[petrholcak]

I worked in the US for 5 years in the 1980's and I contributed to the company 401k plan. I was a green card holder and have SSN. I am now 61 years old, resident and citizen of Canada and I am retired and no longer working. I want to take a lump sum distribution of the 401k account in the US at some point of time. I need to fill in the W-8BEN form in order to qualify for a reduced tax treaty witholding rate. What do I put on Line 10 of that form... i.e. Article (?), (?)% witholding rate, specify type of income (?) Do I qualify for 0% witholding rate? Should I wait until I am at least 62 to have the income declared as "pension". Please help!

[AtlantaTaxExpert]

Under sub-paragraph 2 of ARTICLE XVIII, the withholding rate is restrcited to 15%, because under that provision, the tax can be no higher than 15%. A later protocol specifically identidies a 401K plan as a pension for purposes of the treaty with no specific citation of an age requirement.

Since the IRS allows withdrawals from 401Ks at age 59.5, you have already met the age requirement, so, in my opinion, there is no need to wait.

Since the U.S. is taxing the 401K distriubution at 15%, you should be able to claim a tax credit on your Canadian tax return if the pension is also being taxed in Canada.