Soc. Sec, CPP,

Date:           Tuesday June 20, 2006
Time:           10:35 AM -0700
QUESTION:
1. Dual citizen, living in Canada. Drawing SS and paying Can. taxes on 85%.
Is this correct? (Your note in the Dec. 1995 newsletter seems to indicate
that the benefits of one are not taxable in the other, but some of the most
recent correspondence/advise in your group mailings reflect that 85% is
taxable)
2. Starting this year drawing CPP, and next year OAS. How is this treated on
US return?
3. Are any of the benefit amounts effected by the drawing of another? e.g.
Will my CPP drawing impact the amount of Social Security that I am getting.
-----------------------------------------------------
david ingram replies:
In the Dec 1995 newsletter we spoke of a change in the treaty that made CPP,
OAS and FICA (US social Security) only taxable in the country that paid the
money.  i.e. only Canada would tax OAS and CPP and only the US would tax
FICA no matter where you lived.
Halfway through 1998, the powers that "be" decided they did not like the
arrangement but it took until the summer of 1997 for them to change the
rules so that they all became taxable in the country you lived in under
Article XVIII of the US Canada Treaty.
Therefore, you report your CPP and OAS AND FICA on the Canadian return and
pay tax to Canada after remembering to deduct 15% of the FICA on line 256.
They should all be reported on your US return as well on line 20a but put a
zero in 20b and attach a little or big note reminding the IRS that they are
all tax exempt under Article XVIII(5)
Depending upon how long you lived in the US, there is sometimes a lowering
of the FICA amount on the receipt of CPP.
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