Have a Tax Question? Ask a Tax Expert
As a general rule, the pension/annuity articles of most tax treaties allow the country of residence (as determined by the residency article) to tax the pension or annuity under its domestic laws. This is true unless a treaty provision specifically amends that treatment.
Please see IRS publication 597 - http://www.irs.gov/pub/irs-pdf/p597.pdf page 2.
Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada.
Under Article XVIII, pensions and annuities from Canadian sources paid to U.S. residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Canadian pensions and annuities paid to U.S. residents may be taxed by the United States, but the amount of any pension included in income for U.S. tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident.
Please provide the information above to your tax preparer to claim a tax treaty benefits.
Let me know if you need any help.
If the same income is taxable in the US and in a foreign country - the person may claim a credit for taxes paid in a foreign country on your US tax return.
To determine the amount of credit - the person should use the form 1116 and attach it to the tax return. - http://www.irs.gov/pub/irs-pdf/f1116.pdf
Here are instructions - http://www.irs.gov/pub/irs-pdf/i1116.pdf
Please see more details in IRS publication 54 - http://www.irs.gov/pub/irs-pdf/p54.pdf