Refund of RPP contributions while US citizen

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xatham
Posts: 13
Joined: Sun Jul 03, 2016 11:24 pm

Refund of RPP contributions while US citizen

Post by xatham »

Hello. I did search past forum answers and while there were some relevant topics, none were quite the same, so I decided to make a new topic. Here are the facts of the matter:

1) I became a US citizen in early 2022. I applied for a refund of my contributions to an employer-sponsored registered pension plan (RPP) I was a member of for less than 2 years. I received the entire balance of the RPP contributions on 12/29/2022 as a lump sum distribution.
2) Since this is a lump-sum reimbursement of all of my contributions, 25% was withheld at the source. I believe this is the correct rate as this was a lump sum disbursement, and not a periodic withdrawal.
3) This is entirely taxable in the US (I am reporting it on line 5b, pension income) though I will get to claim a tax credit for the 25% which was taxed using form 1116.
4) I must report the RPP on form 8938.

My questions:
1) on form 1116, does this count as g) lump sum distributions? It seems obvious that it would, but you've informed others that they should count it as d) general category income.

2) If it does count as g) lump sum distributions, the instructions for form 1116 say to calculate numbers from form 4972, but that form doesn't apply to me as I held the pension fund for less than 2 years. Any idea?

3) On form 8938, I have identified it as an "other foreign asset", filled out section 36 (not a stock or an interest in a foreign entity) as a "trust" (section 36b). I answered "yes" to line 12 (were any foreign assets sold during the tax year). Was this correct?

4) Should I report it on schedule b? It's not dividends or interest, so I thought no. I did answer "yes" to questions 7a) (owning foreign financial accounts) and 8b) (receiving a distribution from a foreign trust).

5) From recent publications, it appears that form 3520 are not required for RPP distributions, correct?

6) I used the exchange rate on 12/29/2022 to do the calculation - was this correct? Or should I use the yearly average?

Many thanks.
xatham
Posts: 13
Joined: Sun Jul 03, 2016 11:24 pm

Re: Refund of RPP contributions while US citizen

Post by xatham »

I'm so sorry - I goofed with the title and the description.

That should read "While US TAX RESIDENT". I became a US TAX RESIDENT in early 2022, not a US Citizen.
sasktoaz
Posts: 4
Joined: Wed Aug 17, 2022 10:51 am

Re: Refund of RPP contributions while US citizen

Post by sasktoaz »

Hi Xatham, did you resolve this? I have a similar issue as I am planning on withdrawing my Canadian RPP this year.
fruitfulstarbolins
Posts: 1
Joined: Mon Jan 22, 2024 12:49 am

Re: Refund of RPP contributions while US citizen

Post by fruitfulstarbolins »

xatham wrote:
> Hello. I did search past forum answers and while there were some relevant
> topics, none were quite the same, so I decided to make a new topic. Here
> are the facts of the matter:
>
> 1) I became a US citizen in early 2022. I applied for a refund of my
> contributions to an employer-sponsored registered pension plan (RPP) I was
> a member of for less than 2 years. I received the entire balance of the RPP
> contributions on 12/29/2022 as a lump sum distribution.
> 2) Since this is a lump-sum reimbursement of all of my contributions, 25%
> was withheld at the source. I believe this is the correct rate as this was
> a lump sum disbursement, and not a periodic withdrawal.
> 3) This is entirely taxable in the US (I am reporting it on line 5b,
> pension income) though I will get to claim a tax credit for the 25% which
> was taxed using form 1116.
> 4) I must report the RPP on form 8938.
>
> My questions:
> 1) on form 1116, does this count as g) lump sum distributions? It seems
> obvious that it would, but you've informed others that they should count it
> as d) general category income.
>
> 2) If it does count as g) lump sum distributions, the instructions for form
> 1116 say to calculate numbers from form 4972, but that form doesn't apply
> to me as I held the pension fund for less than 2 years. Any idea?
>
> 3) On form 8938, I have identified it as an "other foreign
> asset", filled out section 36 (not a stock or an interest in a foreign
> entity) as a "trust" (section 36b). I answered "yes" to
> line 12 (were any foreign assets sold during the tax year). Was this
> correct?
>
> 4) Should I report it on schedule b? It's not dividends or interest, so I
> thought no. I did answer "yes" to questions 7a) (owning foreign
> financial accounts) and 8b) (receiving a distribution from a foreign
> trust).
>
> 5) From recent publications, it appears that form 3520 are not required for
> RPP distributions, correct?
>
> 6) I used the exchange rate on 12/29/2022 to do the calculation - was this
> correct? Or should I use the yearly average? https://basketrandom.pro
>
> Many thanks.

did you resolve this?
myddred
Posts: 2
Joined: Tue Mar 19, 2024 6:02 am

Re: Refund of RPP contributions while US citizen

Post by myddred »

1) Regarding Form 1116, lump-sum distributions from a pension plan are generally considered to fall under category (g) for "pensions, annuities, and other similar amounts received as compensation for personal services." However, it's always recommended to consult the instructions or seek guidance from a tax professional to ensure accurate reporting.

2) If Form 4972 doesn't apply to your situation because you held the pension fund for less than 2 years, you may not need to complete that form. In such cases, you should follow the instructions provided in the Form 1116 instructions or seek professional advice.

3) The categorization of the RPP as an "other foreign asset" and selecting "trust" (section 36b) on Form 8938 seems reasonable, but it's essential to review the instructions or consult with a tax professional to ensure proper reporting.

4) Reporting on Schedule B may not be necessary if the RPP distribution doesn't fall under dividend or interest income. However, it's important to carefully review the instructions and consider seeking professional advice to determine if any other reporting requirements apply based on your specific circumstances. https://candy-crush.io
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