I recently moved back to Canada after 14 years in the US. Now retired.
My income sources consist of:
in Canada
CPP
OAS
RIF Withdrawal
Bank Interest
USA – starting this year
Social Security (taken 1 year early at age 65)
IRA withdrawal
Very small company pension
I would like to ask for assistance/clarification in filling out tax forms in both countries please.
Last year Canada was straight forward as I had no income from the US.
Next year what US income must be included and where on the Tax form is it to be claimed?
For the US - 2012 I filled out:
8891 for my RIF income (as beneficiary).
On the 1040 I put the RIF $value on line 16a and $0 on 16b (taxable amount).
Sched B with 7a-Yes, 7b-Yes and 8-No
8938 to report RIF and RRSP information
Talking to the local IRS (wintering in Yuma, AZ), IRS on the phone (7 different contacts over 3 ½ hours) and AARP reps I could not get an answer as to where to include CPP – and next year will also be OAS. Some of the references made during the phone marathon were File 97, Article 18 of the Tax Treaty, provision #5, publication 15, Publication 54, Publication 597 US-Canada Tax Treaty, Publication 901, etc.
Where is CPP and OAS reported and what are the tax implications. Does it look like the US form was filled out correctly?
I also filled out 6 years of FBARs (TD F 90-22.1) reporting all RIFs, RRSPs and TSFA. (even though most of the years reported on I was living in the US).
On a side note clarifying entries I read in some of the many Topics in this very informative forum, I was asked by the Social Security folks how much CPP I was receiving and they reduced my Social Security payout by about ½ of my CPP value using an algorithm called the Windfall Calculator.
Thanks in advance for any assistance.
Dual Citizen with Pension Income from both countries
Moderator: Mark T Serbinski CA CPA
Lots of issues: First off it is very important to determine when you returned to canada, and how long you were in US.
2012 US tax. You stated you put '0' as your taxable income from RIF. How did you conclude this. Typically, somce of your RIF is taxable in US, and some (most) is not, but highly unlikley that NONE of it is taxable. The values for 16(a) and 16(b) come from the 8891 (a) is the total withdrawls you made, and (b) is the taxable portion of those withdrawal( line 7 of 8891). The rIF value only goes on 8891.
ALL OTHER INCOME (except OAS/CPP/SS) are reported on BOTH tax retunrs every year that yopu are a US citizen and Cdn resident. For the year you move back to Canada, only world income from after you arrival is reported to Canada.
The answer to quaetion 8 is YES, and has been for every year that you had either an RRSP or a RRIF. Have you not been filing 8891 all these years while living in US?
Doing FBAR was great, but failing to do 8891 is worse.
8938 should include all foreign assets, not just RRSP/RRIF, which in fact is only included in the total, not reported, since you have an 8891 for them.
OAS/CPP/ SS:
By treaty, these are reported ONLY in the country where you reside. So, when exactly did you move back to Canada. from that day on you report thoise income only on your CDn return. Before tha, only on your US return (with no Cdn tax withheld).
SSA was correct to reduce your SS by the WEP process (as long as you worked between 10 and 29 years in US). If you worked any more that 30 or less than 10 yrs in US, they should not have applied WEP.
I'll stop there becuase I'm sure you will reveal more issues.
2012 US tax. You stated you put '0' as your taxable income from RIF. How did you conclude this. Typically, somce of your RIF is taxable in US, and some (most) is not, but highly unlikley that NONE of it is taxable. The values for 16(a) and 16(b) come from the 8891 (a) is the total withdrawls you made, and (b) is the taxable portion of those withdrawal( line 7 of 8891). The rIF value only goes on 8891.
ALL OTHER INCOME (except OAS/CPP/SS) are reported on BOTH tax retunrs every year that yopu are a US citizen and Cdn resident. For the year you move back to Canada, only world income from after you arrival is reported to Canada.
The answer to quaetion 8 is YES, and has been for every year that you had either an RRSP or a RRIF. Have you not been filing 8891 all these years while living in US?
Doing FBAR was great, but failing to do 8891 is worse.
8938 should include all foreign assets, not just RRSP/RRIF, which in fact is only included in the total, not reported, since you have an 8891 for them.
OAS/CPP/ SS:
By treaty, these are reported ONLY in the country where you reside. So, when exactly did you move back to Canada. from that day on you report thoise income only on your CDn return. Before tha, only on your US return (with no Cdn tax withheld).
SSA was correct to reduce your SS by the WEP process (as long as you worked between 10 and 29 years in US). If you worked any more that 30 or less than 10 yrs in US, they should not have applied WEP.
I'll stop there becuase I'm sure you will reveal more issues.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
nelsona thank for the quick reply.
I lived/worked in the US for 14 years. Returned to Canada in March 2012.
The $0 taxable I must have deduced from section 72 as tax had already been paid on the withdrawal in Canada. Sorry, but don't recall now. Could you please tell me how you calculate what portion is taxable in the US?
