IRS updates guidance on US-Canada DTA
The Internal Revenue Service (IRS) has released a revised October 2015 version of its Publication 597, which provides information on the United States-Canada double taxation agreement (DTA), reports Tax News.
A number of DTA provisions that most often apply to US citizens or residents who may be liable for Canadian tax are discussed in the publication. However, as DTA provisions are generally reciprocal, it is noted that Canadian residents who receive income from the United States may also refer to it to see whether a treaty provision affects their US tax liability.
The publication, for example, looks at the position of dual-resident taxpayers who are Canadian residents, and those who are not; income tax credits; the treatment of income from self-employment and permanent establishment rules; pensions, annuities, and social security; investment income from Canadian sources, including dividends, interest, royalties, and capital gains from the sale of property; and the taxation of charitable contributions.
In particular, it points out the new procedures for electing to defer US tax on undistributed income from certain Canadian retirement plans, including registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs). The IRS now allows taxpayers to claim retroactive relief available under the DTA, even if they failed to properly do so in the past.
The IRS has also eliminated the annual requirement for taxpayers to file an RRSP and RRIF information form to make an election or to report distributions or earnings on undistributed income. Taxpayers are no longer required to file it for any year, past or present.
