The 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. 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. If the individual does not inform the institution of their residency status, then they will be issued a 1099-INT/DIV.
Canadian non-residents are subject to Canadian sourced income only; your income has already been held at source if all the paperwork is done correctly. Which means that you do not need to report the 1042-s on your Canadian tax return. These amounts would be applied to the USA tax return.
If you are a Canadian resident, then you will report your foreign interest and dividends, as well as taxes withheld on the “Foreign” slip in your Canadian tax return package.
How do I apply the 1042-S form to my tax return?
Open the “Foreign” Slip and apply 1042-S Box 2 in “Foreign Interest & Dividends” – Box 7a in “Foreign Taxes Paid”. Amount entered will calculate to line 12100 of the Canadian tax return (T1). Foreign taxes paid will be applied as a Foreign Tax Credit, on line 40500. Furthermore, if you received a 1099-INT/DIV slip, you will apply the amounts in the same boxes mentioned previously.
Ensure you specify the source country (USA) and enter the exchange rate so the amount can be converted to CDN$. Example US$1=CDN$1.3, the exchange rate that will be entered is 1.3. You may want to apply a “note” to each slip as well to be able to easily identify them if needed later.
- How Does Residency Status Impact Your Tax Return?
- Do You Need to Declare Income Earned From Sources Beyond Canada?
- Foreign Income & Tax Treaties
- Foreign Income Tax Credit
- Common USA Tax Forms Explained & How to enter them on your Canadian Tax Return
When she’s not creating blogs or assisting TurboTax customers in her role as a Bilingual Social Care Expert, Lise enjoys writing, painting and loves her video calls with her grandbabies.
Lorsqu’elle ne crée pas de blog ou n’assiste pas les clients de TurboImpôt dans son rôle d’expert social bilingue, Lise aime écrire, faire de la peinture et adore ses appels vidéo avec ses petits-enfants.