Might anyone know this? I e-mailed TaxACT, and its phone line has been busy all day.
I have a 2014 Canadian RRSP (income code 43) distribution to enter into my tax software, TaxACT. I know the gross distribution goes on Form 1040, Line 16a, and I have calculated my taxable amount (gain after my arrival in the U.S.), which goes on Line 16b.
But, where do I enter this data in TaxACT? I guess I could enter it directly on page 1 of the 1040. I just want to be sure it's entered right and then Form 1116 for the Foreign Tax Credit is triggered and completed correctly. Thanks in advance for any input!
Where to enter Canadian RRSP income into TaxACT software?
Moderator: Mark T Serbinski CA CPA
Thanks, that did it, for anyone else who may be wondering. Using Form FEC, the amounts properly show up on Lines 16a and 16b.
Separately, I think you just caught an error I made when completing Form 1116. On Form 1116, I entered the gross amount in Part I, Column A, as general income. It sounds like I need to change it to the actual gain realized, or taxable amount.
Separately, I think you just caught an error I made when completing Form 1116. On Form 1116, I entered the gross amount in Part I, Column A, as general income. It sounds like I need to change it to the actual gain realized, or taxable amount.
I received a response from TaxACT. Please see below for those who have questions regarding Canadian RRSP tax treatment for 2014.
"Dear TaxACT® Customer:
Starting in 2014, taxpayers with Canadian registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) automatically qualify for tax deferral treatment. Previously, you had to make this election by filing Form 8891 and reporting details such as contributions, income earned, and distributions. As part of this change, Form 8891 has been eliminated and you are no longer required to file this form for any year, past or present. Going forward, these Canadian retirement plans will be taxed similarly to IRAs and 401(k)s; withdrawals will be taxed at the time of distribution.
There are two possible places to enter Canadian sourced retirement income in the TaxACT program.
1. In the Social Security section to transfer to Lines 20a and 20b of Federal Form 1040
2. On the worksheet FEC Foreign Employer Compensation and Pensions to transfer to Line 16 of Federal Form 1040
Canadian-source retirement income
By provision of the income tax treaty between the U.S. and Canada, benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program to a U.S. resident are taxable, if at all, only in the United States.
These Canadian benefits are treated as U.S. social security benefits for U.S. tax purposes. Thus, under section 86 of the Internal Revenue Code, the portion of the benefits that is taxable will depend on your total income.
If your total income is above certain limits, a maximum of 85% of your benefits will be subject to U.S. tax.
Canadian benefits that are treated as U.S. social security benefits are reported on Lines 20a and 20b of Form 1040 or Lines 14a and 14b of Form 1040A.
To enter this information in the TaxACT program:
1. From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
2. Click Social Security Benefits
3. The program will proceed with the interview questions for you to enter or review the appropriate information
If your Canadian retirement income does not meet the provisions of the income tax treaty between the U.S. and Canada (benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program) to be taxable to a U.S. resident as U.S. social security benefits for U.S. tax purposes, you will need to enter the information on the FEC worksheet.
To enter the retirement income on the worksheet:
1. From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
2. Click Retirement Plan Income to expand the category, then click Foreign Pension Distributions
3. Click Add to create a new copy of the form or click Review to review a form already created
4. The program will proceed with the interview questions for you to enter or review the retirement income information. The actual amounts would be entered on the screen titled Foreign Employer Compensation and Pensions - Compensation or Pension.
The FEC worksheet is not an IRS form, but is a worksheet only in the TaxACT program used to collect the information and transfer it to the appropriate place on the return. All information entered on the worksheet is transmitted with the return if it is electronically filed. If the return is paper filed, there is no documentation required to be sent with the return. The IRS will contact the taxpayer if they need any additional information on the amount entered on the return for foreign retirement income. If you would still like to print the FEC worksheet to mail with the return, the following steps will allow you to do that.
1. Sign in to your TaxACT Online return
2. Click the My Return button in the top right corner
3. Click Print Center, and then click Custom Print
4. In the bottom section, check the box next to Federal Form 1040/1040NR FEC
5. Click the green Print button and then click the blue PDF link. The item will appear in a PDF read-only format. At that time you can click the printer icon on the screen to actually print the worksheet, or close the window without printing.
