I am a dual American/Canadian citizen and I have been living and working in the United States for almost 20 years now. I have an insurance policy in Canada that I am interested in cashing out. They tell me that they will withhold Canadian taxes on it (about 25% to 50%) and pay me the rest. I'm wondering what are my options to getting the money being withheld?
Since I've been living and working in the United States for so long, my lawyer/accountant contacted the Canadian Taxation Office saying that I would not be paying taxes in Canada. That was years ago.
Do I need to start submitting Canadian tax returns now to get this money back? Isn't there a limit on how much you can make in Canada before you need to submit a Canadian tax return?
Trying to figure out the best way to get this withholding money back...if possible... :)
Thanks
KerrBee
Cashing In Insurance Policy
Moderator: Mark T Serbinski CA CPA
The GAIN on this payout (that is, the differnce between what you paid and what you get at the payout) is taxable in Canada and US.
Now the payer should non-resident tax (typically 25%) as a matter of course, since you are a non-resident, You need to have the insuarnace company fill out a form T2062B BEFORE you get paid, and they should determine the correct tax that you should have withheld. You would then at year -end file a non-resident tax return, to determine exactly how much tax you owe. The withholding will be a flat amount, but the exact tax will be determined only on your final tax return (based on any other cdn-sourced income you have in the year)
You will also have to report this on your 1040, and use whatever final Cdn tax you pay as a credit using form 1116.
Now the payer should non-resident tax (typically 25%) as a matter of course, since you are a non-resident, You need to have the insuarnace company fill out a form T2062B BEFORE you get paid, and they should determine the correct tax that you should have withheld. You would then at year -end file a non-resident tax return, to determine exactly how much tax you owe. The withholding will be a flat amount, but the exact tax will be determined only on your final tax return (based on any other cdn-sourced income you have in the year)
You will also have to report this on your 1040, and use whatever final Cdn tax you pay as a credit using form 1116.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
While you are non-resident, this is considered Canadian-sourced income, and is thus ALWAYS subject to Cdn tax, just like any Cdn pension you eventually get (but not CPP/OAS, which is specifically exempt).
As a non-resident, there is no minimum thresshold below which you would not file a tax return. Non-residents do not get the statndard personal ammount as a deduction.
As a non-resident, there is no minimum thresshold below which you would not file a tax return. Non-residents do not get the statndard personal ammount as a deduction.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best