Cashing RRSP while in USA

canadianGirl · Post by **canadianGirl** » Fri Apr 10, 2009 2:39 pm

Hi, I have read all related topics, but still cannot clearly understand how it should be.
I moved to USA in the middle of 2008 and just one month later sold all my RRSP in Canada and paid 25% tax for non-residents.
Now I prepare US tax return and my accountant included the whole amount I sold (let's say $25K) in my USA tax return as Other Income. 25% is used as tax credit, but I still have to pay Federal and State taxes, another ~12% which brings the total tax paid on that amount way over my tax bracket. (I earned in 2008 less than 20K). Is it how it is supposed to work?

Thanks you.

nelsona · Post by **nelsona** » Fri Apr 10, 2009 6:49 pm

Your accountant is incorrect. Only the gain since you entered US is taxable in US (which is probably zero). Since the 25% tax is not going to be any use to you, it should be used as a deduction.

Btw, the RRRSP needs to be reported on form 8891 -- let me guess your acct doesn't know about that either -- and the gross amount on 16a (zero on 16b) not other income.

Glad you found this site before being completely hosed by a complete moron.

canadianGirl · Post by **canadianGirl** » Sat Apr 11, 2009 12:14 pm

Thank you very much for reply, it makes sense now.
Another question, what kind of deduction is it for tax I paid in Canada?

Thanks you.

nelsona · Post by **nelsona** » Sat Apr 11, 2009 3:34 pm

Foreign tax.