CDN RESP Withdrawls by US Resident Alien

CDNinCO · Post by **CDNinCO** » Tue Jul 17, 2012 2:50 pm

Does anyone have any experience with this, and know what the rules and implications are?

Our family moved to the US several years ago, and at the time that we left, we had RESPs for our kids. Now that they are about to go to college, we want to withdraw the funds for them. We've been filing trust returns for the plans in the US.

Is there a withholding tax on the CDN side? Will my children have to file CDN tax returns to get the withholding tax back if it is refundable?

Will the income be taxable to my children in Canada or in the US?

nelsona · Post by **nelsona** » Tue Jul 17, 2012 3:14 pm

The EAP (the growth) portion of the RESP is subject to taxation in the hands of the student. If he/she is non-resident (ie going to school in US) then the EAP is withheld at 25%, and is NOT reported on their US tax return (see below). If they are in canada they will simply report it on both returns and get credit for any tax paid in canada on their US retunr.

You (the parents) were of course responsible for paying US tax on the accrued growth every year on your 1040 (not simply reporting the trust), since it was not sheltered income. This continues until the resp is exhausted.

http://www.pwc.com/en_CA/ca/tax-memo/pu ... rsp-en.pdf

nelsona · Post by **nelsona** » Tue Jul 17, 2012 3:17 pm

Corrected post:

The EAP (the growth) portion of the RESP is subject to taxation in the hands of the student. If he/she is non-resident (ie going to school in US) then the EAP is withheld at 25%, and is NOT reported on their US tax return (see below). If they are in canada they will simply report it on their Cdn return

You (the parents) were of course responsible for paying US tax on the accrued growth every year on your 1040 (not simply reporting the trust), since it was not sheltered income. This continues until the resp is exhausted.

http://www.pwc.com/en_CA/ca/tax-memo/pu ... rsp-en.pdf

CDNinCO · Post by **CDNinCO** » Mon Jul 30, 2012 6:49 pm

Thank you for this information and the link to the brochure from PwC. Very helpful.

Is it possible for the child/student to get some of the withholding tax back by filing a Canadian Tax return?

nelsona · Post by **nelsona** » Tue Jul 31, 2012 7:16 am

Yes, by filing a 217 return.

nakubo.1974 · Post by **nakubo.1974** » Sun Apr 05, 2015 6:36 pm

Canadian citizens moved to the US (on a greencard) in 2013. Filed 3520 for myself and wife in that year.

Took an EAP from the RESP in 2014. I have filed the appropriate 3520 for myself, wife, and son (beneficiary of RESP). We also received an NR-4 because the bank considered us non-resident (rightly so) and withheld 25% tax.

Son has W-2 wages (less than 3k) in 2014. Does the amount from the NR-4 need to be included in the 1040 for my son? From the attached PWC link I could not figure out why we would not do so.

nakubo.1974 · Post by **nakubo.1974** » Mon Apr 06, 2015 11:31 pm

Hello, this thread (which is newer) states that the EAP income is not reportable on the student's return. An older thread (http://forums.serbinski.com/viewtopic.php?t=1295) states the opposite.

Can someone who has received an EAP comment on what approach they took. If you reported the income, what schedule was it reported on?

Sorry, I just read through all the posts after searching for "RESP" and "NR4" separately but did not find an answer.