdraw any money or transfer to a seperate account, unless we decided to leave the company, in which case we could apply to have the funds moved.

In August 2011, I left the company, and submitted the necessary paperwork to the pension plan company (Vanguard) and I decided to take the funds in cash, rather then leave them in the US in a retirement account. I had to provide a signed W8-BEN with my Canadan Social Insurance Number before they would release the funds. When I did receive the check in the mail, Vanguard had withheld 30% due to taxes.

My questions are:

1) I believe I can (and am required to) apply this income and taxes on my 2011 Canadian taxes, as foreign income and taxes paid which is applied for a Foreign Tax Credit correct?

2) At present I only have a copy of the check stub showing amount owed, amount paid in taxes, and net amount. Is Vanguard required to send me a Canadian T slip for this tax, or any other document? I'm using Turbo Tax and the Foreign Income section indicates income on a T4 slip, Box 72.

3) Am I required to complete a US tax form (1040) for this pension payout? If so, am I only completing it for the pension amount, or do I have to include all of my 2011 Canadian income and Canadian taxes paid?

4) Based on the information I have provided above, are there any other tax tips that I should be aware of for filing in either Canada or the US in regards to this?

Thanks in advance for any help you can provide.

[nelsona]

1. Correct. Except that only 20% of the withholding is considered tax. I believe the reason you were withheld 30% is because you also paid 10% early withdrawal penalty, which CRA will not accept as foreign tax.
2. They will send you a 1099, which CRA will accept.
3. No.
4. no.