Public AND Private Canadian Pensions, Reporting Income and Tax Credits

[Burns58]

I'm still in the WS mode and confused by all the suggestions as to how best to report foreign pensions and take credits for foreign withholding. My best analysis after reading numerous posts is:

CPP and OAS

-no foreign tax withheld

- convert to USD

- add amount to US Social Security

- State tax (if any) will calculate correctly

Private Pension for Past Employment

- Canada issues a NR4 form

- monthly payments are subject to 15% withholding by Revenue Canada

- convert income and tax withholding to USD

- create a 1099-R in TT, the reported foreign tax withholding is automatically applied.

- use 99-0999999 and hope it efiles, if not, Snail Mail the return.

- If successfully efiled, then State tax will be calculated correctly

Question

1. When I report the Private Pension as above, TT then shows a Miscellaneous income entry equal to the created 1099-R amount. Is it double reporting? Is the tax withholding automatically applied or do I need to Claim a Foreign Tax Credit?

2. Should I enter the Private Pension instead as if it was an RRSP/RRIF pension as one poster suggested?

3. Is there a better reporting method for Private foreign pensions using TT (disk) ?

4. Is TaxACT simply better for these foreign pension situations?

[DaveF1006]

It depends. I personally don't recommend using the mock 1099R, with 999's. Some Tax filers had a problem with efiling using this method. I always prefer my clients efile whenever possible. For the private pensions, I recommend filing in the following manner. 

1. Log into your account
2. Select Wages and income>other income
3. Miscellaneous Income, 1099-A, 1099>start
4. Scroll to the bottom of the page to Other Reportable Income
5. Other taxable income, answer yes
6. Then give a brief description of the income and the amount. List the income either as RRSP/or RRIF.

Now, to report your foreign withholding on NR4. Go to:

1. Federal>deductions and credits>deductions and credits>estimate and other taxes paid>Foreign Tax Credit>start or revisit
2. When it asks We just need to check if you have any uncommon situations indicate I paid foreign taxes on income I earned while working in another country. 
3. Navigate and record the entries that the program asks for and when you reach the page that mentions Foreign Tax Credit Worksheet, this is where you take notice.
4. The first that you will be asked is what category of income is it, you will say General Category income.
5. Next screen will say Country Summary, select add a country and then select Canada.
6. When it says Other Gross Income - Canada, Put the amount of your pension here. You won't be double-taxed but this is used to determine the amount of US tax liability of the pension.
7. then you will navigate through the screens until you come to a screen that says Foreign Taxes Paid - Canada, here is where you record the amount of foreign taxes paid that is listed on the NR4 form in US dollars.

In response to the remainder of your questions, the Turbo Tax disk will not give you a better option to report this. I am not familiar with Tax Act so I do not know how effective it is.  The method i suggested should work fine using Turbo Tax.

In response to you first question, it sounds like you may have entered this already a miscellaneous income. I am confused though because the amount should show up as a pension amount in Box 5B in the 1040 if you filed it using all 9's in the EIN. It looks like you are using Turbo Tax online since you asked me if the disk is better so what I would like for you to do is this.

1. Go to tax tools
2. Tools
3. View Tax Summary
4. Look on the left navigational pane for review my 1040.
5. Look to see if there is an entry in Box 5B
6. Also check line 8 to see if there is an entry for additional income that reflect the amount of the pension. If you have types of additional income besides the pension, you can scroll to Schedule 1 and here it lists all the income that is listed in line 8 of the 1040.

If there is an amount in 5B, go back to the section where you entered the 1099R and delete the entry. You should only have one entry and this should be reflected in line 8 of the 1040 and Schedule 1. 

[Danielle_30]

I see that if you go to form 1116, Form view mode, there's a button to include a Statement where one can include further pension details and exchange rate related to the foreign tax paid.  I recall reading that attempts to include a Statement can prevent electronic filing.  Any experience to report when this is filed electronically without a statement?  Odds of IRS requesting a statement after filing?

[DaveF1006]

Including a statement with Form 1116 may complicate electronic filing. Since the statement is allowed to prepared within the Turbo Tax program, you may be allowed to file electronically. If you are allowed to file electronically, the IRS will process your return but there is a possibility that they may request additional information later.

The odds of the IRS requesting a statement after filing depend on various factors, including the complexity of your tax situation and the details provided in your return. If the IRS needs more information to verify your foreign tax credit claim, they may send a notice requesting the missing statement or additional documentation.