I wonder if the issue you have is to do with the reporting of the tax withholding. We report our UK (private) pension payments on a cash basis, only reporting the tax withheld and paid to UK Inland Revenue when I succeed in getting them to release the withheld funds to us. UK private pensions paid to US tax residents are to be taxed entirely in the US. So if the UK withholds tax from our pensions, we don't report that immediately to the US IRS, we wait until we've received it back from the UK. Eventually we can complete a form that the UK accepts as proof that we're US taxpayers paying tax on these pensions in the US, and that brings UK withholding to an end. I have no idea if the same rules apply to Canadian private pensions received by US tax-payers. But if the rules ARE similar then I'd imagine that the tax withholding reported would cause a mismatch in the IRS system and cause an issue to be flagged?
