RRSP withdrawal for Non-Resident

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

RRSP withdrawal for Non-Resident

Post by ruib77 »

Hi,

Currently working in the USA with a GC for 7 years. A non-Resident of Canada for tax purposes. I have around 60K RRSP in Canada and I want to withdraw all of it this year. I think a 25% flat rate is the only option for me. Can anyone please help me with the steps for withdrawals and tax? What I understood is:

- I will inform the bank about the RRSP withdrawal and they will give 60k -25% = 45k. Early next year they will issue me the tax slip.
- How do I file tax for this to CRA? Any details?
- I have to file 15k as a foreign tax credit in TAX software and let it calculate the rest for IRS Federal and State Tax.

Please correct me and add any additional info as needed.

Thanks...
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

Your 25% tax is all that is required for CRA. No return to file.

Once you determine the taxable amount for US, then you will use form 1116 to claim any foreign tax credit. The states do not issue foreign tax credits.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

Re: RRSP withdrawal for Non-Resident

Post by ruib77 »

Thanks, Nelson. Looks pretty straightforward.
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

Re: RRSP withdrawal for Non-Resident

Post by ruib77 »

Few more questions for IRS filing:

- I assume the bank will issue a tax slip where it will show my actual gain from the RRSP. Should I report the gain as Capital Gain in 1040 schedule D?
- For 1116 if it is not Passive category income what should be the appropriate choice? Here are some:
Foreign branch category income
General category income
Section 901(j) income
Certain income re-sourced by treaty
Lump-sum distributions

Thanks..
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

Your bank will not issue such a form. It is something you need to have tracked, bu knowing its value when you moved to US. LOTS of posts on that.

It is gen limit income.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

Re: RRSP withdrawal for Non-Resident

Post by ruib77 »

Thanks Nelson. I browsed many posts in this forum but need your help to summerize it.
When I moved to USA the value of my RRSP was 50k. Now it is 60k. When I will withdraw RRSP this year, fund custodian will withold 25%.

- I will report 60k-50k=10k as income to IRS.
Question: what type of income or Form should I use?

- Should I do form 1116 foreign tax credit for 25% of 10k OR 25% of 60k ?

Thanks again.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

You will report 60 gross and 10 taxable on the pension line. All fugures we are talking about are USD if course.

You can use the 25% tax a either a credit on form 1116, but it will be greatly reduced OFR you can use it as a deduction on schedule A, along with other deductions. One typically tries both to see which gives the lower final tax.

Do you have other income in US?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

Re: RRSP withdrawal for Non-Resident

Post by ruib77 »

Thanks for clarifying that the income goes into the Pension line. I have some other investment income in the USA but form 1116 will bring more returns for me by the standard deduction of Married filing jointly.

Going back to my second question, did you mean 25% of taxable income (10k) as a foreign tax credit in 1116?

Thanks
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

You include ALL your foreign tax ($15K). However, form 1116 will reduce this to WELL below this amount, probably in the range of 5K once your marginal and effective tax brackets are established with all your income, including wages.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

Re: RRSP withdrawal for Non-Resident

Post by ruib77 »

- For 1116, I don't see Gen limit income in TaxACT. I assume I have to select "Certain income re-sourced by treaty" which is considered as Gen limit income, right?
- For 1116, I have to declare the entire 60k as income, right?

Thanks again.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

General limitation income is there, believe me.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

Only the taxable portion of your RRSP goes on 1116.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

General CATEGORY income. Surely that didn't Stump you?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
ruib77
Posts: 41
Joined: Sat Jul 14, 2012 10:17 pm

Re: RRSP withdrawal for Non-Resident

Post by ruib77 »

Here what I see from browsing:
"General limited income is income that is not passive income, Section 901(j) income, or income resourced by treaty or Lump-Sum distribution income. General category income may include: Wages, salary, and overseas allowances of an individual as an employee."
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: RRSP withdrawal for Non-Resident

Post by nelsona »

Yeah. So since your withdrawal is none of the other categories, it is general.

I think we are done here.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
Post Reply