Hi, Dave,
Nice talking to you on April ??. Thanks for the ride to the
ferry. I am back to xxxxxxxx now and am trying to update my
income tax filing with the RRSP redemption, but have not much
luck. I need your advice on this, which was one of my main
reasons to see you but we ran out of time.
Here are my interpretations on some items of Form 8891:
Line 7a distributions received: I assume this is the total
redemption (or gross amount).
Line 7b taxable distribution: This is the total redemption –
deferred sales charge. (This is the amount for calculating the
25% tax withhold as I verified.)
Line 8 plan balance at the end of the year: This should be 0.
Line 10 b&c total ordinary dividends and qualified dividends are
the same in this case.
Line 10 d capital gains: I assume this is only the capital gains
for the year when I redeemed it.
In Canada, RRSP redemption is taxed as income, not capital gains.
Is it right? How is this treated in the US tax return?
the US only taxes the profit - not the original capital. The
only part that is taxable in the US is the difference between its
value when you left Canada and the value it is when you cash it
in.
So - if you left Canada with a $1,000 RRSP which is now worth
$2,000, Canada will take 25% of $2,000 which is $500.00. In the
US, you will report the $1,000 as a profit on Schedule B. In
Turbo Tax, you would show it as interest, dividends or capital
gains. If you go deeper on Schedule B, you will find the
interest and dividends worksheets (double click on the amounts).
If you use these extra worksheets, you will find a place to put
the tax paid to Canada as a foreign tax paid and it will allow
you to direct it to a specific Form 1116. The Gov't 1040 guide
suggests that it takes an hour and 53 minutes to do a form 1116
by hand. It will take you three hours to figure it out using
TurboTax which still does not have the form 8891 available
showing that they have little concern for the 450,000 US
residents with Canadian RRSP's and the 400,000 Americans living
in Canada with RRSP accounts.
Form 8891 does not ask for the tax withhold. How can we recover
the tax credit paid in Canada?
You recover all or some of the tax paid to Canada on the
"earnings portion only" by filling in form 1116 as above.
I am using the TurboTax software and it is not clear how to treat
this case. I try to show this as retirement distribution income
without the actual 1099-R. I show the tax paid in Canada as the
federal tax withhold in the US, but this may be wrong.
The tax paid in Canada does NOT count as tax deducted. The tax
paid to
Canada goes on form 1116 and a percentage or all becomes a
deduction from US tax as a credit. .
I show the RRSP redemption as other pension income from a foreign
country, but I am not sure the income category type for the
foreign tax credit should be passive income or lump-sum
distribution. It makes huge difference in my final tax payment.
Which category is correct?
The earnings portion only goes on Schedule B as mentioned above -
it is clearly passive income.
Do you know at the end I may have to pay double tax for this RRSP
redemption?
You will not likely pay any double taxation if you do it right.
I hope you understand what I want and wish you can provide some
advice on this. I will be traveling again until the end of May.
You can email me on this. If this is too complicated, I may have
to wait until I move to Vancouver in September and redo my income
tax filing again.
You will find it complicated. Few people have succeeded in
figuring it out themselves. The above should help you do it if
you persevere long enough.
Thanks for your advice and help
XXXXXXXXXXXXXXXX
you are welcome " XXXXXXXXr".
david
===============================
This is a good Sunday Morning question for the radio program.
Answers to this and other similar questions can be obtained free
on Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, I, david ingram am
a permanent guest on Fred Snyder of Dundee Wealth Managers' LIVE
talk show called "ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the
internet at
www.600AM.com
Call (604) 280-0600 to have your question answered. BC listeners
can also call 1-866-778-0600.
Callers to the show and questioners on this board can also attend
the Thursday Night seminars on finance and making your Canadian
Mortgage Interest deductible.
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa
Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to davidingram at shaw.ca
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed
information or consultation and is to be regarded only as general
comment. Nothing in this message is or should be construed as
advice in any particular circumstances. No contract exists
between the reader and the author and any and all non-contractual
duties are expressly denied. All readers should obtain formal
advice from a competent and appropriately qualified legal
practitioner or tax specialist in connection with personal or
business affairs such as at www.centa.com. If you forward this
message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
This from "ask an income tax and immigration expert" from
www.centa.com or www.jurock.com or www.featureweb.com. David
Ingram deals on a daily basis with expatriate tax returns with:
multi jurisdictional cross and trans border expatriate problems
for the United States, Canada, Mexico, Great Britain, the United
Kingdom, Kuwait, Dubai, Saudi Arabia, Thailand, Indonesia, Japan,
China, New Zealand, France, Germany, Spain, Italy, Russia,
Georgia, Brazil, Peru, Ecuador, Bolivia, Scotland, Ireland,
Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran, India,
Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba,
Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands,
US, UK, GB, and any of the 43 states with state tax returns, etc.
Rockwall, Dallas, San Antonio and Houston Texas
Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and
Immigration Tips, Income Tax and ImmigrationWizard Income Tax and
Immigration Guru Income Tax and Immigration Consultant Income Tax
and Immigration Specialist Section 216(4) 216(1) NR6 NR-6 NR 6
Non-Resident Real Estate tax specialist expert preparer
consultant expatriate anti money laundering money seasoning
FINTRAC E677 E667 4789 4790 TDF-90 Reporting $10,000 cross border
transactions
Alaska, Alabama, Arkansas, Arizona,
California, Colorado, Connecticut,
Delaware, District of Columbia, Florida,
Garland, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey,
New Mexico,New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon.
Pennsylvania, Rhode Island, Rockwall,
South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavit Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas Taxman and Tax Guru and wizzard
wizard - consultant - expert - advisor -advisors consultants -
gurus - Paris Prague Moscow Berlin
Lima Rio de Janeiro, Santaigo
-------------- next part --------------
An HTML attachment was scrubbed...
URL: http://www.centa.com/CEN-TAPEDE/centapede/attachments/20050509/0ef2d31e/attachment.htm
What's Related