Final return for citizen with non-resident wife

[DaveO]

I’ve prepared the US side of the return for a retired couple in Canada. He was a US citizen while she was Canadian. He passed away in 2017. He had funds from two IRA accounts in the US which paid a monthly benefit to him. After his death they paid to his widow. I have two 1099R forms for these accounts and also two 1042-S forms for distributions paid after his death. The IRS only wants the 1042-S on an NR return while the 1099R forms must be on a 1040. Do I have to file them as MFS?

[Burke]

What have you been doing in the past (while he was alive)? They can file a joint return, she would be a surviving spouse. Did he live long enough to have US income that required him to file? Did the 1099R's show the payments to him?

[DaveO]

I have filed the 1040 jointly in the past. He would not have taxable income on his own if filed separate but does need to file due to gross income from pensions taxable in Canada but not here. I could file them separate but then she is on the 1040NR where she will owe quite a bit of tax whereas on the 1040 MFJ there is no tax. There are 1099R forms issued to him for half the year and 1042-S forms to here for the remainder of the year. She plans to either cash out the plans or donate the money through a QCD so we don't have to repeat the exercise. (The distributions are RMD's) I can force the income onto the return but it is the withholding that is a problem.

[Burke]

Form 1042-S is a withholding form. Would there be a refund if it were reported on Form 1040? Or is it a break-even proposition? I would lean towards a joint return, record the withholding on Line 64 marking it Form 1042, attach it, and file on paper. Why would she owe tax on the 1040NR if withholding was done at the source and that is the only income reported?

[DaveO]

Thanks Burke, that was the route I was considering but hoped maybe someone on here had encountered this before. Appreciate your input.

[Burke]

Caveat. I admit I have not encountered this situation before. It seems someone would have, however.

[DaveO]

I had a foreign student issued a 1042 by the local university for being a graduate assistant. Never mind she had attended the school for the 4 prior years they would not correct the form and issue a W-2. We did this with the federal return and it went right through. The state was a whole different matter. At least here there is no state.