Canadian Govt Grants and 1040 Reporting

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dmendel
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Joined: Sun Apr 23, 2006 1:13 pm

Canadian Govt Grants and 1040 Reporting

Post by dmendel »

Any suggestions for American living and working in Canada (no US income) for reporting the following on 1040:

1. [b]Canada Education Savings Grant[/b]. Is this reported as Line 21 other income? I have called IRS international office and the General Counsel's Office in Washington, and no one seems to have an answer. Some I have spoken with don't think it is even reportable income, since it is a contributed to a trust by the govt, and is not a direct benefit to me (but rather to the beneficiary).

2. [b]Universal Child Care Benefit.[/b] Again, is this reported on Line 21 other income? And if you claim child care expenses (on 2441), do you deduct the UCCB amount (on line 14 of 2441) in computing the credit?

Thanks!
nelsona
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Post by nelsona »

1. The grant is not reported as income.

However, the income that teh RESP generates IS reportable income year-over-year. So any interst, dividends and cap gains the RESP makes is taxable in the contributors name. (it is not the childs, yet).

And the RESP is a foreign trust subject to 3520 reporting.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
lanman2000
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Post by lanman2000 »

Hi there,

Did you ever figure out the answer to your 2nd question about UCCB and where to put it on the US returns?
nquery
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Joined: Tue Feb 14, 2012 7:27 pm

Post by nquery »

I would also love to know if there is a more concrete answer on UCCB benefits. I have researched it a lot and while there are only a few references to it out there, it seems like it ends up on line 21. But possibly people are putting it there simply because they don't know where else to put it ...
lanman2000
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Joined: Wed Jul 29, 2009 8:30 am

Post by lanman2000 »

Ok so I researched this further and here's my findings.

-UCCB is fully taxable in Canada
-Declare it on your canadian return
-Declare it on your US return under other income
-be sure to enter it on a 1116 to get FTC for taxes paid to canada

that's it...
nquery
Posts: 56
Joined: Tue Feb 14, 2012 7:27 pm

Post by nquery »

Yes exactly thanks.
ND
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Post by ND »

CRA on its website says that the UCCB is designed to help Canadian families, as they try to balance work and family life, by supporting their child care choices through direct financial support.

Why then, for 1040 reporting purposes, shouldn't it be equated with "Payments to support children" that are excluded from “gross incomeâ€￾ pursuant to IRC § 71(c)(1)!?

Canada Child Tax Benefit is a tax-free monthly payment made to eligible families to help them with the cost of raising children under age 18. Same argument could be made there too.

Since the treatment of these Cdn items isn't provided by IRS, isn't the taxpayer meant to figure the best fit in the IRC and the underlying substantive principle is the same between IRC § 71(c)(1) and UCCB/CCTB.
nelsona
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Post by nelsona »

CCTB is not taxable in canada and is thus not in US. UCTB is, and therefore is taxable in US too.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ND
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Post by ND »

Why can't UCCB be taxable just in Canada as Cdn govt decided it's income and not a benefit per se, but then on 1040 follow US tax definitions and treat it as excludable from gross income? Why is a taxpayer filing 1040 bound by CRA treatment and what is the underlying reason or rule or source for your blanket statement that since it's taxed in Canada, it's taxed in the US? tks
eortlund
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Post by eortlund »

I just list the UCCB under wages. I wonder how much it really matters where exactly it goes.
eortlund
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Post by eortlund »

ND,

I don't know about you, but I never owe taxes to the US anyway. Do you find that if you report your child tax benefits, it really changes anything in the end?
nelsona
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Post by nelsona »

eortlund. If it didn't matter, there would be one line under income, no?
Its obviously not wages. Its govt payments.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
eortlund
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Post by eortlund »

Well, I guess I've been doing it wrong. Won't have a chance to do it right since my youngest turned 6. But I can advise others on it.
ND
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Joined: Thu Feb 21, 2013 5:28 pm

Post by ND »

The discussion got side-tracked and my question wasn't answered. Can anyone answer it along with providing support? tks. Here it is again: Why can't UCCB be taxable just in Canada as Cdn govt decided it's income and not a benefit per se, but then on 1040 follow US tax definitions and treat it as excludable from gross income? Why is a taxpayer filing 1040 bound by CRA treatment and what is the underlying reason or rule or source for your blanket statement that since it's taxed in Canada, it's taxed in the US? tks
nelsona
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Post by nelsona »

ND, I'll confess that my answer that CRA does so IRS may not sound like a satifactory response. But, since these could be considered as pensions (CRA essentially treats them as such, for example in 217 election space), and govt payments is listed under the Pension and Annuity section of the treaty, then "what one does applies to the other" does fit.

There is an interesting article that discusses this (and quotes the treaty position described above), but the author comes up witha a fundamentally wrong conclusion that the treaty says that UCCB is not taxable "because if your spouse were to file a tax return it would not be taxable". He confuses the owing of tax with taxability. Just because someone has low enough income to not pay tax does not mean something is not taxable.

If however, only the higher-income spouse is filing in US, they would not report the income. But if the lower-income spouse is the US filer, or if they are filing jointly, then it must be reported.
However, I would not say that the IRC section you quote has any bearing on this at all. That is for alimony and support payments, not govt payments.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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