How to handle US and Canadian Withholding Taxes for RSUs

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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sckor
Posts: 1
Joined: Fri May 11, 2018 8:19 pm

How to handle US and Canadian Withholding Taxes for RSUs

Post by sckor » Fri May 11, 2018 8:38 pm

Brief history -

Canadian Citizen, was in the US on a TN VISA working for a tech company in California from 2015 until late 2017. I received several RSU grants while working in the US. Relocated to back to Canada and am now a Canadian resident working for their Canadian subsidiary. Consequently, I still have my RSU's and they are still vesting. I will not spend enough time in the US this year to trigger the SPT.

On the vest notice, there is withholding for US Federal tax and California state tax that is scaled based on the relative duration of time spent in California vs Canada since the RSU's were granted until the vest date. In addition, the CRA is taking withholding of the full vest amount at the Ontario top marginal tax rate. The total between all of the governments is about 81% withheld. :cry:

I understand that my employer will include the RSU vest income and Canadian withholding amounts on my T4 and will also issue a W2 for the US side withholding.

How do I go about getting relief from the double taxation in this situation?

Do I file a 1040NR/540NR for the US and then claim any amounts they ultimately tax me on as a foreign tax credit on my Canadian return?
Or do I skip the US returns and just file for the foreign tax credit on the Canadian side?
Or do I need to somehow convince the CRA they are only entitled to tax on the portion the US didn't tax me on (it think there is some article in the treaty about which government is entitled to what portions).

Regardless I am puzzled how to enter it in my Canadian return since I don't want to add foreign income to offset the foreign taxes since the CRA will already have that income included on my T4.

Advice appreciated (this will be for tax year 2018, btw).

Thanks!

MaggieA
Posts: 112
Joined: Sun Oct 31, 2004 4:06 pm

Re: How to handle US and Canadian Withholding Taxes for RSUs

Post by MaggieA » Wed Oct 03, 2018 11:50 pm

My story is virtually identical to yours. Now back in Canada working for the Canadian subsidiary, I still have my RSUs and they continue to vest. But here's the difference. On mine, there is Canadian withholding at the BC top marginal rate, which is sad, but that's it. No US withholding whatsoever. Seems like either sckor's employer or mine must be getting it wrong.

Buts1987
Posts: 3
Joined: Sun Jun 21, 2020 9:22 am

Re: How to handle US and Canadian Withholding Taxes for RSUs

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