Including Canadian elected split-pension income on my 1040?

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bm275
Posts: 2
Joined: Tue Jul 03, 2012 12:12 pm

Including Canadian elected split-pension income on my 1040?

Post by bm275 »

Hello,

I was hoping you could help.

Here is the situation:

- US citizen but have been a Canadian resident my entire working career
- My husband, also US citizen and Canadian resident, has elected to 'split' his pension payments with me.
- Do I report these elected split-pension payments on my US returns (1040, and respectively my 8891s)?

Thanks so much for your help!
bm275
Posts: 2
Joined: Tue Jul 03, 2012 12:12 pm

Post by bm275 »

Just out of curiosity, as I have another friend in a similar situation- would the answer be the same, if both her and her husband were joint US and Canadian citizens?

Thanks!
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

IRS does not accept teh split, so you would be reporting these in the hands of the pension holder. 8891 has nothing to do in this discussion.

As has been previously established, pensions splitting does NOT work well for US citizens, since they end up with income tha twas not taxed in canada, and thus pay extra tax in US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
MGeorge
Posts: 313
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Post by MGeorge »

I think the best way to treat this situation is to file a joint return with your spouse. As I'm sure you're aware, the benefit of pension income splitting is that you minimize your income liability by moving income from a higher earner (in a higher bracket) to the lower earner. The US system lets everyone do this by filing a joint return.

If anyone thinks I'm missing something - please comment.
MGeorge
Posts: 313
Joined: Fri Jun 22, 2012 9:23 am
Location: Canada

Post by MGeorge »

Just re-read my post and thought something might not be clear:
Do the pension income splitting on your Canadian return, then file jointly on the US return.
Regards.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

This works fine HOWEVER, this still forces the non-US mate to report all sorts of things.

Otherwise if it is the US citizen mate who has the pension must report it all, but only declare the tax he ends up paying, which will result in more tax in US.

As you may have noticed, there is an advantage to structuring things such that the non-US spouse doesn;t have top report: TFSA, RESPs, mutual funds, etc.

This is all unravelled by pension-splitting.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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