Received NR4 from Canada with code 40 living in the U.S.

[timtimtim]

I received NR4 form as I worked in Canada a year ago where I contributed to my pension plan. However, since I left the company and am living in the U.S., I got NR4 with code 40 (lump sum). How should I go filing my taxes?

Will this be considered 1099 - R? SSA 1099? or simply a foreign income?

[KarenJ2]

You should enter your Canadian pension distribution as if you received a 1099-R.  

After entering your pension income (don't forget to convert first to USD) then enter your foreign tax paid to help offset any double taxation.

To report the Canadian tax paid on your pension: 

1. Enter foreign tax credit in the search box at the top of the page and click the Jump to link 

2. Click 'Yes" you paid foreign taxes 

3. Click through the screens regarding foreign interest and dividends 

4. Click yes that you have reported all your foreign income already in TurboTax 

5. Click that you want to take a credit 

6. Answer question about the Simplified Limitation Election 

7. Choose income type for pension - it will be General category income 

8. Add Canada 

9. Enter description - Canadian pension 

10. Enter Income amount that you previously reported under 1099-R

11. Enter your taxes you paid on your Canadian pension in the box "Other income" 

[Laromarie]

Hi, I have received an NR4 from Canada with code 40. I am younger than 50 years old. I was a Canadian Government employee that as to resign. Which code of 1099-R should I use? Will I be penalized for early withdrawal? The full amount is taxable? Should I use miscallenous income or 1099-R? Thank you!

[ReneeM7122]

It depends.  If there is an early withdrawal penalty, it would come from the Canadian side.   Here's a link to TurboTax Canada.

To enter foreign pension in TurboTax online program, you will you would NOT treat it as "other income," rather, you will create a mock form 1099-R.

Within your Personal Tax section, Under Retirement Plans, select the IRA, 401(k), Pension Plans (1099-R).

• On screen, Your 1099-R, answer Yes and select Continue
• Next screen, Choose your bank or brokerage, select I'll type it in myself
• On the screen Tell Us Which 1099-R You Have,  check the box I need to prepare a substitute 1099-R and follow the prompts. 

@Laromarie​​​​​​​

[GPRP]

So do I convert the withholding tax paid to US $ and enter it as as if I paid US taxes under 1099-R AND also take the foreign tax credit?  

[ErnieS0]

Enter your Canadian withholding converted into USD in the foreign tax credit section only @GPRP.

Withholding on the 1099-R screen is for US withholding and goes on a different place on the tax form.

[Newfei]

Following this question, suppose I have $2000 RRSP distribution with 25% withheld tax that is $500 on my NR4 (all are in USD). When I claim foreign tax credit, the tax credit is only about $300. That seems not reasonable. Together I will pay US tax about $400 plus Canadian tax $500 minus $300 credit, end up $600 tax for that $2000 distribution. That tax rate is higher than either US or Canada tax rate. Maybe I am wrong?

[AmyC]

The US foreign tax credit is the lower of the tax between the two countries. It should be $500 paid to Canada with a $300 credit against US taxes to cover the tax on that income. You may have other income that is being taxed. If this was the only income, you would not have a tax liability.

@Newfei 

[Newfei]

Thanks. I figured out how it works. This year I can only claim $300 credit of the $500 tax paid because of the tax credit limit. The remaining $200 unused credit can be carried over to next year. I also need to figure out how to claim that $200 carry over credit on next year's return. 

[MarilynG1]

In the Foreign Tax Credit interview, you will come an a entry for your Foreign Tax Credit Carryover amount.

You will find Form 1116, Schedule B, Foreign Tax Carryover Schedule in your return.

Here's more info on How to Enter a Foreign Tax Credit Carryover.

@Newfei