Canada split-pension income implications on a 1040 return
Moderator: Mark T Serbinski CA CPA
Canada split-pension income implications on a 1040 return
I have dual Canada/Citizenship , my wife is Canadian, and when doing my wife's & my tax return, split her pension income and move an amount along with the same percentage of tax dollars paid to my return. When I file a 1040, I do not report this income or the corresponding taxes paid as this is not my income and just a paper transfer to reduce Canadian taxes. I have an aquaintance who had their 2010 US 1040 return prepared by a U.S. tax preparer who included this income on a 1040. My question is who is correct?
The pension splitting is NOT recognized by IRS. So if the US person is the one with the pension, and they file for themslelves only in US, they prooably will owe IRS some tax, since they MUST report the whole pension, and can only claim the actual tax they were levied on their Cdn return.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
If it is the husbands pension that is being split, I would assume that he would report the full pension and take a foreign tax credit for taxes paid.
If it is the wife's pension that is being split, I believe that the pension spit to the husband and the corresponding taxes transferred to the husband would not be reported and that their would be no FTC in this situation. I am referring to your comment re MFS. Again this refers to my situation where I have dual citizenship and my wife is Canadian.
If it is the wife's pension that is being split, I believe that the pension spit to the husband and the corresponding taxes transferred to the husband would not be reported and that their would be no FTC in this situation. I am referring to your comment re MFS. Again this refers to my situation where I have dual citizenship and my wife is Canadian.
Lets cut out the confusion:
If Cdn spouse has split their pension with US spouse, the US spouse, if reporting separately, reports nothing of the pension on 1040. they can however report their portion of the pension tax calculated on the Cdn return as a credit (along with tax on other reported income) but the credit will be severlly limited given little or no income was reported. It cannot be a deduction, since the tax was paid by the Cdn spouse.
If the US spouse has split theri pension with Cdn spouse, the US spouse reports ALL the pension on 1040. They can only claim their portion of the tax as calculated on their Cdn return. or they can cliam all the tax that was withheld (and not refunded) as a deduction.
In otherwords, as I said earlier, pension splitting is not the windfall it is meant to be for US/Cdn couple, unless, as JCGA, they file jointly (in which case they weren't going to pay US tax anyways).
If Cdn spouse has split their pension with US spouse, the US spouse, if reporting separately, reports nothing of the pension on 1040. they can however report their portion of the pension tax calculated on the Cdn return as a credit (along with tax on other reported income) but the credit will be severlly limited given little or no income was reported. It cannot be a deduction, since the tax was paid by the Cdn spouse.
If the US spouse has split theri pension with Cdn spouse, the US spouse reports ALL the pension on 1040. They can only claim their portion of the tax as calculated on their Cdn return. or they can cliam all the tax that was withheld (and not refunded) as a deduction.
In otherwords, as I said earlier, pension splitting is not the windfall it is meant to be for US/Cdn couple, unless, as JCGA, they file jointly (in which case they weren't going to pay US tax anyways).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
The IRS does not recognize pension splitting it goes by who does teh pension income belong to period. If teh pension income belongs only to your wife who is not a USC then you do not report this to IRS and you claim no FTC on this and she has no reporting to IRS if she is not required to report due to her not being a USC or resident and you do not file jointly.
JG