Overpayment of foreign tax on the T5 will end up as a deduction on line 232. Overpayment of foreign tax on a T3 does not count for some reason. This is stated at this link:
http://www.taxtips.ca/filing/foreigntaxcredit.htm
My question is about overpayment of foreign tax on "foreign tax slips". I have a U.S. 1099-DIV tax slip where I paid more than the normal 15% to the U.S. TurboTax puts the overpayment into line 232 as a deduction.
Is TurboTax correct in treating the excess amount (overpayment) as a deduction?
paying more than 15% tax in the U.S.
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Re: paying more than 15% tax in the U.S.
It's curious that more than 15% was withheld. It suggests that the dividend wasn't really a dividend, but rather some other sort of distribution, like from a partnership. In that case, perhaps the dividend is actually foreign business income and the tax withholding a foreign business income tax, in which case the foreign tax credit calculation is different.
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Re: paying more than 15% tax in the U.S.
It can also happen if form W8-BEN is not provided / updated as required.
A completed from remains valid for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year.
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“It doesn't matter how beautiful your theory is, it doesn't matter how smart you are. If it doesn't agree with experiment, it's wrong.” [Richard P. Feynman, Nobel prize winner]
- Norbert Schlenker
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Re: paying more than 15% tax in the U.S.
Ah, but then the excess withholding is recoverable by filing a 1040NR and claiming the protection of the treaty.
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Re: paying more than 15% tax in the U.S.
The CRA assessment for that year resulted in no adjustment so a person might infer that TurboTax did the right thing for the 'foreign tax slip".