Non-resident Tax withheld

[Brunette 0]

Hey all, I'm hoping someone might be able to provide some experience.

I lived and worked in Canada for the first 3 months last year. After I moved to the US, I collected EI for 4 months.

On my T4E in box 24 is an amount of the 25% non resident tax deducted from any EI benefits which I can report on line 437 of my tax form.

Now I also have a NR4 for cashing in my RRSPs shortly after I left the country. Box 17 on the NR4 has the amount of non-resident tax withheld. I'm not sure what to do with the number in Box 17. Can I also report that on line 437?

I don't think I qualify to do a Section 217 as it says one must be a non-resident of Canada for all of 2006. I was still a resident of Canad from January to the end of March.

Any insight?

Thanks.

Edited March 2, 2007 by Brunette

[Kathryn41 3,205]

It's been several years since I was in that situation but I remember my first year here I too had cashed in my RRSP so I could deposit the money into the US equivalent. If I remember correctly we ended up filling out a separate schedule to declare the investment income and then claimed the foreign tax credit option for the tax withheld. I don't recall what lines they were anymore - we had no problems, except that it made the whole process of doing taxes a lot more complicated since deductions are also calculated on the investment income and we had to figure out percentages to allow for mortgage deductions, etc. IRS accepted it and allowed everything so it worked out (- and yes, we have already been audited for that year's taxes for my husband's alimony payments . . we have a great 'proof' document for removing our conditions - an IRS audit where they allowed everything we filed jointly:-) ).

[zyggy 9]

Hey all, I'm hoping someone might be able to provide some experience.

I lived and worked in Canada for the first 3 months last year. After I moved to the US, I collected EI for 4 months.

On my T4E in box 24 is an amount of the 25% non resident tax deducted from any EI benefits which I can report on line 437 of my tax form.

Now I also have a NR4 for cashing in my RRSPs shortly after I left the country. Box 17 on the NR4 has the amount of non-resident tax withheld. I'm not sure what to do with the number in Box 17. Can I also report that on line 437?

I don't think I qualify to do a Section 217 as it says one must be a non-resident of Canada for all of 2006. I was still a resident of Canad from January to the end of March.

Any insight?

Thanks.

You can qualify to do a partial Section 217.. read more about it to find out more... Tax BUlletin T4056

Election under section 217 of the Income Tax Act

When you receive certain types of income from Canada after you emigrate, the Canadian payer has to withhold non-resident tax on the income and send it to us. This tax withheld is usually your final tax obligation to Canada on the income.

However, under section 217 of the Income Tax Act, you can choose to file a Canadian return to report the types of Canadian-source income listed in the next section. By doing this, you may be able to pay tax on this income using an alternative taxing method and receive a refund of some or all of the non-resident tax withheld. Choosing to report these types of income on a Canadian return is called "electing under section 217 of the Income Tax Act."

What income is eligible for this election?

This election applies to certain types of Canadian-source income which you receive after you leave Canada, including:

Old Age Security pension;

Canada Pension Plan or Quebec Pension Plan benefits;

most superannuation and pension benefits;

registered retirement savings plan payments;

registered retirement income fund payments;

death benefits;

Employment Insurance benefits;

certain retiring allowances;

registered supplementary unemployment benefit plan payments;

deferred profit-sharing plan payments;

amounts received from a retirement compensation arrangement, or the purchase price of an interest in a retirement compensation arrangement;

prescribed benefits under a government assistance program; and

Auto Pact benefits.

What date is your section 217 return due?

If you elect under section 217 for 2006, you have to file your 2006 return on or before June 30, 2007.

If you are late in sending us your section 217 return, your election will not be valid.

You may also be reporting Canadian-source income, other than eligible section 217 income, on your return. If you have a taxable capital gain from disposing of taxable Canadian property, or if you have to pay tax on employment income you are reporting, you have to file your return by April 30, 2007.

If you are reporting business income and you have to pay tax on that income, you have to file the return on or before June 15, 2007.

Note

If you owe tax for 2006 and do not file your return for 2006 within the dates we specified above, we will charge you a late-filing penalty. We will also charge compound daily interest starting May 1, 2007, on any unpaid amounts owing for 2006.

Completing your section 217 return

Do not file a separate return to elect under section 217. Instead, complete one return for 2006. Follow the instructions in the section called "Completing your 2006 return", and the following special rules.

Identification

Write "section 217" at the top of page 1 of your return and enter your date of emigration from Canada.

Income

On your return, include:

the income you are reporting as an emigrant (see the section called "Income"); and

all amounts eligible for the section 217 election (see the section called "What income is eligible for this election?") that were paid or credited to you in the part of 2006 that you were a non-resident of Canada.

Federal and provincial or territorial tax

Special rules apply for calculating federal and provincial or territorial tax on your section 217 return in the year that you emigrate. Generally, you have to pay federal tax, as well as provincial or territorial tax for the province or territory where you lived before you left Canada.

Federal and provincial or territorial non-refundable tax credits

If you include on your return at least 90% of your net world income for the part of 2006 that you were not a resident of Canada, you can claim all of the federal and provincial or territorial non-refundable tax credits that apply to you. This represents your allowable amount of federal and provincial or territorial non-refundable tax credits.

If you do not meet this 90% rule, your allowable amount of federal non-refundable tax credits cannot be more than 15.25% of the section 217 income (see the section called "What income is eligible for this election?") that was paid or credited to you in the part of 2006 that you were not a resident of Canada. You can claim all of the provincial or territorial non-refundable tax credits that apply to you.

Notes

Attach a note to your return giving a breakdown of your 2006 net world income (in Canadian dollars) for the part of 2006 that you were not a resident of Canada. Show separately the income you received from sources inside and outside Canada for that part of 2006. We cannot allow any non-refundable tax credits without this information.

For the other rules that may apply, contact the International Tax Services Office.

Remember, for your leaving Canada return, you only have to declare the income that was earned while you were still in Canada. All your income that was earned outside of Canada would not be reported and the 25% tax is all that you would owe.

What Section 217 allows you to do is to opt to have that Canada SOurce Income that you earned after you emigrated treated as if it was earned in Canada and figure out your tax that way... That is what Section 217 is...

Do your taxes both ways... A normal Leaving Canada return with the income that was earned while you were only in Canada... and again with all of your Canada source income with the Canadian taxes that were withheld from the in Canada income and the income after you emigrated. File the return that gives you the biggest refund...

Edited March 3, 2007 by zyggy