I left my job in Canada and moved to the US last year (I am a dual-citizen). When I left I opted to cash-out my Canadian pension from my work as a lump-sum payment. About half of it I was able to roll over into an RRSP and the rest was paid out in cash.
I was only in Canada for less than a month in 2013 before moving so I wouldn't be able to claim the foreign income exclusion since the pro-rated limit will be too low. I assume my only option is to claim the taxes paid on it as a foreign tax credit on form 1116.
Does this count as a "lump-sum distribution"? (requiring form 4972). I will not receive a form 1099-R and I'm not sure that the tax form I will get will include a capital gain amount. Can I just claim it as "general category income" and claim the amount already taxed as a foreign tax credit? Is there some sort of tax treaty law that would apply to this and allow me to exempt the whole amount?
Also in regard to the portion rolled over into an RRSP I am planning to file form 8891 to defer the taxes and report in on my FBAR. I assume that should cover that portion for US tax purposes?
I would appreciate any help that can be given to me on this.
Thanks :)
Reporting pension cash-out from Canada
Moderator: Mark T Serbinski CA CPA
Pensions are not eligible for earned income exclusion, since it is not considered earned income.
Only the portion that was not rolled into RRSP is taxable in US (just as it was in Canada).
Pension income is General limitation income.
Have you filed your 2013 departure return yet, and sinced this lump-sum came to you after you left did you pay the 25% NR withholding? This payout should not appear on your Cdn return, and only the 25% should be paid to CRA.
Since you did not pay US tax on the RRSP contribution you just made, eventually you will pay tax on it when you start taking it out.
Only the portion that was not rolled into RRSP is taxable in US (just as it was in Canada).
Pension income is General limitation income.
Have you filed your 2013 departure return yet, and sinced this lump-sum came to you after you left did you pay the 25% NR withholding? This payout should not appear on your Cdn return, and only the 25% should be paid to CRA.
Since you did not pay US tax on the RRSP contribution you just made, eventually you will pay tax on it when you start taking it out.
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
Thanks for the quick reply.
I sent in a residency determination form (NR73) to Canada Revenue. Since my husband is still in Canada waiting to immigrate they consider me a resident in Canada for tax purposes until he leaves. I spoke to the pension plan and they will be sending me a T4A for the payout in February, from the amounts they told me it was taxed at 30%.
I will have to file both a Canadian and US tax return this year. I was under the impression that I would claim the payout and Canadian income on my Canadian return and claim my US income which would be then tax exempt due to tax treaty laws.
On my US return I would claim the payout amount on lines 16a and b? It seems to need a form 4852 as a substitute 1099-R. Can I only fill in the amount given and taxes taken out on the 4852 and leave the rest blank? (Those are the only values I will have). Also I assume the whole amount is the taxable amount? Older 1116 forms have a check box for "general limitation income" but the new ones only have "general category income" so I'm guessing that is the same.
When I put it in Turbo tax to fill out the 1116 form it only counts 60% of the tax I paid as a tax credit, shouldn't more of it count? Without the foreign income I get back ~$1800 but with it I owe $700. If I was taxed 30% on my Canadian income already shouldn't that be enough?
Also, since I will have to file a Canadian return this year also there is a possibility of getting back a refund from Canada. Do I have to calculate that and subtract any refund I get from Canada off of the taxes I claim that I paid to Canada on my 1116?
I sent in a residency determination form (NR73) to Canada Revenue. Since my husband is still in Canada waiting to immigrate they consider me a resident in Canada for tax purposes until he leaves. I spoke to the pension plan and they will be sending me a T4A for the payout in February, from the amounts they told me it was taxed at 30%.
I will have to file both a Canadian and US tax return this year. I was under the impression that I would claim the payout and Canadian income on my Canadian return and claim my US income which would be then tax exempt due to tax treaty laws.
On my US return I would claim the payout amount on lines 16a and b? It seems to need a form 4852 as a substitute 1099-R. Can I only fill in the amount given and taxes taken out on the 4852 and leave the rest blank? (Those are the only values I will have). Also I assume the whole amount is the taxable amount? Older 1116 forms have a check box for "general limitation income" but the new ones only have "general category income" so I'm guessing that is the same.
When I put it in Turbo tax to fill out the 1116 form it only counts 60% of the tax I paid as a tax credit, shouldn't more of it count? Without the foreign income I get back ~$1800 but with it I owe $700. If I was taxed 30% on my Canadian income already shouldn't that be enough?
Also, since I will have to file a Canadian return this year also there is a possibility of getting back a refund from Canada. Do I have to calculate that and subtract any refund I get from Canada off of the taxes I claim that I paid to Canada on my 1116?
It is debatabel that you are still resident, but no matter at thsi point. That is another reason one should NOT file an nR73 unless asked.
It is not a lump sum,. it is simply gen limit income. For software purposes, you "fill in" a fake 1099-R, not 4852, but that is just to get the numbers onto your tax return.
Lesson for others: when you move to the US, that is your departure date. Don't ask CRA, just infrom them.
1116 is designed to NOT give you credit for foreign tax any more than what you would have paid on average for that income.
That is why it was important that you be Non_resident when you took this oney.
It is not a lump sum,. it is simply gen limit income. For software purposes, you "fill in" a fake 1099-R, not 4852, but that is just to get the numbers onto your tax return.
Lesson for others: when you move to the US, that is your departure date. Don't ask CRA, just infrom them.
1116 is designed to NOT give you credit for foreign tax any more than what you would have paid on average for that income.
That is why it was important that you be Non_resident when you took this oney.
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
Hi, my wife is in a very similar situation. Left Canada in March, cashed some of her private pension contribution (BCHydro), and rolled the rest onto an RRSP.
CRA took 30% of her lump pension withdrawal. This occurred in Sep 2013, when she was not a green car holder.
She started to work in the USA in April, and got her green card in November.
Since 2013 was the year when her departure / arrival happened, I have these questions:
q1: for her Canadian 2013 return, should she NOT report her US earnings from April to Dec, and simply report her canadian income (Jan-Mar and the pension withdrawal?
q2: Similarly, for her first ever US return, should she report her USA income only (Apr-Dec 2013)? And leave out her canadian income?
q3: Or, for her 2013 Canadian return, should she report ALL income (Can and USA), and deduct whatever taxes she paid in USA?
q4: and finally, for her USA return, should she report ALL income (can and USA) and deduct canadian taxes already withheld?
Thanks indeed!!!
Jim
CRA took 30% of her lump pension withdrawal. This occurred in Sep 2013, when she was not a green car holder.
She started to work in the USA in April, and got her green card in November.
Since 2013 was the year when her departure / arrival happened, I have these questions:
q1: for her Canadian 2013 return, should she NOT report her US earnings from April to Dec, and simply report her canadian income (Jan-Mar and the pension withdrawal?
q2: Similarly, for her first ever US return, should she report her USA income only (Apr-Dec 2013)? And leave out her canadian income?
q3: Or, for her 2013 Canadian return, should she report ALL income (Can and USA), and deduct whatever taxes she paid in USA?
q4: and finally, for her USA return, should she report ALL income (can and USA) and deduct canadian taxes already withheld?
Thanks indeed!!!
Jim
Jim
Hi all, I have a supplementary question:
I became a green card holder in April 2013, and moved immediatley to USA.
For all of 2013 I received a private canadian pension distribution, paid monthly. Taxes were withheld in Canada, at 22%
In USA I earned less than $500.
For my first year:
q1: for my canadian tax return: I simply report what I received and what I got taxed, one T-4, simple. But, how and when do I INFORM CRA I have left Canada permanently? I understand i should send a NR73 form, but I get conflicting information/opinions.
q2: for my USA first ever return, I fill out 8891 and 1116 (pension payments received and taxes withheld in Canada). It seems simple, but I'm sure there are things I am ignoring.
q4: If and when I become a 'non-resident of Canada for tax purposes', what happens then?
a. Does CRA tax me for the rest of my life... at a 15% flat rate? (And what about my CPP when I really turn 65?)
b. Or does CRA cease to tax me at all, then I pay USA taxes on my Canadian pension income?
c. I find the Can-USA Treaty a bit obscure.
Inasmuch as I read, and talk to others, I seem to find a different answer to these questions.
Thanks again!
Jim
I became a green card holder in April 2013, and moved immediatley to USA.
For all of 2013 I received a private canadian pension distribution, paid monthly. Taxes were withheld in Canada, at 22%
In USA I earned less than $500.
For my first year:
q1: for my canadian tax return: I simply report what I received and what I got taxed, one T-4, simple. But, how and when do I INFORM CRA I have left Canada permanently? I understand i should send a NR73 form, but I get conflicting information/opinions.
q2: for my USA first ever return, I fill out 8891 and 1116 (pension payments received and taxes withheld in Canada). It seems simple, but I'm sure there are things I am ignoring.
q4: If and when I become a 'non-resident of Canada for tax purposes', what happens then?
a. Does CRA tax me for the rest of my life... at a 15% flat rate? (And what about my CPP when I really turn 65?)
b. Or does CRA cease to tax me at all, then I pay USA taxes on my Canadian pension income?
c. I find the Can-USA Treaty a bit obscure.
Inasmuch as I read, and talk to others, I seem to find a different answer to these questions.
Thanks again!
Jim
Jim
Hi all, I have a supplementary question:
I became a green card holder in April 2013, and moved immediatley to USA.
For all of 2013 I received a private canadian pension distribution, paid monthly. Taxes were withheld in Canada, at 22%
In USA I earned less than $500.
For my first year:
q1: for my canadian tax return: I simply report what I received and what I got taxed, one T-4, simple. But, how and when do I INFORM CRA I have left Canada permanently? I understand i should send a NR73 form, but I get conflicting information/opinions.
q2: for my USA first ever return, I fill out 8891 and 1116 (pension payments received and taxes withheld in Canada). It seems simple, but I'm sure there are things I am ignoring.
q4: If and when I become a 'non-resident of Canada for tax purposes', what happens then?
a. Does CRA tax me for the rest of my life... at a 15% flat rate? (And what about my CPP when I really turn 65?)
b. Or does CRA cease to tax me at all, then I pay USA taxes on my Canadian pension income?
c. I find the Can-USA Treaty a bit obscure.
Inasmuch as I read, and talk to others, I seem to find a different answer to these questions.
Thanks again!
Jim
I became a green card holder in April 2013, and moved immediatley to USA.
For all of 2013 I received a private canadian pension distribution, paid monthly. Taxes were withheld in Canada, at 22%
In USA I earned less than $500.
For my first year:
q1: for my canadian tax return: I simply report what I received and what I got taxed, one T-4, simple. But, how and when do I INFORM CRA I have left Canada permanently? I understand i should send a NR73 form, but I get conflicting information/opinions.
q2: for my USA first ever return, I fill out 8891 and 1116 (pension payments received and taxes withheld in Canada). It seems simple, but I'm sure there are things I am ignoring.
q4: If and when I become a 'non-resident of Canada for tax purposes', what happens then?
a. Does CRA tax me for the rest of my life... at a 15% flat rate? (And what about my CPP when I really turn 65?)
b. Or does CRA cease to tax me at all, then I pay USA taxes on my Canadian pension income?
c. I find the Can-USA Treaty a bit obscure.
Inasmuch as I read, and talk to others, I seem to find a different answer to these questions.
Thanks again!
Jim
Jim
Once you became non-resident, your pension tax in Canada should have dropped to 15%, so you need to have CRA refund you the over-taxed amount.
q1: No, you need to file a departure return and report only the pension you got PRIOR to moving. your departure date will be the way of telling CRA. Do not send NR73. What you were supposed to do is tell your PENSION that you left.
q2. 8891 is for RRSPs only. It that what you have?
q4. Your pensions will always be taxed 15%, withheld by your pension firm.
CPP is special and will only be taxed in US. along with OAS.
You are jumping in on a thread and asking far too many questions.
Please read my answers, and perhaps start a new thread, not mixing with anothers situation and keeping the questions about your spouse separate.
q1: No, you need to file a departure return and report only the pension you got PRIOR to moving. your departure date will be the way of telling CRA. Do not send NR73. What you were supposed to do is tell your PENSION that you left.
q2. 8891 is for RRSPs only. It that what you have?
q4. Your pensions will always be taxed 15%, withheld by your pension firm.
CPP is special and will only be taxed in US. along with OAS.
You are jumping in on a thread and asking far too many questions.
Please read my answers, and perhaps start a new thread, not mixing with anothers situation and keeping the questions about your spouse separate.
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