RRSP non resident tax

ladybug078 · Post by **ladybug078** » Sun Jan 25, 2009 10:40 pm

I'm trying to file my US return using Turbo Tax but cannot figure out where to put my non resident witholding tax from a RRSP that I sold last year.

I believe that I correctly reported the gross amount of the sale in the Canadian pension section.

I also have tried filling out the foreign tax credit section with my foreign credit carryforward from 2007 but don't know where to put the $3000 that was withheld. As it stands right now, my refund will be $3000 less than it was prior to entering in the RRSP sale. I assumed that the foreign credits should cover pretty much the full amount so I don't have to pay US tax on the income from the RRSP.

Does anyone where to enter the info in turbo tax?

nelsona · Post by **nelsona** » Mon Jan 26, 2009 6:04 am

The net RRSP amount (line 16b) should be put on a Form 1116. The $3000 (all figures should be converted to US of course), is put on that form on the foreign tax paid line. The form will then calculate how much of the tax will be used, and what your carryforward is.

Be sure that you have correctly calculated line 16b (it will also be on your 8891 form). It is based on the growth of your RRSP, not simply what you withdrew.

The way foreign tax credits work, it is very unliket that much of the $3000 will be used, since the creit is only paid at your effective rate, not the marginal taxrate on which you pay tax.

ladybug078 · Post by **ladybug078** » Mon Jan 26, 2009 12:30 pm

Thanks for the reply. To clarify....

On line 16b I don't put the $13,000 I received from the sale but instead the captial gains from the investment?

When I've entered info in for the Foreign Tax Credit area the result is $0 credit. I must be doing something wrong, correct?

nelsona · Post by **nelsona** » Mon Jan 26, 2009 12:57 pm

on 16b you put the growth of the investment from the time you moved to US.

On form 1116 you put that same value as the gross income, and you put the Cdn tax you paid in the foreign tax paid.

Only if the grwoth is zero will you get zero credit.

Tip: If you do this correctly and the credit is still small (becuase your 16b value is mall), consider using all the Cdn tax as a deduction on schedule B. It is good to try it both ways and see which yeilds the lower overall tax. If you use it as a deduction, you need to be careful that you aren't getting into the AMT range.

ladybug078 · Post by **ladybug078** » Tue Jan 27, 2009 6:32 pm

The RRSP actually decreased in value after the move to the US. So do I just leave line 16b as $0?

nelsona · Post by **nelsona** » Tue Jan 27, 2009 8:44 pm

Yes. And, if this is all your RRSPs you can technically use the overall loss as a loss on your itemized deductions (in the miscellaneuos deduction section), along with all the Cdn tax you paid.