How to report distribution reported on NR4 (code 39) on US Taxes? I'm reading conflicting posts on where to add both the distribution and the amount withheld by Canada.

[DMarkM1]

Enter the income as Canadian Registered Pension Income in the "Wages and Income" section using the "Retirement and Social Security" dropdown.  The distribution is taxable.  

Next use the "Deductions and Credits" tab and find the "Estimates and Other Taxes Paid" dropdown.  There you can find the "Foreign Tax Credit (FTC)" topic to enter the Canadian withholding amount.  Categorize the income as "General Income" in the FTC topic.  

NOTE:  Be sure to convert to US dollars.  If the distribution was on a specific date, use a calculator like the one here.  If the distribution was spread throughout the year, you can use the "Yearly Average" converter here.  

[CHughes24]

So if I understand this correctly, I enter the gross distribution  as income using form 1099R AND enter the gross income distribution and the amount withheld under the deductions and credits under the foreign income section?  It seems like I'm inputting the same gross distribution twice, is that correct?

[LindaS5247]

You are entering the distribution as SSA income.  You are then entering any foreign (Canadian) tax paid on that income under Foreign Taxes as "Other Taxes Paid" to get the credit for the tax paid on such distribution.

To enter the NR4, treat it as if it is a SSA-1099 and enter it in the Retirement Plans and Social Security section, under ‘Social Security (SSA-1099, RRB-1099)’.  

Then, go to the Deductions and Credits section and select Foreign Taxes under ‘Estimates and Other Taxes Paid’ to enter any foreign tax you already paid to Canada on that income.

For more info specific to the US/Canadian tax treaty, please see http://www.irs.gov/pub/irs-pdf/p597.pdf
 

[CHughes24]

Thanks for the help but this still isn't clear within turbotax.

Just to be sure I got this correct from the responses.....

I added the gross distribution from the NR4 (changed to US $$) to Box 5 on SSA-1099.

Then under the deductions&credits, Foreign Taxes I selected "tax credit" rather than "itemize" the tax paid.  That takes me to the foreign tax credit computation where I'm asked to include the amount received (used General Income Category) under other gross income and finally that section asks for the foreign tax paid (the amount withheld and noted on the NR4)  All that seem correct?  Thank you so much for your guidance.  It just seemed odd to be including the gross distribution again under the credit section.  

[DianeW777]

Yes, that is correct.  The credit section requires the amount of income you included on your return that was also taxed by a foreign country.  You do record it in two places on the tax return, one in the income section and again when calculating the foreign tax credit.

[GaryCanada]

Some of the posts here I believe are incorrect.

NR4 code 46

ONLY CPP - Canada Pension Plan are treated combined with USA social Security income because they are taxed in the USA under the tax treaty agreement with Canada if you RESIDE in the USA as a tax resident.

NR4 code 39

Other private pensions from employers in Canada are TAXED in Canada and Should NOT be combined with USA social security because the treaty considers them differently (assuming your tax home is the USA for that year).  But I cannot find how that should be coded on the USA side.

[GaryCanada]

NR4 CODE 61 as a tax resident of  BOX 12 USA I changed into an 1099-INT form from a credit union or bank, and made up a tax id of all 111111etc. There is another place somewhere it turbo tax needed to get it to be accepted as I recall.

NR4 CODE 26 as a tax resided of BOX 12 USA is a "worksheet entry" considered an RRIF or  and is entered as certain Canadian Registered Retirement Plans.  CHECK box is  "Registered Retirement Income Fund"    

and RRSP uses the other check box "Registered Retirement Savings Plan"

[GaryCanada]

Certain "Tax Experts" from the USA think Canada Pension Plans are all CPP - like Social Security in the USA.

CPP is treated exactly like USA Social Security in Turbo Tax.  If you collect both, you can convert the CAD amount to USD and on a supporting detail worksheet show each one individually on the downloaded version and it will add them together. The online-version you may have to add them together yourself.

