Will collapsing RRSP in U.S. increase my taxable U.S.income?

[jyoung75]

I'm a U.S. citizen that recently moved back to the U.S. (April 2008) after working several years in Canada. While in Canada my employer made an RRSP contribution to my spousal RRSP account in 2007, and my RRSP account in 2008. After returning to the U.S. I took both distributions, which were taxed 25% by the Canadian government. Due to the withdrawals I received two NR4s which I used to file my taxes.

Now the part that has me confused...the accounting firm claims that both the RRSP distributions should be counted as income in 2008. Say I made made $120,000 last year, and took out 2 x $10,000 in RRSP distributions, they claim my US income is then $140,000. Is this correct - are employer paid RRSP contributions added to your US income? If they are, are they counted as income the year you receive the contribution (i.e. one in 2007 and one in 2008) or the year you take the distribution (i.e. both in 2008)? Also, I'm filing jointly with my wife, so does it matter that the 2007 RRSP contribution was made to a spousal rather than to my account?

[nelsona]

The only portion of the RRSPs that is not taxable in US is the amount that YOU personally put in the RRSP. All else, growth, employer contribution) is taxable.

You can use the Cdn tax against the US tax on form 1116

[nelsona]

... and no the employer portion would not have been taxable when it was made, so there is no double taxation going on (do you remember reporting your employer contribution of your 2007 1040?).

[jyoung75]

I did not report my employer contribution on my 2007 1040, so looks like I will have to report both my 2007 and 2008 on this year's taxes due to my withdrawal. Thanks again for the response.

[nelsona]

you report all but your own contribution as taxable. If you made no contributions, you report the entire RRSP withdrawal as taxable.