Foreign, Foreign Investments, Forms & Schedules, Non-Residents

What is the 1042-S Form & How do I apply it to my Canadian Tax Return?

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.

Residency Status

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.

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