How to enter income from NR4 code 39 on US tax return

[Fer4]

I am a US citizen living in the US. I worked in Canada for a private employer in the past and started to collect a small pension in 2022. I am using TurboTax Deluxe and would like to understand in detail how to enter the income reported in the NR4 form with code 39 that I just received from the payer. This is not a pension from the government but from a private employer. I have read several posts on the subject, mostly from 2019, that suggest entering this income using a 1099-R, others talk about using a substitute 1099-R, others suggest 1099-S, and others to enter this as Miscellaneous. I am not sure which one is applicable to my case. I tried 1099-R but there is no match between the fields in the NR4 form and the 1099-R. Also the 1099-R asks for a Federal ID of the payer, but the payer is in Canada. Is there any updated information on how to do this for filing taxes in 2022? Also, I understand that in order to avoid double taxation I need to file form 1116.  Will TurboTax add form 1116 automatically if I choose to use Foreign Tax Credit? Your help is much appreciated.

[ErnieS0]

There is no update. Enter your NR4 code 39 as a 1099-R as Tax Expert Alumni DianeC958 suggests in Filing 1099-R for Canadian Retirement Income (RMD).

She suggests using 11-1111111 as the federal tax number.

The boxes will not match. Use Gross Income from your NR4 as Gross Distribution (line 1) and Taxable Amount (line 2a) on the 1099-R screen. 

Covert your amounts to U.S. dollars. See Yearly Average Currency Exchange Rates.

TurboTax will not automatically add Form 1116. To claim a foreign tax credit or deduction:

1. Type foreign tax credit in Search (magnifying glass) in the upper right corner
2. Select  Jump to foreign tax credit
3. Complete the screens to claim either the credit or deduction

For more help: Where do I enter the foreign tax credit (Form 1116) or deduction?

Use the non-resident tax withheld (converted into U.S. dollars) from Form NR4.

[Fer4]

Thank you very much ErnieS0 for the information. I will follow your instructions and let you know if I have more questions.

[Fer4]

A couple of questions about the information on 1099-R: 1) The amounts on lines 1 and 2a have to be converted from Canadian to US dollars, correct? Is the average exchange rate provided in the link that you attached applicable to this case? I read in the instructions of form 1116 that the taxes paid to a foreign country have to be converted at the exchange rate effective on the date that they were withheld. 2) What do I enter for the distribution code in Box7? TurboTax is asking me to contact the payer for that information but that must be for a U.S. payer.  In this case the payer is in Canada. Thank you again for your help.

[DMarkM1]

Yes. Here is a currency exchange tool in which you can pick a historical date.  There several available online to choose from.  Assuming you met all the requirements for distributions from the plan use code 7 for "Normal distribution."  Code 39 indicates pension benefit on a periodic basis which matches code 7.  

[Fer4]

Thank you for the information. 

Is there anyway to upgrade my TurboTax Deluxe edition so that I can have my taxes done by a TurboTax consultant? Or, do I need to pay a completely separate fee for that service?

[MoniqueLO_]

If you are using TurboTax Online, please see How do I upgrade or switch to a higher version of TurboTax Online? for instructions. 

If you are using TurboTax software, please feel free to contact Customer Support so you can speak with someone who can assist you. 

For more information about TurboTax Live Full Service please see: What is TurboTax Live Full Service?

@Fer4 
 

[Fer4]

I followed the instructions from DMarkM1 and entered all the information from my NR4 onto the 1099-R. I am now working on the Foreign Tax Credit portion to claim what the Canadian payer withheld from my income. In order to have a better understanding of what is needed for this part, I decided to first download form 1116 and instructions, manually filled it out, did all the calculations and came up with the Foreign Tax Credit that I am entitled to on Line 35, Part IV, of the 1116 form.  According to this I am entitled to about $us 700 of credit. However when I go through the interview questions of the Foreign Tax Credit section of TurboTax, it ends up telling me that I am not entitled to this credit.   Part of the problem seems to be that the interview questions state that foreign taxes paid are reported on income on forms 1099-INT, 1099-DIV, 1099-OID or Schedule K-1, none of which are related to my case.  The foreign income that I am reporting is as if I had received a 1099-R, and ends up on line 5b of form 1040.  So it would seem that the interview questions of Foreign Tax Credit in TurboTax do not cover 1099-Rs.  I would appreciate your suggestions. 

[HopeS]

It depends on the version of TurboTax you are using. However, there s a section relating to other Income Category types. See the screenshot below:

First, you will say No to the question, Do all of the following apply to your foreign income and expenses?

Question 1: All Foreign taxes paid were reported with interest and dividend income only.

Question 2: You are claiming no expenses against foreign income, etc

@Fer4