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?

[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?

[tjierra]

Totally confused how to enter this in Ufile as I haven't done this before.

Have small amount of shares through husbands work anD they are US based even though he works in Canada.

I don't know where to enter the amount stated on the 1042-S (ie $29.00 as gross income)

thanks for any help

 

[Phynyndragon]

i received a 1042-S for income from streaming on the internet (ie Youtube, Twitch). Its not a large amount. Do i put this under foreign income or self-employment? ive done some research but are getting both as answers.

[Wilma Manuel]

Hi, I have 1042-S (Foreign Person's US Source Income subject or Withholding) from the year 2020 to 2021, can I report this tax season 2022? thanks

[Geo123]

Hello Wilma Manuel,

FOr 2022 you would file under the current tax year, for 2020-2021 you would need to ReFile those tax tax returns,

There are various types of IRS 1042-S forms
eg. 1042-S Summary of Investment Income / Form Ssa-1042s Social Security Benefit Statement
It is for the tax withheld under chapter 3 on certain income of foreign persons, including nonresident aliens, foreign partnerships, foreign corporations, foreign estates, and foreign trusts

To enter these IRS forms:.
>>>Interview setup
[Interview setup (left hand navigation pane - - beneath “CRA Express NOA”) >> Double click the interview setup]
>>>>Go to Right Hand Screen - Interview SetUp
>> Investment income and expenses >> Foreign income or foreign property (T1135) "-->"
FOR EXAMPLE for 1042-S Summary of Investment Income
>>Foreign capital gains - Stock, mutual funds & other non depreciable property

 

[Anthony s]

Hi, I have the same form 1042-s but for gambling winnings in the US but I am a Canadian citizen. How do I do this in ufile? 

[Geo123]

Hello Anthony s,

1042-S form – Foreign Person’s U.S. Source Income Subject to Withholding is issued to non-residents of the USA that have investments there or in your case, gambling earnings. The issuer of this slip is usually a financial institution like a bank, based on the information they have on file provided by the individual, as a non-resident of the USA.

https://www.irs.gov/forms-pubs/about-form-1042-s

Assuming you are a Canadian resident (as opposed to US resident - Canadian citizen), then you will report it as Foreign income - other , as well as taxes withheld on the “Foreign” slip in your Canadian tax return package.  You should contact the CRA to determine what exactly is the type of income.

*Interview Set Up

*Foreign income or foreign property (T1135) >>

*Foreign income - other

Example :

Description of the source of the foreign income [Gambling Earnings - USA]
 

Exchange rate to apply 1.3013

 Amount of foreign income received $1,000.00

Amount of foreign tax paid $100.00