I moved to the US from Canada in 2012. I filed 8891 for RRSP accounts part of the 2013 tax return. I withdrew all the monies from RRSP accounts in 2013. So, for this year, I'll file the 8891 , include the full distribution as income in the return. What about the 25% penalty paid ?. Where do I need to claim this deduction/credit ?.
Thanks for the response.
RRSP Withdrawls
Moderator: Mark T Serbinski CA CPA
In your first post, you said, "I moved to the US from Canada in 2012. I filed 8891 for RRSP accounts [as] part of the 2013 tax return."
I assume this was just a slip of the tongue, and you were referring to filing 8891 as part of your 2012 return, not 2013 return, (which you would have filed of course in early 2013). You will not have filed any 2013 return yet.
As part of your 2012 return for Canada, you would have filed a departure return, since you had become a non-resident mid-year. Your non-resident status then resulted in your tax on the RRSP withdrawal being 25%, which is a flat tax as a non-resident, and is your final tax to Canada on the withdrawal. As long as you filed a departure return to Canada for 2012, you will not owe them a tax return on the RRSP withdrawal, and the 25% is your final Canadian tax. However, the income must also be declared on your US 1040 return for 2013. In order to mitigate the double tax which would otherwise occur, you file a 1116 with your 1040. You will normally get all of the 25% paid to Canada (converted to US dollars) as a tax credit on your US return if your US average tax rate is higher than 25%, but not all of it if your US average rate is less than 25%.
nelsona, please correct any misunderstandings I may have.
I assume this was just a slip of the tongue, and you were referring to filing 8891 as part of your 2012 return, not 2013 return, (which you would have filed of course in early 2013). You will not have filed any 2013 return yet.
As part of your 2012 return for Canada, you would have filed a departure return, since you had become a non-resident mid-year. Your non-resident status then resulted in your tax on the RRSP withdrawal being 25%, which is a flat tax as a non-resident, and is your final tax to Canada on the withdrawal. As long as you filed a departure return to Canada for 2012, you will not owe them a tax return on the RRSP withdrawal, and the 25% is your final Canadian tax. However, the income must also be declared on your US 1040 return for 2013. In order to mitigate the double tax which would otherwise occur, you file a 1116 with your 1040. You will normally get all of the 25% paid to Canada (converted to US dollars) as a tax credit on your US return if your US average tax rate is higher than 25%, but not all of it if your US average rate is less than 25%.
nelsona, please correct any misunderstandings I may have.