US tax for RRSP RIF distribution Taxable and Foreign tax Credit

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davidrbaker3971
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by davidrbaker3971 » Tue Apr 02, 2019 8:41 pm

in another post you noted that CPP and OAS can be added to 1116 as General limit income.
Can that be done even though the actual taxable income is also reported under equivalent to social security income without acting as a double entry of that CPP/OAS income? and also that there is no foreign tax credit actually being claimed against the CPP/OAS ?
I understand the advantage of getting the CPP/OAS on the 1116 and increasing the Canada portion of income to use more of the foreign tax credit.

Also, should I not be reporting Canada private pension income on the 1099R form ?

nelsona
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by nelsona » Tue Apr 02, 2019 9:00 pm

Not sure what you are asking. ALL income that appears on a 1116 has already appeared on the 1040 at some point.
For a US resident, even though no Cdn tax specifically tied to that income, I have no problem adding it to the general limit 1116, along with Cdn pensions, wages, etc.
For Cdn resident, I don't see the value of adding them, since you will ultimately remove them from 1116 when you provide the net income. 1116 askes for gross income, which means income incuded in one's AGI. CPP and OAS are zero contribution to gross income.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

worryfreeinvestor
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by worryfreeinvestor » Wed Apr 10, 2019 9:55 am

Which "form" are you discussing in this thread for 2018 1040, please? The 1040 itself? We do not receive a 1099-R for a RRIF distribution. We receive a NR-4 from the Canadian payer, which does not have a direct crosswalk to the 1040.

nelsona
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by nelsona » Wed Apr 10, 2019 10:11 am

All income lines on the tax return can include foreign income. Then it is up to you to identify the income as foreign, on 1 or more 1116 forms.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

worryfreeinvestor
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by worryfreeinvestor » Wed Apr 10, 2019 10:25 am

Thank you. I was thinking about the one for which you indicated the amount of the tax credit would automatically adjust per the taxable/non-taxable ratio. It looks like that is 1116, right?

I really feel a double whammy this year because it is the first year for a RRIF distribution since I migrated to US in 2005 plus the redesign of the whole 1040 "module"" in 2018 means navigating even the usual (non-Canadian) stuff necessitates a new learning curve.

worryfreeinvestor
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by worryfreeinvestor » Fri Apr 12, 2019 3:36 pm

There appears to be no place on the 1040 line 4(a) or 1116 to describe in the return that the income and accompanying tax credit (for tax withheld at source by Canadian payer) are associated with a RRIF. And because there is no more 8891, there is no way to explain on the return where the income is actually from. If we do the taxable vs. nontaxable calculation you recommend, how do we explain it in return, if at all? Or do we just wait for the audit? Or?

worryfreeinvestor
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by worryfreeinvestor » Fri Apr 12, 2019 3:49 pm

A simple spreadsheet but how to explain to IRS? On 8833?

nelsona
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by nelsona » Sun Apr 14, 2019 8:01 pm

The tax would be taken on 1116. Too later to figire out. Tax season starts in January.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

worryfreeinvestor
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by worryfreeinvestor » Mon Apr 15, 2019 10:24 am

Tax season never ends! Thank you. I have figured out the taxable vs. non-taxable. It is indeed very easy thanks to your help. Where I am coming from is we migrated to U.S. in 2005, and filed 8891 through 2014. Then 8891 became obsolete. 2018 is the first year we withdrew a distribution from RRIF. So, as no reporting of RRSP/RRIF has occurred with respect to annual 1040 filing for a few years, how will IRS know where this income is from without 8833? I see where the dollar figures go on 1116 but nowhere to give enough detail for an IRS employee (or software) to figure out: "Okay, I see this Canadian passive income is a RRIF distribution and the taxable vs. non-taxable breakdown comes from the 2018 asset value versus the 2005 asset value when they became U.S. residents, so I am satisfied with what I see." If I were the IRS (and I am glad I am not), the 1116 information itself would cause me to contact the taxpayer to understand where the figures are from. I guess what I am trying to do is minimize the risk of an audit.

nelsona
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by nelsona » Mon Apr 15, 2019 10:44 am

There is no way of telling. This is for you to track and keep proof of. That is the way of IRS.
Keep good records. I've been withdrawing funds from RRSP/RRIF for 16 years with no issue.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

worryfreeinvestor
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by worryfreeinvestor » Fri May 31, 2019 7:52 pm

nelsona wrote:
> Each year you take out money, you need to determine the taxable ratio based
> on (a) the non-taxable amount in your RRSP/RRIF and the total amount you
> have.
>
> The non-taxable portion when you first begin withdrawing is the $200 you
> had when you arrived. The taxable portion is abouve that.
>
> So, if at beginning of year you had $300, then the taxable ratio is
> (300-200)/300 = 1/3
>
>
> Si, if you took $50, your taxable portion is $50 *1/3 = $16.67 and the
> non-taxable is $33.33.
>
> Next year, your non-taxable portion is $200 - $33.33 = $166.67 and so on.

Thank you. By "non-taxable portion" do you mean the following? That is, if next year the BOY value of the RRIF is $250, the taxable ratio is ($250-$166.67)/$255=1/3?

It looks constant if the BOY valuation is simply the previous year balance minus the distribution. But unless i take my distribution on December 31, there could be variance, right?

nelsona
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Re: US tax for RRSP RIF distribution Taxable and Foreign tax Credit

Post by nelsona » Mon Jun 03, 2019 6:04 am

The BOY is the value on 1/1 of the year. It would take into account growth/loss as well as any distributions.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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