RIF lump-sum withdrawal for part-year resident
Moderator: Mark T Serbinski CA CPA
RIF lump-sum withdrawal for part-year resident
There is a lot of information on this site about RIF payment taxation for non-residents of Canada. However I could not find info about this situation: If I am a Canadian resident only for a first part of the year, what is better - to take my RIF minimum lump payment when I am a resident or when I become a non-resident? I am aware that if I am a full-year non-resident of Canada I can elect under section 217 for Canada tax. But for a part-year resident, may be it is better to take this payment before leaving Canada ( to make tax filing simpler filing T1)?
Serge
Re: RIF lump-sum withdrawal for part-year resident
The Cdn tax will be lower if you take it after leaving. It will only be 15%. I'm quite sure your marginal rate in Canada is more than 15%.
The tax in US regardless of how you file will be less than 15%, so nothing to worry about there.
The tax in US regardless of how you file will be less than 15%, so nothing to worry about there.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: RIF lump-sum withdrawal for part-year resident
To have this 15% tax, I will probably need to file two returns to CRA: first one for 10 months when a resident (T1 form) and the second one for 2 months as a non-resident (under section 217 and NR5 form) because my RIF payment will be during these last two months. Correct?
Serge
Re: RIF lump-sum withdrawal for part-year resident
no. first, the 15% will be a flat withholding as a US resident.
One does not file two Cdn returns, even if using 217 while leaving Canada (you are thinking that it is like the US 1040/1040NR -- it is not). The 217-eligible income portion will just be added to your return, and, like I said, it won't be less than 15%, so you will not make the election. you will simply accept the 15% tax. You will have already alerted your RIF manager of your departure, of course.
if by chance the RIF is not correctly withheld, you would correct this with a letter (if it was under withheld)< or an NR7-R form (if over withheld).
In any event you will use the 15% as a credit (along with all your other CDn tax calculated on your return) towards the various 1116 forms you will file.
One does not file two Cdn returns, even if using 217 while leaving Canada (you are thinking that it is like the US 1040/1040NR -- it is not). The 217-eligible income portion will just be added to your return, and, like I said, it won't be less than 15%, so you will not make the election. you will simply accept the 15% tax. You will have already alerted your RIF manager of your departure, of course.
if by chance the RIF is not correctly withheld, you would correct this with a letter (if it was under withheld)< or an NR7-R form (if over withheld).
In any event you will use the 15% as a credit (along with all your other CDn tax calculated on your return) towards the various 1116 forms you will file.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: RIF lump-sum withdrawal for part-year resident
Thank you for your detailed answer.
Could you advise how to report RIF payments to IRS for the following situation:
I used to live in US for 10 years, then I moved to Canada, and now I am moving to US again.
My RRSP/RIF account value (NT) before my first move to US was 60K.
During my 10 year US residency the growth was 20K ( 80K total value).
Now, on the day of the 2nd move to US the account value is 70K (after some growth and withdrawals).
What VAL value should I use to calculate a taxable portion of my RIF payment in 2022, 60K or 70K?
May be I can use this 70K as my new starting NT value for all further RIF payments?
Could you advise how to report RIF payments to IRS for the following situation:
I used to live in US for 10 years, then I moved to Canada, and now I am moving to US again.
My RRSP/RIF account value (NT) before my first move to US was 60K.
During my 10 year US residency the growth was 20K ( 80K total value).
Now, on the day of the 2nd move to US the account value is 70K (after some growth and withdrawals).
What VAL value should I use to calculate a taxable portion of my RIF payment in 2022, 60K or 70K?
May be I can use this 70K as my new starting NT value for all further RIF payments?
Serge
Re: RIF lump-sum withdrawal for part-year resident
The TAXABLE portion is the $20K of growth. So whatever the value is when you become taxable un US again (either Jan 1 2022, or, if you file dual status, the value on the first day of your 1040 portion) minus 20K is the NON-taxable portion, that ratio becomes NT/FMV becomes the ratio for the withdrawal this year.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing