Claiming FTC for IRA early withdrawal 10% penalty tax

patti · Post by **patti** » Sat Apr 26, 2014 11:35 am

I know from reading this forum that Canada now allows FTC for the 10% penalty tax when a resident withdraws funds early from an IRA. I am playing around with Ufile trying to figure out how much I would need to withdraw to get my average Cdn tax rate up to 25% and use the full US withholding (15% treaty rate + 10% penalty rate). But this is not so simple!

My problem is the mechanics of claiming that extra 10% tax. Ufile caps the FTC at normal 15% treaty rate on form 2209. Is there some other place on the return where the extra 10% credit gets entered or do I need to find a way to override this 15% limit imposed by the software to force it onto form 2209? (It seems a shame to do these calculations manually!)

nelsona · Post by **nelsona** » Sat Apr 26, 2014 11:55 am

Ufile has a problem as it limits ALL ftc to 15% when it is only supposed to limit interest dividends and royalties.

You need to override and file paper, or get ufile to fix it.

patti · Post by **patti** » Sat Apr 26, 2014 12:00 pm

Interesting (and disappointing) that Ufile would put this restriction. Oh well. Thank you for confirming that the full 25% FTC should go on form 2209.

Do you know if there is any other Cdn tax software that does this correctly and allows users to claim the full 25% FTC as required?

rlb · Post by **rlb** » Sat Apr 26, 2014 1:47 pm

TurboTax (Canada version) does not impose this restriction.

patti · Post by **patti** » Sat Apr 26, 2014 2:02 pm

Thanks rlb!

Does anybody know about the free software makers such as StudioTax or TaxFreeway? (Hey, if I am going to switch next year, maybe I can save a few bucks!)