How to report 1042-S on CRA returns

[A Miranda]

I've received a 1042-S form from Fidelity (Foreign persons U.S Source Income subject to withholding). This is for shares I purchased through an employee stock purchase program. I need to file the 1042-S in my tax returns for the past few years. Its not for a large amount (Federal tax withheld between $170-350 depending on the year)

Can anyone help with how I go about doing that?

[Nawal]

Hi A Miranda, In the Interview Setup, click on Foreign income.
In the Foreign income section of UFile, there are routines there for the different types of foreign income reporting.

NOTE: 1042-S is used to report US withholding tax,  UFile does not have the US 1042-S form as such.  And UFile does not support it.

You still use UFile  you just have to find a place to report this US withholding tax paid. Each one of the respective places for foreign income has a place where you can report US withholding taxes. For example,  foreign pension income : "Amount of foreign tax paid". This entry is necessary for UFile to generate form T2209, which shows the calculation of the foreign tax credit. 
 

[TheTaxSmith]

Hi A Miranda. Nawal posted the following (reposted in Italics here) to another question on the forum

"To report your foreign income or foreign property, please follow the steps below:

1- In the "Left side menu on the Interview tab", please select  "Interview setup".
2- On the right-hand side of the screen, go to the "Investment income and expenses" group, and check the box "Foreign capital gains"

3-To convert your foreign currency, enter the "Exchange rate to apply"  to convert to Canadian dollars.  Then enter the amounts in your foreign currency. The program will automatically convert the amounts to Canadian dollars. The amounts will appear in Canadian dollars in your tax return."

In this case you will need to determine the actual cost of what would be shares at the date you received them and also the Proceeds you received at the specific dates. Using the instructions as per Nawal you can enter the purchase Cost and Proceeds in US funds and find the exchange date for each item. The dates for the purchase as well as the sales will differ. Also for the tax withheld you can enter that at the exchange rate as per the sale date. The program will deal with the calculation for the Foreign taxes and any Foreign tax credits to be claimed on your Canadian return. Be careful to use the exchange rates correctly as the purchases may not have been in the same year as the sales. You can manually enter an exchange rate rather than selecting the pre imbedded rates.

 

 

 

 

[A Miranda]

On 2/15/2021 at 9:18 PM, TheTaxSmith said:

In this case you will need to determine the actual cost of what would be shares at the date you received them and also the Proceeds you received at the specific dates. Using the instructions as per Nawal you can enter the purchase Cost and Proceeds in US funds and find the exchange date for each item. The dates for the purchase as well as the sales will differ. Also for the tax withheld you can enter that at the exchange rate as per the sale date. 

Thanks you for that info. It is very helpful.

I haven't received anything from Fidelity to date. The shares haven't been sold. Fidelity still holds it in my name. Any payouts (dividends) were reinvested. So I didn't receive anything. Do I still need to find out the costs for past years to report that?

[TheTaxSmith]

Hi Miranda.

As you received dividends that were reinvested you need to claim those dividends as foreign investment dividend income. You should use the rate of exchange applicable to the date you received them as well as for the tax withheld. Now you also need to keep track of the amount reinvested to be able to add it to the cost of the shares you own/purchased. That is for the future when you dispose of them.

[ConfusedTaxPayer]

I have a question related to this. Assuming a dividend  income of X USD and a foreign tax paid of Y USD. Is "Income exempt under a tax treaty" = X or is it (X - Y). Further am I allowed a deduction ...either under section 20(11) or the Federal non-business foreign tax credit (T2209)? If yes to either what is my credit? Is it X?

Thank you

[Curmudgeon]

Are you receiving this information on a t-slip? Normally US dividends are not income exempt unless the investment is in a RRSP. If it is on a t-slip, enter the information and you will get a tax deduction for the foreign tax paid.

[ConfusedTaxPayer]

No. This is not on a T Slip but rather an IRS 1042-S. These are shares of the company that I work for and are held in an employee purchase plan account administered in the US.

[ConfusedTaxPayer]

Wanted to add that US taxes were deducted.

[Curmudgeon]

What to do is in Interview setup, Investment income and expenses, select Foreign income and property, Income from foreign dividends. Fill in the first 5 boxes. This assumes that you are not filing a US tax return. 

[ConfusedTaxPayer]

No I am not filing a US Tax return. Just that they deduct taxes at source. And yes, I have been putting these in as Income from foreign dividends as you mentioned.. Was just wondering if there were any additional credits to be had for the tax deducted at source.

[Curmudgeon]

You will be credited for the US tax deducted, i.e., it will be deducted from Cdn tax owing. Can't get more credit than that.

[Davi]

hi... Is "Income exempt under a tax treaty" = X or is it (X - Y).. I have the same question, is the answer X or X-Y?