Cross-Border Tax Filing for 401(k) withdrawal

[digi_0809]

Hello,

I'm a canadian tax resident and withdrew funds from my 401(k) account in the U.S for an emergency last year. A 30% withholding tax was applied to the withdrawal. I understand I will receive a 1099-R form for U.S tax filing, but I also need to declare this income on my Canadian tax return.

Here are my questions:

1. Should I file my U.S taxes first and then report the withdrawal on my Canadian return using foriegn tax credit?

2. Are there any additional steps I need to take to avoid double taxation?

Any advice would be greatly appreciated

[ThomasM125]

You would have to prepare the Canadian return before you completed your US return to know what your foreign taxes were for your US return. I can't comment on your Canadian return, but on your US return you may qualify for a credit for taxes you pay to Canada on your income for 2024. To the extent you pay US tax on your foreign income, you can reduce your US tax by the foreign income taxes paid or accrued. Any unused credit in the current year can be carried over up to ten years in the future.

To apply for a credit for foreign taxes paid or accrued during the year:

1. From the Federal section of TurboTax, go to the Deductions and Credits section

2. Find Estimates and Other Taxes Paid

3. Choose Foreign Taxes

4. Indicate that you paid foreign taxes or have credits from prior years

5. Work through the section until you see an option to take a deduction or credit, the credit is usually better

6. Complete the rest of the section