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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Canada Tax
Satisfied Customers: 1561
Experience:  Tax preparer with 23 years experience, including US/Canada tax returns.
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How do i file Canada nr4 and t4a income on us 1040 tax

Customer Question

how do i file Canada nr4 and t4a income on us 1040 tax return for 2015
Submitted: 1 year ago.
Category: Canada Tax
Expert:  Arthur Rubin replied 1 year ago.

Thank you for using Just Answer. In most cases, it's not that simple. If you are taxed on the income in both the US and Canada, you calculate the US income based on currency conversion at the time the funds become available, so the actual CDN$ numbers on the NR4 are not what is transferred to the US return.

As to where it is reported, I would need more information as to the country the income is sourced to, and your residency and (US) citizenship.

Customer: replied 1 year ago.
Expert:  Arthur Rubin replied 1 year ago.

Your reference to form 8891 suggests the Canadian income is from an RRIF or RRSP, but those would be reported with NR4 code 26, 27, 28, or 43.

In any case, if the income is from a RRIF or RRSP, it is not taxable in Canada. If he made the deferral election on form 8891 (which is no longer required after 2012), he reports the US$ amount of the distribution. I'm not certain whether it's reported on the IRA line or the pension line of the 1040. I'll have to get back to you on that. If he did not make the deferral election, the earnings within the RRIF or RRSP would have had to be reported on the US tax returns in those years, and a US form 8606 would have been required to adjust the basis.

If it's from a pension, as suggested by NR4 code 39, it can be taxed in Canada at at most 15%, per the treaty. That 15% should have been withheld if the payor knows that he lives in the US. He reports the full amount (converted to US$) as a pension, and may take an itemized deduction or Foreign Tax Credit for the 15% withheld. (That conversion to US$ is probably done at the average annual rate, rather than the rate of each payment.)

Expert:  Arthur Rubin replied 1 year ago.

Sorry, that previous answer was wrong in regard RRIFs and RRSPs. Give me a moment to put together the correct answer.

Expert:  Arthur Rubin replied 1 year ago.

If an RRSP, Canadian withholding is 25%, per the tax treaty. If an RRIF, Canadian withholding is 15%. And, per a modification of the treaty, unless you reported some of the earnings as US income before 2012, the election to defer taxation of earnings is automatic. Form 8606 is not used; all distributions are taxed 100% in the US, even that earned during periods you were not a US person.

Expert:  Arthur Rubin replied 1 year ago.

Sorry, I was wrong about the 8606; withdrawals are considered first to come from the basis, which is the value of the account when you became as US person, plus any reported earnings.

Expert:  Arthur Rubin replied 1 year ago.

I was wrong that time, also. Distributions are reported according to the percentage not allocated to basis; but are reported on the interest and dividends line, not on IRA or pension.