Other than 2 RRSPs (1 personal and 1 Locked-in previous employer pension) my only other asset is a vehicle and small savings account.
I have no other income other than a small T5 for bank interest.
I just found out about the 8891 when doing this years US taxes. While living in the US my RRSPs were essentially stagnant with some GIC's and automatic renewals on them. There were no deposits or withdrawals. My first withdrawal was after I returned to Canada. Do I need to submit 8891's if there was no activity?
I think I covered all your questions. Thanks again.
I lived/worked in the US for 14 years. Returned to Canada in March 2012.
The $0 taxable I must have deduced from section 72 as tax had already been paid on the withdrawal in Canada. Sorry, but don't recall now. Could you please tell me how you calculate what portion is taxable in the US?
Other than 2 RRSPs (1 personal and 1 Locked-in previous employer pension) my only other asset is a vehicle and small savings account.
I have no other income other than a small T5 for bank interest.
I just found out about the 8891 when doing this years US taxes. While living in the US my RRSPs were essentially stagnant with some GIC's and automatic renewals on them. There were no deposits or withdrawals. My first withdrawal was after I returned to Canada. Do I need to submit 8891's if there was no activity?
I think I covered all your questions. Thanks again.
8891's are need to report the existence of the RRSPs, regardless of any internal growth or any withdrawals. Failure to report their existence on form 8891 makes you liable for penalties (just like the penalties for FBAR reporting failures).
The problem is that it is no longer as simple as before to elect to defer taxation on your RRSP, so, as well as failure to file 8891 penalties, you also liable for tax, interset and penalties on your internal RRSP/LIRA income for the past six years, unless you ask for special permission to back-file 8891 for past 6 years.
For IRS, only a portion of the RRSP is taxable/not-taxable, it is based on their value at the time you entered US, 14 years ago, and their value today. If you are not able to determine this, they are 100% taxable in US. The tax you paid in canad has nothing to do with what is taxable in US, rather the Cdn tax you pay can be used as a credit on any tax you owe.
The locked-in pension RRSP or RRIF is 100% taxable in US.
Quick example. If your RRSP was worth $50K in 1998 and $100K today (so it is 1/2 taxable and 1/2 non-taxable in US), and your LIRA is worth $100K (all taxable in US), and you take $5000 from each, you would report $10K gross withdrawl ($5000 + $5000), and $7500 ($2500 + $5000) net taxable on your 1040. The Cdn tax you paid (as calculated on your tax return) would be a credit on 1040 using form 1116.
So, on your CPP questin, based on what I you've said, payments from the first 3 months of CPP/OAS/SS from 2012 would be reported on 1040 only, and the last 9 months on your Cdn tax return.
Your 2012 Cdn tax retunr is called a "newcomer" return, so I hope you follwed the special rules for one who arrives in Canada mid-year.
Too bad you did not find this site about 18 months ago....
The problem is that it is no longer as simple as before to elect to defer taxation on your RRSP, so, as well as failure to file 8891 penalties, you also liable for tax, interset and penalties on your internal RRSP/LIRA income for the past six years, unless you ask for special permission to back-file 8891 for past 6 years.
For IRS, only a portion of the RRSP is taxable/not-taxable, it is based on their value at the time you entered US, 14 years ago, and their value today. If you are not able to determine this, they are 100% taxable in US. The tax you paid in canad has nothing to do with what is taxable in US, rather the Cdn tax you pay can be used as a credit on any tax you owe.
The locked-in pension RRSP or RRIF is 100% taxable in US.
Quick example. If your RRSP was worth $50K in 1998 and $100K today (so it is 1/2 taxable and 1/2 non-taxable in US), and your LIRA is worth $100K (all taxable in US), and you take $5000 from each, you would report $10K gross withdrawl ($5000 + $5000), and $7500 ($2500 + $5000) net taxable on your 1040. The Cdn tax you paid (as calculated on your tax return) would be a credit on 1040 using form 1116.
So, on your CPP questin, based on what I you've said, payments from the first 3 months of CPP/OAS/SS from 2012 would be reported on 1040 only, and the last 9 months on your Cdn tax return.
Your 2012 Cdn tax retunr is called a "newcomer" return, so I hope you follwed the special rules for one who arrives in Canada mid-year.
Too bad you did not find this site about 18 months ago....
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
nelsona, thank you again for your quick if not painful response. You are correct in saying that this would have been excellent information many months ago. Looks like I need to do some digging regarding values 14 years (and a couple of divorces) ago.
I may look into the 'special permission' for tardy 8891 submissions but it seems I need to invoke someone smarter than myself to pursue these issues. The DIY days are over.
Again, thank you for your knowledge and assistance.
I may look into the 'special permission' for tardy 8891 submissions but it seems I need to invoke someone smarter than myself to pursue these issues. The DIY days are over.
Again, thank you for your knowledge and assistance.