News from the CRA
For the last month I have been on pins and needles about a letter I received from the Canada Revenue Agency regarding my 2008 taxes. Waiting for H&R Block to resolve the situation was more than I could handle. After several failed attempts to get through directly to the CRA, I finally talked to someone on Wednesday. She clarified for me the sequence of events that led up to the new assessment in December.
Apparently the CRA notified H&R Block in September that they wanted my full return (Block had filed electronically). They sent it in. The result was the new assessment. At first I thought the issue had to do with my IRA, but when I called back today and spoke to someone who could actually discuss the details of my return, it turns out the concern was with my pension payments! The CRA felt that it did not meet the requirements of the US/Canada tax treaty and that I had received the money before age 59 ½. Therefore the tax I paid the US was a penalty, not a tax, and as such the CRA did not acknowledge it as tax paid against that income.
After getting some great help from the folks at the benefits office at Andersen (sometimes I really miss that “Minnesota nice attitude and service with a smile you always seem to get there!), I wrote up my explanation of how the CRA had made an error and faxed it all to the nice lady in Winnipeg at the CRA.
Less than an hour after she received it, she called me on my phone acknowledging the error and telling me she would revise my tax statement for 2008 back to its original condition. YAY!!!!!
BOO!!!!!! Fifteen minutes later she called back to say she had made another mistake. In fact, I would have to pay in $5100 after all. Basically she claimed that the US had over taxed me on the basis of the US/Canadian tax treaty, and that I should re-file my US tax return to ask for money back, but that in any event, I would owe Canada about $5100 more. No doubt they will want interest and penalties as well, although in fairness, I hope they would drop those given my efforts to get this right and their carelessness in the first place.
So I went in minutes from wild elation about not having to pay $8000 (with visions of a little vacation in Florida running through my frozen brain!) to being burdened with a somewhat less, but still substantial amount of tax liability. AAARRRGGGHHH!
On a positive note, I did find a great resource on the web at the IRS website. There is a number you can call to ask for tax help if you find yourself in my situation. It is called Tax Help for US Taxpayers in Canada and the number is: 215-516-2000.
The guy I spoke with (a Mr. B????. . .something Slavic) explained that I need to re-file my taxes with a 1040X AND that I should use form #8833 to amend my tax liability so that it is in line with the US/Canada tax treat, article 18, paragraph 2. I passed this little gem on to my tax accountant in the states, who otherwise hadn’t a clue that my being a Canadian resident might affect my US Federal tax obligation.
We live and learn.
Apparently the CRA notified H&R Block in September that they wanted my full return (Block had filed electronically). They sent it in. The result was the new assessment. At first I thought the issue had to do with my IRA, but when I called back today and spoke to someone who could actually discuss the details of my return, it turns out the concern was with my pension payments! The CRA felt that it did not meet the requirements of the US/Canada tax treaty and that I had received the money before age 59 ½. Therefore the tax I paid the US was a penalty, not a tax, and as such the CRA did not acknowledge it as tax paid against that income.
After getting some great help from the folks at the benefits office at Andersen (sometimes I really miss that “Minnesota nice attitude and service with a smile you always seem to get there!), I wrote up my explanation of how the CRA had made an error and faxed it all to the nice lady in Winnipeg at the CRA.
Less than an hour after she received it, she called me on my phone acknowledging the error and telling me she would revise my tax statement for 2008 back to its original condition. YAY!!!!!
BOO!!!!!! Fifteen minutes later she called back to say she had made another mistake. In fact, I would have to pay in $5100 after all. Basically she claimed that the US had over taxed me on the basis of the US/Canadian tax treaty, and that I should re-file my US tax return to ask for money back, but that in any event, I would owe Canada about $5100 more. No doubt they will want interest and penalties as well, although in fairness, I hope they would drop those given my efforts to get this right and their carelessness in the first place.
So I went in minutes from wild elation about not having to pay $8000 (with visions of a little vacation in Florida running through my frozen brain!) to being burdened with a somewhat less, but still substantial amount of tax liability. AAARRRGGGHHH!
On a positive note, I did find a great resource on the web at the IRS website. There is a number you can call to ask for tax help if you find yourself in my situation. It is called Tax Help for US Taxpayers in Canada and the number is: 215-516-2000.
The guy I spoke with (a Mr. B????. . .something Slavic) explained that I need to re-file my taxes with a 1040X AND that I should use form #8833 to amend my tax liability so that it is in line with the US/Canada tax treat, article 18, paragraph 2. I passed this little gem on to my tax accountant in the states, who otherwise hadn’t a clue that my being a Canadian resident might affect my US Federal tax obligation.
We live and learn.