RRSP 25% Withholding - RRIF 15%?

CanTex · Post by **CanTex** » Tue May 29, 2012 5:58 pm

My head is spinning. Canadian ex-pats for "decades", living in the U.S., RRSPs sat there quietly all this time, no further contributions after leaving Canada.

I tried filling out a "play" Section 217 return before I file a NR5 for "better" tax treatment on lump-sum RRSP withdrawals. Looks like I would pay more than 25% on the RRSP with worldwide income thrown in there. Headache!

Clarify if you could: Are RRIFs, periodic payments, only taxed at the 15% treaty rate, versus 25% from RRSP lump sum withdrawals? If so, it looks like we need to do RRIFs to distribute the funds to us.

Yes, I add the payments to my U.S. return and fill out the IRS form (1116?) to claim a deduction for the tax paid in Canada.

nelsona · Post by **nelsona** » Tue May 29, 2012 9:08 pm

You are correct about the 15% RRIF vs. 25% RRSP, but theRRIF withdrawl can be no more than 10% of the previous tear-end value.

Remember that not ALL the RRSP/RRIF dirstibution is taxable in US.

I have writtn many threads on how to determine the taxable portion of your withdrawal.

nelsona · Post by **nelsona** » Tue May 29, 2012 9:15 pm

Just another point. Your RRIF has to be set up in 2012, for you to take withdrawal eligible for 15% in 20FOURTEEN, not 2013. You don't get the 15% rate until the yesr BEGINS with an RRIF.

tsanaha · Post by **tsanaha** » Wed May 30, 2012 2:30 pm

when RRSP can be converted to RRIF ? I mean at what age ?

nelsona · Post by **nelsona** » Wed May 30, 2012 3:38 pm

Any age. Once you create the RRIF, you MUST take minimum withdrawals every year thereafter. The minimums increase with age,using formula:
1/(90-age) upto age 70 and then gradually upto 20% above age 90.

tsanaha · Post by **tsanaha** » Wed May 30, 2012 4:18 pm

Thanks, I will do the convert, and I guess this must be done in person (i read a comment somewhere here awhile ago)

nelsona · Post by **nelsona** » Wed May 30, 2012 5:07 pm

I have done it by mail.