I believe i made an error and replied toa topic insead of opening a new topic. Anyways here goes, this is a question that i'm sure you are familiar with. i am canadian citizen who is a U.S resident. i have canadian RRSP and wish to withdrawl those funds. what are my reporting obligations to the IRS and do i withdrawl those funds as a canadian citizen and have revenue Canada withold money for taxes. Will i be double taxed on this money as a result?
is there a legal reason that i have to withdrawl this money from my RRSP fund?
Sincerly,
Breck Moore
rrsp for Cdn citizen who lives in U.S
Moderator: Mark T Serbinski CA CPA
You do not have to withdraw anything from your RRSP until you are 69 years old.
As I said in the other posts, this board as well as the forum on Grasmick.com are rife with all the info you need with regards to RRSPs, and will not be repeated in this or any other thread, not by me at any rate.[}:)]
<i>nelsona non grata... and non pro</i>
As I said in the other posts, this board as well as the forum on Grasmick.com are rife with all the info you need with regards to RRSPs, and will not be repeated in this or any other thread, not by me at any rate.[}:)]
<i>nelsona non grata... and non pro</i>
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by breck moore</i>
I believe i made an error and replied toa topic insead of opening a new topic. Anyways here goes, this is a question that i'm sure you are familiar with. i am canadian citizen who is a U.S resident. i have canadian RRSP and wish to withdrawl those funds. what are my reporting obligations to the IRS and do i withdrawl those funds as a canadian citizen and have revenue Canada withold money for taxes. Will i be double taxed on this money as a result?
is there a legal reason that i have to withdrawl this money from my RRSP fund?
Sincerly,
Breck Moore
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Nelson is correct that this information is available elsewhere, but it would take you some time to track down, so, my short answers:
1. You must report the funds withdrawn on your annual 1040, both the gross amount and "taxable" amount (lines 16a and 16b). Determining the taxable amount is the difficult part.
2. As a non-resident of Canada, lump sum withdrawals from an RRSP are subject to a 25% withholding, automatically. Your institution does know you're a US resident, right? Make sure they withhold or Revenue Canada will come looking for a tax return.
3. You will be able to claim a foreign tax credit on your 1040 for the Canadian tax withheld, so there will be no double taxation.
4. Is there a legal reason to withdraw? Only the usual age based requirement (ie. in the year you turn 69 you have some choices to make).
Hope that helps.
CRH
I believe i made an error and replied toa topic insead of opening a new topic. Anyways here goes, this is a question that i'm sure you are familiar with. i am canadian citizen who is a U.S resident. i have canadian RRSP and wish to withdrawl those funds. what are my reporting obligations to the IRS and do i withdrawl those funds as a canadian citizen and have revenue Canada withold money for taxes. Will i be double taxed on this money as a result?
is there a legal reason that i have to withdrawl this money from my RRSP fund?
Sincerly,
Breck Moore
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Nelson is correct that this information is available elsewhere, but it would take you some time to track down, so, my short answers:
1. You must report the funds withdrawn on your annual 1040, both the gross amount and "taxable" amount (lines 16a and 16b). Determining the taxable amount is the difficult part.
2. As a non-resident of Canada, lump sum withdrawals from an RRSP are subject to a 25% withholding, automatically. Your institution does know you're a US resident, right? Make sure they withhold or Revenue Canada will come looking for a tax return.
3. You will be able to claim a foreign tax credit on your 1040 for the Canadian tax withheld, so there will be no double taxation.
4. Is there a legal reason to withdraw? Only the usual age based requirement (ie. in the year you turn 69 you have some choices to make).
Hope that helps.
CRH
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by nelsona</i>
Carson's response is only partially correct, as it is missing a very important reporting requirement, which could cost $1000's![:0]
See, Carson, why it is not so useful to try and encapsulate, when it is all spelled out elsewhere.[B)]
<i>nelsona non grata... and non pro</i>
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
No good deed goes unpunished. [;)]
So the lesson children, is to find a comfy chair, put on your reading glasses, and surf this site!
CRH
Carson's response is only partially correct, as it is missing a very important reporting requirement, which could cost $1000's![:0]
See, Carson, why it is not so useful to try and encapsulate, when it is all spelled out elsewhere.[B)]
<i>nelsona non grata... and non pro</i>
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
No good deed goes unpunished. [;)]
So the lesson children, is to find a comfy chair, put on your reading glasses, and surf this site!
