How do I deal with the following:
IRA withdrawn Feb 21 2012, thransferred and deposited to Canadian RRSP on Feb 22 2012.
Financial Institution documents show deposit to RRSp account on FEb 22,2012.
Since this date in within the first two months of 2012 the RRSP deduction would normally be reported on the 2011 Canadain return.
The pension income form the US IRA is reported on form 1099 for the year 2012 dictating this income to be reported in 2012 in both countries.
The foreign tax credit also belongs to 2012 as the tax paid to the US is frrm the 2012 tax return calculation.
Can the transfer to the RRSp plan be reported as a deduction on the 2012 Canadian return rather than in 2011 as a normal contribution would be due to the date of the transfer being in the first two months of 2012. This would match the pension income from the US IRA , the foreing tax credit from the US on the IRA withdrawal and the deduction for the RRSp transfer (contribution).
Thank you for your comments .
IRA transfer to RRSP problem
Moderator: Mark T Serbinski CA CPA
Hold it. This is NOT an RRSP contribution which would count against any yearly or lfetime contribution limit. It is simply a transfer.
You would NOT report this with the previous year. You report both the income and the tax in the same year.
btw, even a regular contribution made in Jan/feb of a particualr year can be reported in that year rather than the previous year.
But that does not apply in this case. It is all 2012.
You would NOT report this with the previous year. You report both the income and the tax in the same year.
btw, even a regular contribution made in Jan/feb of a particualr year can be reported in that year rather than the previous year.
But that does not apply in this case. It is all 2012.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thank you Nelsona. Yes US citizen.
Indeed not quite sure where the numbers go but here is what I think I found out.
Total Ira distribution of $ 88261.95 would go as received from lump sum payment from US IRA plan ad shows as income on T1.
The net amount received after US federal tax deducted and various other fees is
$ 52,220.38 and I believe this would go where T1 software indicates "lumpsums payments from US IRA 60(j) eligible.
Not sure wat to do with the amoount that makes up the difference between the $ 88261.95 and $ 52220.38 if anything. Would tis be a withdrawal from the plan?
The US federal tax and 10% penalty I used as foreign tax credit.
Thank you again for your help.
Indeed not quite sure where the numbers go but here is what I think I found out.
Total Ira distribution of $ 88261.95 would go as received from lump sum payment from US IRA plan ad shows as income on T1.
The net amount received after US federal tax deducted and various other fees is
$ 52,220.38 and I believe this would go where T1 software indicates "lumpsums payments from US IRA 60(j) eligible.
Not sure wat to do with the amoount that makes up the difference between the $ 88261.95 and $ 52220.38 if anything. Would tis be a withdrawal from the plan?
The US federal tax and 10% penalty I used as foreign tax credit.
Thank you again for your help.
The ideal would have been for you to "make up" the ammount that was withheld, from your other holdings. You could have put in the full 88K as eligible.
The effect of not doing this is to make more of your IRA withrawal fully taxable in Canada.
But one big mistake you are making is thinking that the withheld tax is your actual tax. It is not.
As a USC (and that is why I asked), your IRS tax is determined SOLELY on your 1040, not on any 1099 withholding. That would be the case for non-USC. You may owe more or less than what was withheld, that is for your 1040 to determine.
So, you need to fill a 1040, as usual, including the 88K as pension income, plus all your other income for the year, determining your overall tax as you usually do (using various credits, detductions, exemptions) and then using the prorated tax as your eligible tax, plus the 10% penalty.
Quick example.
You report $150K of income on your 1040, including the IRA withdrawal. The tax you calculate comes to, say, 30K, plus the $8800 penalty.
You get to claim the ratio of the tax you calculated (88/150) *30K, plus the $8800 penalty.
In canada you report the $88K (in CAD of course), as foreign income, and use the tax you calc'd above and peanlty on your foreign credit line, fed first, and then the remainder on prov form.
btw, the "fees" shouldn't come into play. your 1099 will show the withdrawl amount. period. That is what is taxable. It will also show the tax withheld, that goes on your 1040 as tax paid. no where else.
The effect of not doing this is to make more of your IRA withrawal fully taxable in Canada.
But one big mistake you are making is thinking that the withheld tax is your actual tax. It is not.
As a USC (and that is why I asked), your IRS tax is determined SOLELY on your 1040, not on any 1099 withholding. That would be the case for non-USC. You may owe more or less than what was withheld, that is for your 1040 to determine.
So, you need to fill a 1040, as usual, including the 88K as pension income, plus all your other income for the year, determining your overall tax as you usually do (using various credits, detductions, exemptions) and then using the prorated tax as your eligible tax, plus the 10% penalty.
Quick example.
You report $150K of income on your 1040, including the IRA withdrawal. The tax you calculate comes to, say, 30K, plus the $8800 penalty.
You get to claim the ratio of the tax you calculated (88/150) *30K, plus the $8800 penalty.
In canada you report the $88K (in CAD of course), as foreign income, and use the tax you calc'd above and peanlty on your foreign credit line, fed first, and then the remainder on prov form.
btw, the "fees" shouldn't come into play. your 1099 will show the withdrawl amount. period. That is what is taxable. It will also show the tax withheld, that goes on your 1040 as tax paid. no where else.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best