RRSP simple question

maminej · Post by **maminej** » Tue Jan 26, 2016 6:41 pm

Hello,

I have a <10K USD RRSP in Canada, that I still regret I didn't close before moving to the US. My understanding that with that little amount, I do not need to report it as I don't meet the threshold of Form 8938.
first question . is this correct ? or should I declare it in 8938 ?

I do not have any RRSP income. I am not using that money, it just sitting there in an RRSP account, and the bank is taking account maintenance fees every now and then :oops:

I am thinking of 2withdrawing that money and pay the 25% canadian tax. I am worried about paying extra tax when declaring this in the US but I read that under the treaty, I can claim foreign tax credit for the 25%.
is this correct ?

Please let me know what would you do with a small account that cause headache every year,,

nelsona · Post by **nelsona** » Tue Jan 26, 2016 6:55 pm

Why the regret? Had you taken the RRSP before leaving Canada, you would no doubt have paid more than 25% tax.

You should probably have closed it soon after becoming US resident, and certainly should do it now. This will solve any FBAR and FATCA issues

The 25% tax to Canada will be used as a DEDUCTION, not a credit. You can use it in calculating a credit, but since hardly any of the RRSP is taxable in US, the credit will be almost zero, The deduction will be worth more.

It is n't a treaty matter. US allows credit or deduction of foreign tax by its own rules,. no need for treaty.

maminej · Post by **maminej** » Tue Jan 26, 2016 7:22 pm

Thanks for the prompt reply Nelson.

Can you please further explain the difference you meant between deduction and credit. I am sorry, I have an engineering background and i want to educate myself.
If you know of a reference that I should read prior to posting stupid questions, please advice..

Regards,
AJ

nelsona · Post by **nelsona** » Tue Jan 26, 2016 11:49 pm

Sorry. You will have to read up on these. This is not a school.

Oliver · Post by **Oliver** » Sun Feb 07, 2016 12:09 pm

Now may be a good time to collapse the RRSP as the weak loonie lowers the taxable gain in the US.

nelsona · Post by **nelsona** » Mon Feb 08, 2016 10:50 am

The taxable "income" (it is not considered gain) is typically not a concern when living in US since the Cdn tax more than covers any US tax.

It is ALWAYS a good time to collapse an RRSP when living in US.