TAX RATES ON RRIF/LRIF WITHDRAWALS FOR US RESIDENTS

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artistic95
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TAX RATES ON RRIF/LRIF WITHDRAWALS FOR US RESIDENTS

Post by artistic95 » Fri Jan 11, 2013 10:56 pm

I am a US/CDN dual citizen retired and living full time and permanently in the US. I worked in Canada for 30 years as result of a transfer and have had to convert my RRSP and LRSP into RRIF and LRIF this past year as I turned 71.
I will be taking my minimum required withdrawals (on a monthly basis) this year with my first withdrawals in January, 2013 and understand the Cdn. tax rate will be 15%. (as opposed to 25%)
Questions::: What do I have to do to maintain the 15% tax rate on withdrawals since the tax will be lost as I do not file Cdn tax returns any longer. ??
I plan on taking the minimum withdrawal , on a monthly basis, and an occasional additional withdrawal as and if needed during the year. Can I do this and still maintain the 15% rate??
Thank you for your input.
Thanks, Artistic95

Phil Hogan, CA
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Post by Phil Hogan, CA » Sat Jan 12, 2013 7:18 pm

Not sure exactly what you're asking but...

If the account is converted to a RRIF then yes, they should be withholding 15% for periodic payments (pursuant to the treaty). Be sure to confirm with them that this is what they plan on withholding e.g. versus 25%.

Additional lump sum withdrawals however may be taxed at the domestic rate of 25% without any treaty reduction
Phil Hogan, CA, CPA (Colorado)
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nelsona
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Post by nelsona » Sun Jan 13, 2013 6:34 pm

The 15% rate will be taken by the broker, up until you exceed either 10% of your begining-of-year balance, ot twice your minimum withdrawal, which ever is more.

Once you exceed this, the payments are no longer periodic and are subject to 25%.

If you are entitled to less than the withheld ammount as your overall tax, you can file a 216 elective return, and get some back for CRA at year-end.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

nelsona
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Post by nelsona » Sun Jan 13, 2013 6:35 pm

sorry.. a 217 elective return.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Phil Hogan, CA
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Post by Phil Hogan, CA » Sun Jan 13, 2013 8:02 pm

Yes, s.217 return is a good option if you qualify. And the cost to prepare the return doesn't exceed the amount recovered.
Phil Hogan, CA, CPA (Colorado)
Canadian and US Income Tax
http://www.hutcheson.ca/about-us/philip-hogan/
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artistic95
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Post by artistic95 » Wed Jan 16, 2013 6:09 pm

Thanks for your input, however, I am still confused on an issue. My understanding is
to maintain the tax rate of 15% on periodic withdrawals under the treaty, My annual withdrawals cannot exceed the GREATER of 10% of my opening 1/1 RRIF/LRIF balances or twice my annual minimum required withdrawals, whichever number is HIGHER. Is that correct??
Also, I have been out of Canada now for over two years. I understand that I can roll my LRIF into my RRIF without penalty and maintain one account.. Is that correct??
I appreciate your input.Thanks again !!
Artistic 95
Thanks, Artistic95

nelsona
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Post by nelsona » Thu Jan 17, 2013 12:41 am

You are simply repeating what has already been stated on the 15%, so, yes.

As to what can be done with your LRIF. that depends on what province it was regulated under. Each jurisdiction has differernt rules. Somee only permit collapse of locked-in accounts, not rollover to other accounts.
Remember that for US tax purposes, your LRIF is 100% taxable. even after you roll it into a RRIF which might otherwise be minimally taxable in US.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

artistic95
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Post by artistic95 » Thu Jan 17, 2013 12:30 pm

Thanks again for your input. Much appreciated.
Incidently, RLIFwas set up in Ontario
Thanks, Artistic95

Philmb
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Re: TAX RATES ON RRIF/LRIF WITHDRAWALS FOR US RESIDENTS

Post by Philmb » Tue Jan 22, 2013 4:26 pm

It is becoming apparent to me that I may not take a RRSP or LIRA and roll it into an IRA. I am also a dual citizen, perm resident in Illinois. The RRSP and LIRA are in Ontario. Is my observation correct: the tax deferred accounts are turned into Ontario-based RRIFs and stay there, to be drawn down over time?

nelsona
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Post by nelsona » Tue Jan 22, 2013 5:13 pm

The RRSP can become a RRIF. The LIRA can become a LIF or LRIF.

You can collapse the RRSP or RRIF at tany time and pay 25%. The LIRA and subsequent LIF however need to have special handling if you wish to collapse.

In either case, if you convert to RRIF and LIF, the periodic withdrawals would be taxed at 15%.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

Philmb
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Post by Philmb » Tue Jan 22, 2013 5:16 pm

[quote="nelsona"]The RRSP can become a RRIF. The LIRA can become a LIF or LRIF.

You can collapse the RRSP or RRIF at tany time and pay 25%. The LIRA and subsequent LIF however need to have special handling if you wish to collapse.

In either case, if you convert to RRIF and LIF, the periodic withdrawals would be taxed at 15%.[/quote]

Nelsona... thank you for the prompt advice!

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