RRSP Distribution

[florida_man]

I'm graduate student at a US university, and I took an RRSP distribution last year. I qualify as non-resident alien due to the number of days I've spent in the US. I also work on campus, so I have US income. I've been living here for a while but this is the first time I've taken a distribution to supplement my income. I'm using the taxslayer software and I'm not sure how to enter this income. I paid Canadian income tax at the time of distribution, and I think it should be entered in the 1040 FEC form but I'm not sure how to account for the taxes that I already paid or should I be subtracting those from the gross? The amount is relatively small compared to what most people would withdraw in a given year so when I file in Canada I should get most of the taxes refunded.

[nelsona]

Since you are a non-resident of US (students are not residents for first few years) you should be filing a 1040NR, on which you report only US-sourced income.

Ther RRSP should only be on your Cdn return, which you should still be filing.

[florida_man]

Hi nelsona, thanks for your reply. I'm​ a PhD student and I've been here 6 years and I'm​ not able to file as a non-resident--I am a resident alien. In this case is the distribution supposed to be on the US taxes? Would this be on a 1040 FEC? If so would I subtract the Canadian taxes paid from the gross?

[nelsona]

Ok. What is your residential status in Canada? You should not be resident in both at this stage.

So have you determined the non- taxable portion of your RRSP. It would be the book value when you became a US taxpayer (presumably 1/1/2016). Once you have this amount, you will prorate that over the gross distribution, These gross and net taxable will go on 16a/b of 1040.

Foreign taxes are NEVER used to reduce the gross amount of any income. You would claim these taxes on form 1116 against the US taxes you owe on the RRSP distribution, or take them as a deduction on your schedule A, if you are itemizing.

As to Canada, if you are now a US tax resident (no longer exempt by status, like you were) you are now a non-resident of Canada, and should be paying 25% flat tax withheld). You need to advise your RRSP that you are no longer Cdn resident. And you need to file a departure return for Canada. You may subsequently be able to reduce the RRSP tax in Canada by using section 216 election, but only if eligible.

[nelsona]

I meant to say a "217" election