The 1042-S form – Foreign Person’s U.S. Source Income Subject to Withholding is issued to non-residents of the USA that have earned income from the United States such as investment income. The issuer of this slip is usually a financial institution like a bank, they will send out this income slip based on the information they have on file provided by the individual, as a non-resident of the USA. If the individual does not inform the institution of their residency status, then they may be issued a 1099-instead.
Residency Status
Non-residents of Canada are subject to tax on Canadian sourced income only; taxes on your income have likely been withheld at source. You do not need to report a US 1042-s on a Canadian tax return as a Non-resident since you will report your Canadian sourced income only.
However, If you are a Canadian resident, you will report the 1042S as your foreign income such as investment income, as well as taxes withheld on the “Foreign” slip in your Canadian tax return.
How do I input the 1042-S form to my tax return?
Using the boxes reported on the 1042S as a guideline, within TurboTax you will enter them as a type of foreign income (be sure to select the correct type of income such as investment) as well as foreign taxes paid (if any). You also need to indicate the exchange rate to report all amounts into Canadian dollars. Investment income entered will be calculated into Canadian dollars and reported to line 12100 of the Canadian tax return (T1). Foreign taxes paid will be used to calculate a Foreign Tax Credit, on line 40500.
Make sure you specify the source country (USA) and the exchange rate listed on the Bank of Canada’s website, so the amount can be reported in CDN$.
Example: For 2022 the average US rate was 1.3013. So if your 2022 slip shows $500.00 US dollars it would convert to $650.65 Canadian dollars.
