Nuances in filing 1040NR as a Canadian non-resident alien

I need help filing 1040-NR to claim a refund for the income tax withheld from my mutual fund distributions that were attributable to "interest-related dividends" or to "short-term capital gain dividends". I am a Canadian citizen/resident (ex US resident) with investments in US mutual funds.

In filling out the 1040-NR, I assume I should exclude all our Canadian income from wages and investments.
1) Do I report all my US income from US investments (all taxable mutual funds)- or include only ordinary dividends but exclude interest, ST Cap Gain and LT Gain. No wages from US.
2) All our investments are joint with my wife (either/or). I assume I can attribute all the income to me and file 1040-NR jointly.
3) Provide info about my two US-born kids/dependents who live with me here in Canada. Do I claim exemptions?
4) Where do I ensure that the withholding tax rate of 15% is used per the treaty?
My sole purpose in filing the US 1040-NR is to get a refund for the income tax withheld from my mutual fund distributions that were attributable to "interest-related dividends" or to "short-term capital gain dividends".

I suppose you can file jointly but I'm not sure how much that matters, it depends what's on the 1042-S. You should have filed W-8BEN with the US financial institution, which I'm sure you now know!

To claim a treaty rate you're supposed to file Form 8833 with the 1040NR, but that's a pig of a form to fill in, it's Article X of the treaty though.

It's US-source income so what you earned in Canada isn't relevant and the exemptions will probably be irrelevant as well because it's a treaty rate.

I suggest you have a read of IRS publication 519.

I have provided W-8BEN to each payor in the US a few years back when I gave up my Green card/US residency. I live and work in Canada all year round. One of the US Mutual Fund companies, Fidelity, withheld the taxes per the Treaty and informed me that I can claim a refund for some of the taxes. I do not know if taxes on distributions from other US mutual fund companies qualify. Can someone tell me if all short term capital gain qualifies and how I can identify "Interest related dividends" from "Ordinary Div" Box 1(a) or "Qualified Div" Box 1(b) on 1099-DIV forms sent by Mutual Fund company

In any case, is it mandatory for someone receiving US mutual fund distributions/income (of less than $100k, the only US source income) where Treaty taxes have been withheld to file 1040NR with or without Form 8833 or anything else? I am considering not filing just for refund.

You don't have to file, but you're after a refund so you have to file to get it back. And you need to file by June 15th as well to claim a tax treaty provision. I'm not quite clear what they're on about, if you informed them of your treaty status on W-8BEN then they should have withheld the correct amount so there is no refund. Sounds strange to me.

Nor should they have given you a 1099-DIV because you're a non-resident alien. It sounds as though they've ballsed up the withholding to me.

Basically, work out what the tax should have been on the amount you got (15% typically), minus it off what they withheld and that is what you are owed. Bang on the 8833 that you're claiming the treaty rate under Article X. It's such a simple thing I wouldn't worry too much about what box means this or that, just include a letter of explanation explaining the situation if it gets messy, or phone up the IRS and see if you can find an agent with a clue.

I assume it's a relatively small amount of money.

how I can identify "Interest related dividends" from "Ordinary Div" Box 1(a) or "Qualified Div" Box 1(b) on 1099-DIV forms sent by Mutual Fund company .

Spatel, interest-related dividends are dividends from interest income generated by the fund. There would generally not have been a U.S. tax if you had received that interest directly. The statute seeks to "neutralize" the interposition of the fund. Fund companies generally will publish the percentages of dividends qualifying for the exemption. For example, Fidelity may have sent you a letter with all of their funds; for the money market funds the percentages are 100%. Other funds publish the information in their annual report. Some (e.g. Pimco) don't bother; they claim not to have sufficient nonresident shareholders to make it worth their while to make the simple calculation (so much for customer service). You should have received form(s) 1042 stating the amounts of U.S. tax withheld.

IRS Form 1040NR doesn't have a line for interest-related dividends. Since the interest-related portion of the dividends is technically exempt (i.e. not considered taxable to nonresident aliens) I reported only the remaining portion and claimed a credit for the full amount of tax withheld on the gross dividends. To be sure that the IRS understands what you're doing I would add an explanation and refer to Code Section 871 (k), though that may lead to further confusion.
Good luck.