NOTE: If, after you click Custom Print in Step 3 above, you see the message "No forms (or documents) available to print," you will need to click View/Pay your return fees which will bring you through the Paper Filing steps. Continue through those screens until you have processed the payment for your product fees."
"Dear TaxACT® Customer:
Starting in 2014, taxpayers with Canadian registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) automatically qualify for tax deferral treatment. Previously, you had to make this election by filing Form 8891 and reporting details such as contributions, income earned, and distributions. As part of this change, Form 8891 has been eliminated and you are no longer required to file this form for any year, past or present. Going forward, these Canadian retirement plans will be taxed similarly to IRAs and 401(k)s; withdrawals will be taxed at the time of distribution.
There are two possible places to enter Canadian sourced retirement income in the TaxACT program.
1. In the Social Security section to transfer to Lines 20a and 20b of Federal Form 1040
2. On the worksheet FEC Foreign Employer Compensation and Pensions to transfer to Line 16 of Federal Form 1040
Canadian-source retirement income
By provision of the income tax treaty between the U.S. and Canada, benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program to a U.S. resident are taxable, if at all, only in the United States.
These Canadian benefits are treated as U.S. social security benefits for U.S. tax purposes. Thus, under section 86 of the Internal Revenue Code, the portion of the benefits that is taxable will depend on your total income.
If your total income is above certain limits, a maximum of 85% of your benefits will be subject to U.S. tax.
Canadian benefits that are treated as U.S. social security benefits are reported on Lines 20a and 20b of Form 1040 or Lines 14a and 14b of Form 1040A.
To enter this information in the TaxACT program:
1. From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
2. Click Social Security Benefits
3. The program will proceed with the interview questions for you to enter or review the appropriate information
If your Canadian retirement income does not meet the provisions of the income tax treaty between the U.S. and Canada (benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program) to be taxable to a U.S. resident as U.S. social security benefits for U.S. tax purposes, you will need to enter the information on the FEC worksheet.
To enter the retirement income on the worksheet:
1. From within your TaxACT return (Online or Desktop), click on the Federal Q&A tab
2. Click Retirement Plan Income to expand the category, then click Foreign Pension Distributions
3. Click Add to create a new copy of the form or click Review to review a form already created
4. The program will proceed with the interview questions for you to enter or review the retirement income information. The actual amounts would be entered on the screen titled Foreign Employer Compensation and Pensions - Compensation or Pension.
The FEC worksheet is not an IRS form, but is a worksheet only in the TaxACT program used to collect the information and transfer it to the appropriate place on the return. All information entered on the worksheet is transmitted with the return if it is electronically filed. If the return is paper filed, there is no documentation required to be sent with the return. The IRS will contact the taxpayer if they need any additional information on the amount entered on the return for foreign retirement income. If you would still like to print the FEC worksheet to mail with the return, the following steps will allow you to do that.
1. Sign in to your TaxACT Online return
2. Click the My Return button in the top right corner
3. Click Print Center, and then click Custom Print
4. In the bottom section, check the box next to Federal Form 1040/1040NR FEC
5. Click the green Print button and then click the blue PDF link. The item will appear in a PDF read-only format. At that time you can click the printer icon on the screen to actually print the worksheet, or close the window without printing.
NOTE: If, after you click Custom Print in Step 3 above, you see the message "No forms (or documents) available to print," you will need to click View/Pay your return fees which will bring you through the Paper Filing steps. Continue through those screens until you have processed the payment for your product fees."
It is normal to owe US tax on your RRSP net income, even though you paid in Canada.
That is how FTCs work, you are taxed on your RRSP at your marginal rate, but the credit is only granted at your effective (average) rate.
So, if you are in the 15% tax bracket, your effective rate is probablky only 8 or 9%.
So you are going to pay ~6% to IRS.
That is why slowly taking out RRSP fiunds at 25% in Canada is not a great move. Either tae it all, ot in RRIF for 15%, or take in years whan you have no income and use 217 election in Canada to reduce NR tar.
That is how FTCs work, you are taxed on your RRSP at your marginal rate, but the credit is only granted at your effective (average) rate.
So, if you are in the 15% tax bracket, your effective rate is probablky only 8 or 9%.
So you are going to pay ~6% to IRS.
That is why slowly taking out RRSP fiunds at 25% in Canada is not a great move. Either tae it all, ot in RRIF for 15%, or take in years whan you have no income and use 217 election in Canada to reduce NR tar.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 