Do I need to report stocks dividends on 1040NR if withholding already applied?

[heiwang88]

Hello,

I am a Cdn citizen living in Canada who will be filing a 1040NR this year. I gave up my green card Jan last year, and I do not meet the criteria for the exit tax. I have US rental incomes and some W2 income from stock grants from previous years.

I have transferred my brokerage account to RBC and updated my status as a Non-US person. As such, any dividends I received last year already had a 15% tax withholding. I was wondering if such dividends income needs to be reported on my 1040NR, since they're technically "US-sourced"?

[nelsona]

Yes, you report them on the NEC page under dividends, and use the 15% rate. Include the 15% in your tax paid line.

If you were not filing a 1040NR, you would not need to report these.

[heiwang88]

Thanks Nelsona. I tried this but it's not letting me e-file the return because it expects a 1042-S with a matching withheld value. My canadian broker didn't issue a 1042-S to me (only a T5 with the foreign tax paid amount on Box 16). Not sure if I should "convert it" into a 1042-S by manually inputting eqv fields, or file by paper. Any suggestions here? Thank you!

RETURN NOT ELIGIBLE FOR E-FILE: IRS Business Rule "F1040NR-020" states that the following amounts must equal the amount on line 25g, "Form(s) 1042-S," of Form 1040-NR; otherwise, the return will be rejected: - Line 9, "Net tax withheld during 2023," of all Forms SSA-1042S (use line 7, "Amount of tax withheld," if line 9 does not have a value) - Line 10, "Total withholding credit," of all Forms 1042-S - Line 13, "Federal tax withheld," of all Forms RRB-1042S If you made any adjustment to a "Tax withheld" amount on screen NR2 (Schedule NEC) that caused these amounts to not be equal, this return must be paper-filed unless further adjustments correct the inequality.

[nelsona]

Not every return can be efiled.

You could create a 1042-S slip but I beleive this requires a code of the slip.

Mail it in.

[heiwang88]

Thanks Nelsona! The slip wasn't available online, but I contacted my bank (RBC) and they were able to provide me a 1042-S slip.

Others can try the same if they're running into the same issue.

[ArvillaKovacek]

You still need to report dividend income from US stocks, even if the 15% tax has been withheld under the US-Canada Tax Treaty. Although the tax has been withheld, you must declare the entire dividend income on your return to ensure compliance with tax regulations. You can then claim a deduction for the tax paid to avoid double taxation. This helps ensure that you do not have to pay additional tax on this income.

[fadius]

just came across this thread and it's making me nervous (as do most US tax related discussions!).

I'm a Canadian citizen/resident (no US citizenship or residency).
I file a 1040NR to report rental income from a US property. I don't report any other income on the 1040NR.
I do have a non-registered investment account (in Canada) and a TFSA with US stocks and receive dividends (with 15% withholding).

was I supposed to be reporting the dividend income on the 1040NR as well?

[ND]

I disagree with all above comments. "If you were not filing a 1040NR, you would not need to report these." why would one suddenly become required to report dividend income on a 1040NR rental return that one would not otherwise be required to report on a stand-alone return!? As well, IRS is clear that returns need only be filed when incorrect withholding rate was applied. This comment is from the same perspective of the question poser - why is IRS expectation. HOWEVER, Cdns should absolutely file such returns because CRA, without any basis to do so, rejects FTC of the 15% dividend withholding if taxpayer does not provide it with a 1040NR copy and IRS transcript - even for instances where IRS does not require a return to be filed. So, NOT for the reason you're asking, but because CRA is a weirdo, one should file 1040NR.

[Carson]

I agree with ND that I would not report US dividends on which proper 15% US tax was withheld and reported either on a 1042-S or a T3/T5 slip from a Canadian institution. I don't think there is any obligation to do so and you risk the IRS kicking back the return with a denial of the withholding tax and a demand for payment. I have seen this happen.

I disagree though with ND that you should do this to be able to claim your US withholding tax as a FTC on your Canadian return. CRA are just fine with US non-resident tax slips or T3/T5's showing US 15% tax withheld.

Let's not overcomplicate this.

[ND]

RE:I disagree though with ND that you should do this to be able to claim your US withholding tax as a FTC on your Canadian return. CRA are just fine with US non-resident tax slips or T3/T5's showing US 15% tax withheld. Let's not overcomplicate this.

Not helpful to the readers of this forum that you're using theory to disagree with actual facts on the ground. I didn't post a suggestion. I posted actual real life observations of cases of Cdns who earned US source dividends with proper 15% withheld and 1042-S issued and CRA denying FTC until a 1040NR transcript is produced.

[ND]

RE:I disagree though with ND that you should do this to be able to claim your US withholding tax as a FTC on your Canadian return. CRA are just fine with US non-resident tax slips or T3/T5's showing US 15% tax withheld. Let's not overcomplicate this.

Not helpful to the readers of this forum that you're using theory to disagree with actual facts on the ground. I didn't post a suggestion. I posted actual real life observations of cases of Cdns who earned US source dividends with proper 15% withheld and 1042-S issued and CRA denying FTC until a 1040NR transcript is produced.