CRH
Now children, let's play nice...
I think Nelson was trying, obliquely, to draw your attention to the need to ensure that you do inform the IRS of the RRSP funds and obtain their deferral of taxation until withdrawal. (Form 8891). Not doing this could be expensive, as the IRS could claim tax on the proceeds of the RRSPs each year.
Another thing to keep in mind. Witholding in Canada is 25% on RRSPs, but only 15% on RRIFs. (I believe annual withdrawals of less than twice the annual minimum withdrawal are not taxed at all).
I think Nelson was trying, obliquely, to draw your attention to the need to ensure that you do inform the IRS of the RRSP funds and obtain their deferral of taxation until withdrawal. (Form 8891). Not doing this could be expensive, as the IRS could claim tax on the proceeds of the RRSPs each year.
Another thing to keep in mind. Witholding in Canada is 25% on RRSPs, but only 15% on RRIFs. (I believe annual withdrawals of less than twice the annual minimum withdrawal are not taxed at all).
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">Canada is 25% on RRSPs, but only 15% on RRIFs. (I believe annual withdrawals of less than twice the annual minimum withdrawal are not taxed at all).<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
The first part is true. 15% on RRIFs. But there is no threshold below which there is no 15% tax. Every penny is subject to the NR tax.
In fact, withdrawals from RRIFs in EXCESS of yearly prescribed maximums will incur full 25% NR tax.
And the IRS tax incurred by not defferring income using 8891 is peanuts compared to the penalties for not reporting the existence of your RRSP (either by 8891 or by 3520).
So I guess my comment was too oblique for even you, tone, though this was not the point I was trying to make.
<i>nelsona non grata... and non pro</i>
The first part is true. 15% on RRIFs. But there is no threshold below which there is no 15% tax. Every penny is subject to the NR tax.
In fact, withdrawals from RRIFs in EXCESS of yearly prescribed maximums will incur full 25% NR tax.
And the IRS tax incurred by not defferring income using 8891 is peanuts compared to the penalties for not reporting the existence of your RRSP (either by 8891 or by 3520).
So I guess my comment was too oblique for even you, tone, though this was not the point I was trying to make.
<i>nelsona non grata... and non pro</i>
MMM, looks like this forum had a hiccup[B)]
Anyhow, I posted yesterday a continuation to the discussion about RRSP vs. RRIF and its treatment by CRA for non-residents.
CRA, by virtue of the treaty, is only allowed to tax A US resident 15% on a <b>periodic</b> RRIF withdrawal (ie. one that is in line with the yearly minimum withdrawal, times a factor), and 25% on any withdrawl in exceess of this.
So, where one would be owing little if any US tax on the withdrawals, and one was nearing retirement age, one would want to considfer converting to a RRIF before systematically withdrawing from the RRSP.
Note that, in many cases, a 217 return might still be beneficial to reduce the Cdn tax below the 15% mark.
The RRSP/RRIF distinction becomes even more crucial if you are a resident of UK, as their treaty allows for <b>ZERO</b> NR tax on qualified RRIF withdrawals, while any RRSP withdrawl is taxed at 25%.
<i>nelsona non grata... and non pro</i>
Anyhow, I posted yesterday a continuation to the discussion about RRSP vs. RRIF and its treatment by CRA for non-residents.
CRA, by virtue of the treaty, is only allowed to tax A US resident 15% on a <b>periodic</b> RRIF withdrawal (ie. one that is in line with the yearly minimum withdrawal, times a factor), and 25% on any withdrawl in exceess of this.
So, where one would be owing little if any US tax on the withdrawals, and one was nearing retirement age, one would want to considfer converting to a RRIF before systematically withdrawing from the RRSP.
Note that, in many cases, a 217 return might still be beneficial to reduce the Cdn tax below the 15% mark.
The RRSP/RRIF distinction becomes even more crucial if you are a resident of UK, as their treaty allows for <b>ZERO</b> NR tax on qualified RRIF withdrawals, while any RRSP withdrawl is taxed at 25%.
<i>nelsona non grata... and non pro</i>