US resident RIF/LRIF withdrawals

artistic95 · Post by **artistic95** » Wed Jan 08, 2014 9:28 pm

I am a US/CDN citizen permanently living in the US with a RIF and LRIF in Canada. I left Canada and moved back to the States in 2007 and filed all proper tax forms.
2013 is the first year I had to withdraw from my RIF and LRIF and withdrew my required minmum amounts , on a monthly basis, and was subject to a 15 % Canadian withholding tax at source.
Since I am no longer required to file Canadoan Income Tax returns, is there any way I can get any of this witholding back??
I understand the "income" allocation of the RIF andLRIF withdrawals will have to be rerported as income on my US returns--correct??
Thank you

nelsona · Post by **nelsona** » Thu Jan 09, 2014 2:11 am

Pension income is eligible for reduced taxation by filing a what is known as a 217 return, on which you report your world income. If your world income is sufficiently small, and your Cdn pension income is a large part of your income, then you *might* be able to reduce the tax rate on your pension below 15%.

From my experience, your total world income would have to be less than $25K for the year for this to work.

As to US taxation, I mentioned this in your other thread. The 15% tax can be used as a credit on your US tax return using form 1116, or as a deduction on schedule A.

artistic95 · Post by **artistic95** » Thu Jan 09, 2014 8:46 pm

Nelsona, thank you for your input

dimancea · Post by **dimancea** » Wed Feb 05, 2014 12:41 am

Nelsona, I have a similar situation and a related question. Can you file in Canada a 217 return and at the same time claim a credit in on form 1116 in the US?

nelsona · Post by **nelsona** » Wed Feb 05, 2014 2:18 pm

You can only claim on 1116 tax was paid/due and was not refunded. So, if you file a 217 and reduce the tax, then only that reduced amount should be used on 1116.

dimancea · Post by **dimancea** » Thu Feb 06, 2014 8:12 pm

Nelsona, thank you for the quick response.

dimancea · Post by **dimancea** » Sun Feb 09, 2014 11:07 pm

Nelsona, I have a follow up question: Last year, I claimed the foreign tax credit, on form 1116, for the tax withheld in Canada. However, the credit amount was less than the amount withheld. I was not able to figure why. Have I possibly made a mistake or is there another reason for the discrepancy?

Thanks.

nelsona · Post by **nelsona** » Mon Feb 10, 2014 9:00 am

This is normal. US tax is less than CDn tax, and foreign tax credits are based on average tax rate.

dimancea · Post by **dimancea** » Thu Feb 13, 2014 11:29 am

Thank you.

dimancea · Post by **dimancea** » Thu Apr 10, 2014 4:50 pm

Nelsona, do you know if it is appropriate to enter the Canadian tax, withheld on the RIF distribution, in Schedule A of the US return, instead of using the Foreign Tax Credit form 1116? And if so, would that result in a dollar for dollar credit?

Thanks.

nelsona · Post by **nelsona** » Thu Apr 10, 2014 5:49 pm

It is always the choice you need to make. 1116 gives you CREDIT, dollar for dollar, except that it is never fully credited.

Schedule A gives you DEDUCTION, which by definition means reduction in tax only tt your marginal rate, not dollar for dollar.

You need to do the tax both ways and choose.

dimancea · Post by **dimancea** » Thu Apr 10, 2014 5:51 pm

Got it. Thank you.