Other Canada pension plans are confused by some of the Turbotax "experts" because they do not understand the differences of the term Canada Pension Plans.

Registered Pension plans RRIF = Registered Retirement Income Fund and RRSP=Registered Retirement Savings Plan.  This are similar to what we call an IRA in the USA. These are entered in worksheets in USA Turbotax. There is a special check box for those plans on the worksheet with the names of those plans spelled out on the Turbotax work sheet.  These are taxed in Canada on an NR4, with Canada tax withheld if you are a USA or Canada tax resident. 

Foreign tax is not shown on the worksheets for RRIF or RRSP worksheets. It would be "nice" if they could place a spot for the foreign tax on the worksheet and have it ripple through to the correct place on form 1116. 

A third type of Pension Plan is one from a individual employer which also has tax in Canada on an NR-4 goes on a 1099-R - These also do not show up with a foreign tax on the worksheet. It would be "nice" if Turbotax could place a spot for foreign tax withheld here also.  

Even better - Just allow the Canada forms to be imported "AS IS" T4, T5, NR4 and do the magic conversion to the correct USA forms, which probably already exist on the Turbotax Canada software.  Then all that is needed is a Currency rate converter form input by people (or potentially linked to a sample one provided by Turbo tax Software wizards. And people would "Flock" to turbo tax to purchase the product since the mapping would be already set up, between the USA and Canada forms. It would a value add save thousands of phone calls, and make it easier for everybody!

So much for my wish list. 

[fredk99]

Is this thread also apply to turbotax 2023 filing? I am having issues on the "Deduction" of the Foreign Taxes part.  I followed the instruction in this thread, and answered all the turbotax interview questions and choose "Credit", which takes me to questions for form 1116, and I am not sure what to choose for "Income Category Type".  Is that the correct way? if so, what is the "Income Category Type"? Any help is greatly appreciated.

[AmyC]

Yes. Form 1116 is used for the foreign tax credit. The general income category is generally used but if you had a lump sum distribution, the rules shift.

See:

About Publication 514, Foreign Tax Credit for Individuals see page 37 for tax treaty income and / or page 43 if lump sum 

Claiming the Foreign Tax Credit with Form 1116 - TurboTax

@fredk99 

[fredk99]

@AmyC Thank you,  I have been reading conflicting posts about how to enter the NR4 (code 39) Gross Income, which is monthly pension benefit from my prior employer. I am using 2023 Turbotax premier for Mac.  Where should I enter Gross Income as? 

1. Under "Retirement plans and social security", choose "Social Security (SSA-1099, RRB-1099), use "SSA-1099" form? 
2. OR,  under "Retirement plans and social security", choose "Canadian Registered Pension Income"
3. OR, under "Less Common Income", choose "Miscellaneous Income", and "Other reportable Income"? 

[MarilynG1]

Since you don't have a Form SSA-1099 or a Form 1099-R, either option 2 or 3 is appropriate, if you want to Efile.

[simona1]

I am also jumping in on this, for the 2023 tax year.  First year I've taken a RRIF distribution from Canada.

I have worked through the "canadian retirement" section under income, and then the foreign tax credit and form 1116.  BUT, while my Canadian taxes withheld (in USD) are over $300, after completing all the sections it tells me my foreign tax credit is a measly $66.  I thought all of the taxes withheld by Canada would be usable as a tax credit? (We do have other income from W2s and business >$200k, so the income limitation is not an issue).

What gives?  How do I get it recognize the full tax credit?  This will become a bigger issue in future years, as we both start taking larger distributions.

Thank you for any insight on this!

[AmyC]

The foreign tax credit is based on factors. The gross foreign income divided by total income is one factor. Another factor is the tax rate. If one country taxes the income at 10% and the other at 20%, you get the lower of the credits. Take a look at your Form 1116 so you can see the process and check your answers.

@simona1