Income from OAS and CPP Publication 915 Social

QUESTION:
Where do I show the OAS and CPP income my wife and I receive on our IRS 1040
form?
Is the OAS taxable in the US?
I have never seen any reference to this in the Guide and we can't be the
ONLY Canadian pensioners living in the US.
Many thanks for your help!
JM
-----------------------------------------
david ingram replies:
Let me put a request for Tax preparers here.  Because George Hatton, Sonja
Clark and Gail Ritter have left the company during the divorce between my
wife and myself, I am in desperate need of two or three tax preparers.  At
least one should have US / Canada experience and the other two need
extensive Canadian Experience.  I would even consider bringing someone (from
out of town or even out of Canada) here on a short term basis.
Back to your question
For the record, I have NEVER seen a return prepared by a US based preparer
where this was handled correctly.  I KNOW that Gary Gauvin in Rockland,
Texas would do it correctly and I know that Doug Lentz in Bellingham would
do it correctly but I have never seen one of their returns with pensions to
compare.
However I have seen dozens of others from all over the US and not one of
them has been correct and I will admit to doing them incorrectly at the
start as well. Everyone just treats them as a company pension and I see US
residents paying significant tax to the IRS when all or most of the Canadian
OAS / CPP is / was not taxable.  If this happened to you, you can still file
a 1040X for 2001, 2002 and 2003 to get a refund.
OAS and CPP are treated as Social Security on your US return. It can range
from tax free to 85% taxable just like Social Security benefits.  Use the
worksheet in Publication 915.  The worksheet is right at the front of the
publication which you can get hold of by clicking:
http://www.irs.gov/publications/p915/ar02.html#d0e334
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Authored by: Anonymous on Monday, March 29 2010 @ 09:54 PM PDT Income from OAS and CPP Publication 915 Social

I found this post on 03/29/10, researching the same question.

 

Here are some facts from an IRS publication that might be helpful to others encountering it:

 

http://www.irs.gov/pub/irs-pdf/p915.pdf

 

Page 5

 

Canadian or German social security benefits paid to U.S. residents: Under income tax treaties with Canada and Germany, social security benefits paid by those countries to U.S. residents are treated for U.S. income tax purposes as if they were paid under the social security legislation of the United States. If you receive social security benefits from Canada or Germany, include them on line 1 of Worksheet 1, shown later.

 

Page 11:

 

Lump-Sum Election

 

You must include the taxable part of a lump-sum (retroactive) payment of benefits received in 2009 in your 2009 income, even if the payment includes benefits for an earlier year.

 

This type of lump-sum benefit payment should not be confused with the lump-sum death benefit that both the SSA and RRB pay to many of their beneficiaries. No part of the lump-sum death benefit is subject to tax.

 

Generally, you use your 2009 income to figure the taxable part of the total benefits received in 2009. How- ever, you may be able to figure the taxable part of a lump-sum payment for an earlier year separately, using your income for the earlier year. You can elect this method if it lowers your taxable benefits.

 

Under the lump-sum election method, you refigure the taxable part of all your benefits for the earlier year (including the lump-sum payment) using that year’s income. Then you subtract any taxable benefits for that year that you previously reported. The remainder is the taxable part of the lump-sum payment. Add it to the taxable part of your benefits for 2009 (figured without the lump-sum payment for the earlier year).

 

Because the earlier year’s taxable benefits are included in your 2009 income, no adjustment is CAUTION made to the earlier year’s return. Do not file an amended return for the earlier year.

 

Will the lump-sum election method lower your taxable benefits? To find out, take the following steps.

 

1. Complete Worksheet 1 in this publication.

 

2. Complete Worksheet 2 and Worksheet 3 as appropriate. Use Worksheet 2 if your lump-sum payment was for a year after 1993. Use Worksheet 3 if it was for 1993 or an earlier year. Complete a separate Worksheet 2 or Worksheet 3 for each earlier year for which you received the lump-sum payment.

 

3. Complete Worksheet 4.

 

4. Compare the taxable benefits on line 19 of Worksheet 1 with the taxable benefits on line 21 of Worksheet 4.

 

If the taxable benefits on Worksheet 4 are lower than the taxable benefits on Worksheet 1, you can elect to report the lower amount on your return.

 

Making the election. If you elect to report your taxable benefits under the lump-sum election method, follow the instructions at the bottom of Worksheet 4. Do not attach the completed worksheets to your return. Keep them with your records.

 

Once you elect this method of figuring the taxable part of a lump-sum payment, you can revoke your election only with the consent of the IRS.

 

Lump-sum payment reported on Form SSA-1099 or RRB-1099. If you received a lump-sum payment in 2009 that includes benefits for one or more earlier years after 1983, it will be included in box 3 of either Form SSA-1099 or Form RRB-1099. That part of any lump-sum payment for years before 1984 is not taxed and will not be shown on the form. The form will also show the year (or years) the payment is for. However, Form RRB-1099 will not show a breakdown by year (or years) of any lump-sum payment for years before 2007. You must contact the RRB for a breakdown by year for any amount shown in box 9.

 

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