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Please would US tax me if i do the following.
Withdraw my RRSP savings in lump sum in future year and canada taxes me on it already. Note i bought the RRSP using my income from the USA since i work only in the USA and i have reported the internal earnings from the RRSP over the years. Paid tax on the internal earnings to USA, should i expect USA to tax me again when i make final onetime final withdrawal from the RRSP to close the account in canada.
Please what forms are supposed to be used at the time.
I know about 3520 &A, schedule B and lines 8a, 9 or 10 and line 16a and 16b for reporting on 1040 during the years. But i am still unclear as per the main issue - tax on lump sum.
Thank you.
kxxxxxxxxx
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david ingram replies:
When you paid tax on the internal earnings, you increased the ACB of the RRSP.
There is no tax on the RRSP in the US.
However, you will be paying 25% tax to Canada and not getting any credit in the states which has resulted in double taxation.
Better to have deferred the tax in the US so that when you reported the earnings in the US, you could claim the 25% foreign tax credit as a foreign tax credit.
See REV.PROC 2002-23 - You can find it at www.centa.com - click on [newsletters] click on [2003], click on August - i.e. read the August 2003 Newsletter
Upon withdrawal, you should fill out US form 3520 to report the withdrawal.
Hope this helps
David Ingram's US/Canada Services
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