RRSP withdrawal for US Citizen/Resident

[terryh]

Hi - I know there are a number of threads that pertain to this issue, but I must be a bit dense.

I worked in Canada for about 5 years and deposited about 70k into RRSPs. I moved back to the US on Dec 31st 2010. I have always reported the monies deposited into the RRSP as normal income on my US tax return.
In 2011, we bought a house, and I withdrew the monies in the account that I had deposited into(the company match is still open). The amount of the withdrawal was approx $75k.

I am reading and hearing a few different ways to report this. i am good with Point 1, but the subsequent points are where my confusion lies.

1. Canada took their 25%, so nothing additional needed to file with them, as I am a non resident.

2. On the US return, on line 16, I need to report the entire amount of the withdrawal, and be subject to the US tax on that portion, as it is WW income(even though the cost basis has already been reported.)

3. Only report the delta between the value when I became a US resident again and the withdrawal amount.

4. Report the difference between the cost basis for all of the deposits and the withdrawal against each yearly exchange rate.

Thanks in advance for the advice.

Terry

[nelsona]

The contributions YOU made are considered cost of the investment.

You should ahve been filing an 8891 every year, bith to make/decline the eleection to defer internal income and to report the existence of the RRSP.

Assuming you have done this.

1. Correct.
2. No. For the year you make the withdrawal, you report the entire withdrawl (in USD) on line 7a of 8891, and the taxable portion on 7(b). This will transfer over to 16a/b of your 1040.
3. No, that is for non-US citizens. You are taxable in US for anything over the contributions.
4. Kind of. You are probably best to take some sort of blended distribution.

I'll give this simple example. Over the years, you contributed (in then current USD) 75K to your RRSP. Employer contributions and growth have resulted in your plan being worth $125K on thwe day you took out $75K.

That means that 3/5 of your with drawal is tax-free in US, so you would report $75K and $30K on line 7a/b of 8891.

30K is your taxable amount.

You then take the $30K you reported and the $18.75K in Cdn tax you paid on form 1116 and figure out your credit.

So, your steps are:
- make sure you have reported 8891 for all years before 2011
- File 2011 return as above.

[terryh]

Thanks Nelsona, appreciate the help.

[terryh]

One last question, it appears I have missed one of the 8891 filings, is it possible to amend a prior return to include this document? Is it a big deal to ammend with this document?

Thanks very much

Terry

[nelsona]

You simply amend the year with 1040-X and add the 8891.