LIRA question

Assum If you had taken periodic payments, Canada could have withheld 15%; the U.S. would tax you but the tax could not be higher than 15% and if any amount, e.g., your made after-tax contributions, would not be taxed by Canada, they would not be taxed by the U.S.

However, you did not take periodic payments. You took a lump-sum. Therefore, Canada is free to tax you on whatever the law there allows. The U.S. is going to tax you using whatever tax bracket you are in for ordinary income. If there is some amount of the distribution that is a return of after-tax contributions AND Canada does not tax you, then the U.S. won't tax you on that same portion.

I have no idea what the actual tax rates are for a nonresident of Manitoba, Canada receiving a lump-sum distribution. Maybe someone else reading this will know. If it is less than the withholding, you could always file a nonresident Canada return to seek a refund.

As to the U.S., you would include the taxable portion of the distribution as defined above, as pension income and you will be taxed. You can complete Form 1116 to calculate a foreign tax credit based on the taxes paid to Canada or you can elect to deduct the taxes you paid Canada on Schedule A if you itemize your deductions. If you calculate the credit, the credit on your US return can not be greater than the amount of tax the US wants from you on the distribution.

What ever you do, this is 2013 income and withholdings. NOT 2012.

I looked up the personal income tax rates for the lowest bracket: Manitoba: 10.8% Federal: 15.0%

That's 25.8% combined.