Roth reporting

[brianbbc]

In regards to a Canadian owning a Roth, assuming the one time election has been made with cra, and no further contributions done, age 60 and only qualified distributions taken so form 8606 is not required with the irs. Question: does this Roth distribution even need be reported to the CRA even though it is “tax free”? I thinking world income on the T1 then taking the tax credit?

[nelsona]

yes they must be reported as pension income in order to determine your gross income (for HST, CCTB, clawback purposes). They are then deducted on your 25600 line as a treaty exempt income.

[maskdoll]

Just found out that my husband's 401k has traditional account and roth account.
He never reported anything on Roth account to CRA. What could he do?

[nelsona]

Back file the statement and hope for the best.

[steveh2]

nelsona wrote:
> yes they must be reported as pension income in order to determine your
> gross income (for HST, CCTB, clawback purposes). They are then deducted on
> your 25600 line as a treaty exempt income.

I wanted to probe this a little more. I know you have answered this question before and your answer is always consistent.

Is there anywhere that CRA has formally written that to be the case? Or, perhaps I should ask, how certain are you this the correct way to enter the Roth distribution on a T1?

I have looked for written CRA instructions, but haven't found any.

Why I ask is because, when one includes the Roth distribution in income not only does it increase "Net Income before Adjustments" (line 23600) which affects GST, OAS clawback, etc. but it also reduces one's age amount tax credit at line 30100. Doesn't reducing a tax credit, which effectively increases tax payable, have the net effect of taxing the Roth distribution? And isn't that what the tax treaty Article XVIII is attempting to prevent? In the US the Roth distribution is not included in income (line 4b on 1040 is $0), nor does it result in a reduction of standard or itemized deductions.

Thanks.

[nelsona]

Roth distributions ARE considered income -- foreign pension income. Then, the treaty allows you deduct that income on line 25600, which is the purpose of that line.
Social security is treated similarly: you include ALL the income, and then deduct the 15% on line 25600.

CRA wants to know your income for the purposes you mention. That is why the deductions are "below the line".

[steveh2]

Thanks Nelson - just had to double check.