A taxpayer received a Canadian Statement of Amounts paid to Non Residents of Canada, Form NR4. It was for pension benefits for when she worked in Canada. She now lives in the U.S. Box 19 - Gross Income shows $5,739.00, Box 17 - Non resident Tax Withheld shows $860.00. Would she enter the $5,739.00 (converted to U.S. dollars) as Social Security benefits? Where, if anywhere, would the Non Resident Tax Withheld be entered on the 1040?

ANSWER

The BIDaWIZ Team's Answer:

The taxation of payments received from Canadian retirement programs that are similar to the U.S. Social Security system receive special tax treatment due to an income tax treaty between the United States and Canadian governments. The way this income is taxed depends on the recipient's residence. If the recipient is a resident of the United States, the benefits are taxable only in the US and are treated as U.S. social security benefits for U.S. tax purposes, and are reported on Form 1040 Lines 20a & 20b as per IRC Section 86. You would claim a credit for the foreign taxes paid via Form 1116.