Reporting UCCB and EI income on US 1040

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whiterhino
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Reporting UCCB and EI income on US 1040

Post by whiterhino »

Hi! I have found the resources on this forum very useful and this is my first post. I am hoping that someone could shed light on how UCCB and EI benefit payments might get reported on US 1040. My spouse and I are both US citizens and Canadian PR living in Canada.

My spouse receives the UCCB (1), and both myself and my spouse have received EI parental leave EI benefits (2).

(1) Where can I report UCCB payments? Is it taxable, reportable or excludable?

(2) I assume EI benefits cannot be excluded via FEIE because they are not earned income. Is it more common to report it under "unemployment compensation", line 19 or "other income", line 21 on form 1040? Some other place? Is it taxable, reportable or excludable?
nelsona
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Post by nelsona »

whatever uccb portion that is taxable in Canada is also taxable in US. You can use the other income line. EI goes on the UI line.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
whiterhino
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Post by whiterhino »

Thanks for the clarification. I just realized that my spouse receives the CCB (not taxable) not the UCCB (taxable). Do I still need to report CCB payments as income on the 1040?
nelsona
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Post by nelsona »

What did I write?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
whiterhino
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Post by whiterhino »

[quote="nelsona"]What did I write?[/quote]

We both wrote UCCB, but it is in fact CCB. I suppose CCB gets reported in the same way on 1040, but if it is not taxable in Canada then should I still report it? Is there a treaty benefit to claim?
nelsona
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Post by nelsona »

(U)CCB are treated the same way in US as in Canada.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
whiterhino
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Post by whiterhino »

Is it necessary to file 8833 to report the income and claim the treaty benefit under article XXII?


"Article XXII
Other Income

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State, except that if such income arises in the other Contracting State it may also be taxed in that other State."
whiterhino
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Joined: Sun Feb 18, 2018 3:53 pm

Post by whiterhino »

Sorry, I meant to ask, is it necessary to file form 8833 to report income from the Canada Child Benefit (CCB) and claim the treaty benefit under article XXII?

"Article XXII
Other Income

1. Items of income of a resident of a Contracting State, wherever arising, not dealt with in the foregoing Articles of this Convention shall be taxable only in that State, except that if such income arises in the other Contracting State it may also be taxed in that other State."
nelsona
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Post by nelsona »

These are considered social benefits and are addressed by the treaty, Whatever socila benefits are taxable in Canada are taxable in US. No need for treaty disclosure.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
whiterhino
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Post by whiterhino »

Ok that’s what I thought. Just wanted to get a sense of how others were handling the situation. I guess GST/HST credit falls under this category as well.

So in the case that a benefit it is not taxable (in Canada), I would not enter the income on line 21? Is there any other place or obligation to report the income?
whiterhino
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Joined: Sun Feb 18, 2018 3:53 pm

Post by whiterhino »

I may be overthinking this, but I am having trouble finding citations supporting CCB being treated as a social benefit under the treaty.

Article XVIII provides how “social security benefitsâ€￾ are taxed in the two countries:

“5. Benefits under the social security legislation in a Contracting State (including tier 1 railroad retirement benefits but not including unemployment benefits) paid to a resident of the other Contracting State shall be taxable only in that other State, subject to the following conditions:

(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; and

(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.â€￾

Article XVIII 5(b) provides that benefits paid under the Canadian social security legislation to US persons in Canada are not taxable by the US. However, “social securityâ€￾ is not explicitly defined in the treaty, so we must resort to Article III paragraph 2:

“2. As regards the application of the Convention by a Contracting State any term not defined therein shall, unless the context otherwise requires and subject to the provisions of Article XXVI (Mutual Agreement Procedure), have the meaning which it has under the law of that State concerning the taxes to which the Convention applies.â€￾

Generally, social security refers to OAS and CPP in Canada, and I can find no other reference in the treaty that would support CCB treated as a social security benefit. Am I not looking in the right section of the treaty?

The other issue I see here is if CCB is considered a social benefit then it would follow that the GST/HST credit and even RESP Canada Education Savings Grant (CESG), and the Canada Learning Bond (CLB) are also social benefits, whether or not they are income-based. Welfare benefits in the US are not taxable, but I don’t think the US definition of welfare benefits applies to Canadian welfare/social benefits due to the treaty language.

Are people incorrectly including CCB and RESP CESG as taxable income on 1040, when it could be argued that it is exempt from US taxation?
Frankd1
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Post by Frankd1 »

With the CCB being non taxable in Canada (no RC62 issued) vs the previous UCCB being taxable, the CCB is not reported to the IRS either.
I'm pretty sure that is what nelsona is referring to when he says it is treated the same in the USA as it is treated in Canada.

Normally the uccb went on line 21 - other income, the CCB wouldn't need to be noted anywhere..
whiterhino
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Joined: Sun Feb 18, 2018 3:53 pm

Post by whiterhino »

That’s what I thought. Any ideas about other social benefits like an RESP CESG or CLB? Is there a synonymous income in the U.S. that is taxable? If Canada is contributing the CESG and CLB to the corpus of the RESP trust, then can I truly ever own it and how could the income ever be attributed directly to me? I’m just trying to make sense of all these Canadian benefits for my recent child. It would also help for tax planning to know how to properly report these other income items.
nelsona
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Post by nelsona »

Only RESP income internal income is taxable. Grant money is not.

None of these is new topics.

As I said from the outset,"(U)CCB are treated the same way in US as in Canada."
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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