Reporting Canadian CPP and OAS on form 1040

[dimancea]

I am US resident and receive Social Security payments from both US and Canada.

THE CONVENTION BETWEEN THE UNITED STATES OF AMERICA AND CANADA WITH RESPECT TO TAXES ON INCOME provides the following:

"If a U.S. citizen and resident receives Canadian social security benefits, Canada will not tax such benefits and the United States will exempt from tax one-half of the total amount of such benefits."

Form 1040 has only one line (20a) to report the total (US and Canada) social security income. Is there a way to report the Canadian SS income separately, so that only 1/2 of the Canadian SS income would taxed?

[dimancea]

I assume the issue I raised is somewhat complicated, since I have not received any replies to my original post.

Maybe, but I am not sure, one solution would be to enter 1/2 of the Canadian SS income on line 1040 and, in the event of an audit, provide the NR4's as back up and invoke the tax treaty.

Has anyone, on this forum, dealt with this particular issue?

Nelsona, can you help?

[JGCA]

If you are a US resident receiving CPP ols age in the US its only taxable in the US up to a max of 85% depending on your AGI there is no 50% rule it could be 85% or less depending on you income and you report it as social security on your 1040

[dimancea]

Thank you for your reply, JG. Are you saying that the stipulation, I quoted from the Canada/US Tax Treaty, exempting 50% of the Canadian SS income received by a US resident, does not apply?

[nelsona]

Where on earth did you get this copy of the treaty there is NO such language (you are reading a VERY OLD copy I'm affraid). The only this that comes close is article 18.5(a), which applies to CANADIAN residents, not US, recieving US social security:

(a) a benefit under the social security legislation in the United States paid to a resident of Canada shall be taxable in Canada as though it were a benefit under the Canada Pension Plan, except that 15 per cent of the amount of the benefit shall be exempt from Canadian tax;

wjhat applies to you is the next paragraph:

(b) a benefit under the social security legislation in Canada paid to a resident of the United States shall be taxable in the United States as though it were a benefit under the Social Security Act, except that a type of benefit that is not subject to Canadian tax when paid to residents of Canada shall be exempt from United States tax.

That means, as JG said. you will not be taxable in canada, and will be taxable only on 85% of your CPP and OAS, just as if it were US social security.

[dimancea]

Thank you. You are right. The original treaty, or an earlier Protocol, had the 50% SS taxable rule: http://www.irs.gov/pub/irs-trty/canatech.pdf. Page 32 para. 5.

It looks like it was modified with the language you mentioned, in a later Protocol.