News release

U.S. tax refunds issued for Canadian seniors

WINDSOR, August 4,1998...Revenue Canada reported today that more than 34,000 income tax refunds have been issued for Canadian seniors who collected United States social security benefits.

The refunds were issued after a review of the more than 65,000 1996 income tax returns that were filed by Canadian residents who collect the benefits. The review was necessary because of an amendment to the Canada-U.S. tax treaty.

The amendment, which came into force on December 16, 1997, means that U.S. social security benefits paid to Canadian residents are taxable only in Canada. Until the Canada-U.S. tax treaty was amended, it allowed the U.S. to apply its flat tax of 25.5 % to most recipients' payments, without any provision for the reduction or refund of the withholding, starting with the payment for January 1996. The amendment means that tax withheld by the U.S. for 1996 has now been refunded (net of Canadian federal and provincial income tax) to any recipient whose Canadian tax on the benefit was less than the U.S. tax.

Some Canadian residents who would qualify for refunds may not have received either a 1996 Notice of Reassessment or a letter from Revenue Canada telling them that they do not benefit from the amendment. If they did not, those residents should write to the tax centres serving their areas. A letter should include the individual's name, address, and social insurance number, along with a copy of a U.S. Form 1042S, Foreign Person's U.S. Source Income Subject to Withholding.

Canadian residents may have paid additional taxes to the U.S. Internal Revenue Service because the proper amount of taxes was not withheld from U.S. social security benefits received in 1996. These residents may also be entitled to a refund and should write to their tax centres. A letter should include the individual's name, address, and social insurance number, along with a copy of a U.S. Form 1040NR, U.S. Individual Income Tax Return. Proof of the additional taxes paid must also be included.

The review of 1997 income tax returns filed by Canadian residents who collected U.S. social security benefits will begin as soon as Revenue Canada receives information from the U.S., expected probably in late 1998.

Recipients of U.S. social security benefits who have questions about their Canadian income tax returns can telephone the tax services office serving their area for more information.

Media information:

Danny Yen

Revenue Canada, Windsor

Telephone: (519) 257-6490