RRSP/US tax return

ldubs · Post by **ldubs** » Sun Mar 24, 2013 10:35 pm

Hi, I've been through this whole forum as well as the visa journey forum but my question has not really been answered.
This is my first time filing a US tax return. I arrived in the US on a fiancee visa(now married waiting for greencard) in Sept 2012. I am currently getting my Canadian tax return filed but I cashed out my RRSP back in September when I first moved to the US. After reading the forums, I see that I need to fill out a 1040 form, 1116 form and 8891 form. Is this correct?

I am only reporting the withdrawal of my RRSP because I have not started working yet.

Since I only have the RRSP to report, is it possible to just do it myself on hr block or something similiar.

I am guessing since I cashed it as soon as I got to the US, the taxable amount is the same as the one they reported on my NR4 form?

nelsona · Post by **nelsona** » Mon Mar 25, 2013 9:43 am

Your RRSP is not taxable in US, becuae it had a new value the day you moved.

You should be filing dual status, with a residency strting date of september.

You may even be ablw to file a 1040NR, and ignore the RRSP altogether.

NRBlockheads will SURELY mess up your return.

ldubs · Post by **ldubs** » Mon Mar 25, 2013 9:54 am

ok thank you.

My Canadian accountant told me i had to file the rrsp with my american return because they listed me as a non resident and I got the funds while already in the US.

He said in order to get some of the withholding tax back I'd have to do it in the US.

nelsona · Post by **nelsona** » Mon Mar 25, 2013 10:10 am

That is fine. But by the IRS rules, you are not taxable on it, so there is nothing to claim back.

Look at the rules for 1040NR, and see if youy quelaify. You do not have a GC yet.

ldubs · Post by **ldubs** » Mon Mar 25, 2013 10:14 am

great, i'll def look into the 1040 NR

I'll also talk to my Canadian Accountant again .. so you're saying he should claim the RRSP cashout on my Canadian taxes? I'm hoping to get abit of that 25% back

nelsona · Post by **nelsona** » Mon Mar 25, 2013 4:10 pm

You won't. your CPA is clueless on these matters.

ldubs · Post by **ldubs** » Mon Mar 25, 2013 4:53 pm

My Canadian Accountant is definitely not clueless and after speaking with him again, he told me exactly what to do for my taxes in the US and after doing them, i will get a good chunk back.

I think you might have misunderstood my original question.

oh and I can't file a 1040NR .. I am considered a resident of the US for tax purposes.

nelsona · Post by **nelsona** » Mon Mar 25, 2013 5:13 pm

To collect a foreign tax credit, you need 3 things:

YOu need foreign income. RRSPs sold immediately after arrivel in US have no gains, this none to report. (your acct does not know this)

You need to owe US tax on that income. Again, you owe no US tax on that or any other income (youyr accouant does not know this)

You need foreign tax. THTAT you have, but not the other 2.

As to 1040, that is for full year. At best you moved mid year, that makes you dual stustis, which allows you to CHOOSE how to file. (your acct does not know this). Since you do not have a Grren card, your residency is determined by the substantial presence test (SPT), which you do not pass. This for 2012, you can and should file 1040NR. This way you do not have to bother with 8891, and will owe no tax (your cpa does not know this).

To file 1040, you will need to report all income for year, and report a small gain from january on your RRSP. Not enough to make you taxable, and certainly not enough to get any tax back.

You do realize that this is a cross-border specialized forum, eh?

Again, your CPA is full of it if he says you can get any of the RRSP tax back -- because your RRSP is not taxable in US, and you owe no tax in US anyways.

nelsona · Post by **nelsona** » Mon Mar 25, 2013 5:14 pm

ask him to do your US return for free, and you'll give him your US refund....

nelsona · Post by **nelsona** » Tue Mar 26, 2013 8:21 am

... and instead of arguing how you should file US return, your CPA should be helping you retrieve RRSP money on your Cdn return, by using section 216 of the ITA.

If you have little or no incopme from outside Canada, you can -- even though you are non-resident -- request that the RRSP be taxed "as if" you were still resident, which means by the graduated tax rates rather than 25% flat. This *might* get you some money back from the correst source.

Mention section 216 to your CPA and watch his eyes glaze over. Seriously, the nerve of that guy.

nelsona · Post by **nelsona** » Tue Mar 26, 2013 8:31 am

meant to say "section 217" return.

ldubs · Post by **ldubs** » Thu Mar 28, 2013 12:48 pm

yes he is going to be claiming it on my tax return using section 217

but he says i still need to be claiming it on my US tax return

nelsona · Post by **nelsona** » Thu Mar 28, 2013 1:13 pm

Good. He knows about 217. That is in Canada of course.

Can't figure out what "it" is, that you should be claiming. You owe no tax in US, you're not reporting any Cdn income, and are not apying any US tax on any Cdn income. and you will be reducing the Cdn tax anyways with 217, perhaps to nothing.

He should stick to Cdn returns.

Notice he isn't offering to do your US return, eh?

ldubs · Post by **ldubs** » Thu Mar 28, 2013 1:19 pm

so you're saying if i claim my RRSP on my Canadian taxes under 217 then i don't have to do anything with it on my US tax return

nelsona · Post by **nelsona** » Thu Mar 28, 2013 2:46 pm

Sigh. I've already told you what you need to do with your RRSP in US, what you do in Canada doesn't matter. You do need to reduce the Cdn tax as much as possible, but that won't have anything to do with how you file/report in US . Cdn tax rules and US tax rules are separate. you have to follow the rules for each country.

You haven't told me how you are going to file in US, I gavc you several choices. None of them should end up with you owing any US tax, nevermind any tax on your RRSP, regardless.

1040NR: no mention of RRSP, so no 8891 no 1116.
dual-status: Form 8891, on which you report entire distribution, but zero taxable. Since you have no other US income, No tax owed, so no need for form 1116.

For 2012, you are basically filing a return just to get into the system. You are not considered a resident for 2012, and you had no US income, so make things as simple for you as possible.