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I have an NR4 Income Code 49 Pension Plan Beneifts - does it…

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I have an NR4...
I have an NR4 Income Code 49 Pension Plan Beneifts - does it need to be recorded on the 1040 form.
Submitted: 8 months ago.Category: Tax
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9/25/2017
Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago
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NR4 income code 49 -– Taxable Quebec Pension Plan benefits.

By law, U.S. citizens and residents must report their worldwide income. This includes income from foreign trusts and foreign bank and securities accounts.

You may be able to take a tax credit or a deduction for income taxes paid to a foreign country. Of course, this is assuming the tax payer filed and paid taxes in Canada on taxable benefits. These benefits can reduce your taxes if both countries tax the same income.

Tax paid to a foreign country is deductible on Form 1116.

Below is a link to the IRS form 1116 Foreign Tax Credit

https://www.irs.gov/pub/irs-pdf/f1116.pdf

Taxes paid to other countries qualify for the foreign tax credit when:They were levied on your income.You were legally obliged to pay them.You did pay them.You did not gain from paying them, andThe United States has not sanctioned the country
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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

Reporting foreign income with Form 1116

Form 1116 first asks you to classify your foreign income by category. You must complete a separate form for each type of income you have.

  • Passive income includes interest, dividend, royalty and annuity income for which you received a 1099 form. The 1099 shows what and whom you paid: taxes in Box 6, and country in Box 7.
  • The general limitation category covers your wages, salary and any highly taxed passive income. Income becomes "highly taxed" for IRS purposes when the foreign country's tax rate is higher than the U.S. rate. For example, if Country Z taxes your interest income at 50 percent, and the U.S. taxes it at 35 percent, the interest you earned in Country Z goes under general limitation income on Form 1116.
  • Section 901(j) countries are the five countries the U.S. has sanctioned. You must report earnings from any of them.
  • The lump-sum distribution category represents income you got from a foreign-sourced pension plan.
  • "Resourced by treaty" relates to tax treaties the U.S. has with other countries. You complete a Form 1116 for this category if the country in which you worked has a special agreement with the U.S. about how it taxes your income as a foreigner. Under "resourced by treaty" agreements, all of your income, including any money you made in the U.S., counts as income from the treaty country when figuring out the taxes you owe it.
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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

Single filers who paid $300 or less in foreign taxes, and married joint filers who paid $600 or less, can omit filing the foreign tax credit form. However, using the form enables you to apply any credit balance to future tax years. Without filing Form 1116, you give up this carryover tax break.

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

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Tax Professional: Chad EA, CFP ®, CERTIFIED FINANCIAL PLANNER TM, Professional replied 8 months ago

If you have any further questions please let me know.

If you are satisfied with this answer, a positive rating by clicking on three stars or more would be appreciated.

Thank you!

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