Locked-in RRSP withdrawal - options?

sam75 · Post by **sam75** » Wed Dec 22, 2010 8:19 am

Hello,
I am a Canadian living in US and became a citizen. I have locked-in RRSP in Canada which I would like to encash. What are my options? What are my tax obligations?

FYI.. this locked-in RRSP funds are at a financial institution, which I transferred from my ex-employer's pension plan (when I was in living in Canada).

Thanks

nelsona · Post by **nelsona** » Wed Dec 22, 2010 10:30 am

First, you need to habve been reporting the existence of the LIRA to IRS every year on form 8891 and FBAR. I hope you have been doing this. If not you need to back-file these for each year you filed a 1040.

Only ater that you can approach your financial instittion and request that you be allowed to break the LIRA because you are non-resisnrt. You will need to fill an NR73 and submit this to CRA, and wait for their determination that indeed you are non-resident. Once this is done, bank will allow you to cash out LIRA; you will pay 15% flat tax withheld.

You will then report the entire income on a final 8891 and your 1040 and use the 25% tax as a foreign tax credit on form 1116.

nelsona · Post by **nelsona** » Wed Dec 22, 2010 10:31 am

I meant you will pay 25% flat tax withheld. not 15%.