Canadian citizen who worked in US for 40 quarters

DonMurphyCanada · Post by **DonMurphyCanada** » Sun May 25, 2014 1:16 pm

I am a Canadian citizen who is eligible to collect Social Security at 62 (I surrendered my green card long ago). So is my wife who is a US citizen living and working in Canada.

What happens at age 62 when we start drawing Social Security in term of me filing US taxes?

Since I will be drawing on Social Security I presume I will then need to file US taxes?

Does that mean I need to declare my Canadian income sources on those US taxes?

nelsona · Post by **nelsona** » Mon May 26, 2014 7:58 am

Cdn residents -- whether US citizens or not -- who receive SS report this only in Canada, and only at 85% inclusion rate.

nelsona · Post by **nelsona** » Mon May 26, 2014 8:11 am

Non-resident non_US citizens with no GC, would only file 1040NR if they had to, reporting US income only. But not for SS, or any other income that was correctly withheld.

nelsona · Post by **nelsona** » Mon May 26, 2014 8:21 am

Sorry, let me an]mend that. You would file 1040NR in any case, reporting all US-source income except SS, but only on the NEC sheet, which is the flat tax rates, which would have been correctly withheld. Unlike Canada, IRS doesn't allow you to skip filing even if you don't owe anything.

OttawaSenators · Post by **OttawaSenators** » Wed May 28, 2014 2:38 pm

Is SS income considered taxable income in Canada? Do you have to report it on Canadian tax return?

nelsona · Post by **nelsona** » Wed May 28, 2014 2:56 pm

What made you think it wasn't.

OttawaSenators · Post by **OttawaSenators** » Wed May 28, 2014 3:00 pm

Just because it was a pension income. So how are both CPP and SS income taxed by Revenue Canada and at what rate?

nelsona · Post by **nelsona** » Wed May 28, 2014 5:08 pm

Um, pensions aren't tax-free last time I looked.

"So how are both CPP and SS [and OAS] income taxed by Revenue Canada and at what rate?"

Depends.

I just explained above how they are taxed for cdn residnts.
I have explained elsewhere how they are taxed for US residents, and am not about to repeat that here, since Murhpy's question was answered to his satisfaction.

OttawaSenators · Post by **OttawaSenators** » Wed May 28, 2014 6:50 pm

Sorry I didn't see the 85% thing. Thnx.

DonMurphyCanada · Post by **DonMurphyCanada** » Sat May 31, 2014 1:28 am

So to clarify when I am drawing social security:

CPP, private Canadian Pensions will lower my social security payments but OAS, RRSP's distributions and 401K distributions will not lower my ss payments (through the WEP process)

nelsona · Post by **nelsona** » Sun Jun 01, 2014 9:55 am

Correct, although the application of WEP to foreign private company pensions is not consistent.

And if you are not filing a US tax return, only the 401(k) distribution will be taxable in US, flat rate 15%.

DonMurphyCanada · Post by **DonMurphyCanada** » Fri Jun 06, 2014 10:23 am

Does Tax Act 2013 understand the flat tax mentioned by Nelson? I am trying to run through the scenerios mentioned on this forum. I have figured out how to invoke 1040NR but is there a wizard question that invokes the flat tax?

I essentially entered 2 sources of income
1) 401K distribution with 15% withholding
2) Canadian Pension with 0% tax withheld (Canadian source income taxed in Canada)

In the early stages of figuring out the Foreign Tax Credit...

Also is there a tax term or IRS term for "Non-resident non US citizens with no GC". I understand what it means but curious they don't have a term for it.

nelsona · Post by **nelsona** » Fri Jun 06, 2014 10:48 am

If you are doing 1040NR, why are you mentionning anything about other non US-sourced income.

And pension income is "not effectively connected" income, this appears on the NEC portion of the 1040NR only.

1040NR is not best handled by software, and is only recently being even attempted by the purveyors of off-the-shelf tax prep software.

And, as i think I said earlier, if your 401(k) income is properly withheld, then you are exempt from even having to file 1040NR. Look at reason 2 from 1040NR instructions: If you have only NEC income and the tax was correct, you don't have to file.

There is nothing to "learn" from prepping 1040NRs fro future scenarios: You will be withheld 15%, and that is it for US taxation. Period end of story.

nelsona · Post by **nelsona** » Fri Jun 06, 2014 10:58 am

I guess when I reversed myself last month, I should't have: you will not be filing a 1040NR, unless your 401(k) broker makes a mistake, and you either pay more or less than 15%.

Now, what you could DECIDE or ELECT to do, is file jointly with your spouse, in order to lower that 401(k) rate to below 15%, when considered with all your other joint income. But this would be on a joint 1040 with your spouse (who is still required to file a 1040), not on a 1040NR.

And this would bring in other reporting requirements on you like FBAR, FATCA, 3520, 8891, that right now, only your spouse has to worry about.

You would only do this, wuith great reservations, if your Cdn taxrate was below 15%, which is unlikley. any saving of US tax would simply be eaten up by CRA.

best to keep things simple: 15% US tax on 401(k), and Cdn tax on everything. minus the 15% already paid on the 401(k).

DonMurphyCanada · Post by **DonMurphyCanada** » Fri Jun 06, 2014 11:05 am

Your correct Nelson, I incorrectly added the non-US income.

I have two sources of US income

1) 401K (covered 15% with w-8 ben). --> nothing to do
2) SS (not taxable/reportable in US) --> nothing to do

No US tax return needs to be filed - awesome!

Thanks for the clarification.