1042-S what should I do with this

jhuang1213 · Post by **jhuang1213** » Mon Mar 23, 2009 11:24 am

Hi, there
Last year the agent handling my 401K account with my former employer filed 1042-S to IRS to report the earning and tax withhold - I am still try to figure out the reason from them

My questions now are:
1. Should I report these info on 1040NR (as commuter living in Canada and working in US)
2. On which line should I report them in 1040NR, earning as well as tax
3. How should I declare the income in Canada return and claim tax foreign tax credit.

Many thanks

nelsona · Post by **nelsona** » Mon Mar 23, 2009 11:35 am

these earnings are reported on PAGE 4 of 1040NR, as not effectively connected income, not on page one. You should not be subject to anymore US tax than was withheld.

The gross withdrawal is reported on your Cdn return MINUS any contributions you made to the 401(k) -- since you never got to deduct the initial contribution. Remember that you had to boost your US wages by your 401(K) contributions when you first made them. Use the line for pension income.

That net amount will be considered foreign income, along with any other foreign income you have. You can use the tax withheld (but not the 10% penalty) towards your foreign tax credit.

nelsona · Post by **nelsona** » Mon Mar 23, 2009 11:36 am

How much tax and penalty were withheld?

jhuang1213 · Post by **jhuang1213** » Tue Mar 24, 2009 6:38 am

Thanks, Nelsona,
On the form it says 15% tax rate. However, since you asked, I did calculation and it came out as 30%. Can you figure out what is possible reason for this?

nelsona · Post by **nelsona** » Tue Mar 24, 2009 9:18 am

15% is the treaty rate for pension income.