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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 10097
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am a Canadian Citizen living in the USA Arizona state since

Customer Question

I am a Canadian Citizen living in the USA Arizona state since 1994 with legal documentation. ( green card)
I have an RRSP plan in Canada which I have not drawn upon yet. I turn 65 next June.
I have not filed a Canadian Tx return since then, but have filed US tax returns.

I still maintain a Canadian bank account and pension funds, etc. can be direct deposited there.

How do I draw on this RRSP and handle the tax issue?
Lauryn
Submitted: 3 years ago.
Category: Tax
Expert:  Lane replied 3 years ago.

NPVAdvisor :

Hi Lauren, you'l need to file a form that lets you elect tax treaty treatment .. I believe its an 8891 with your 1040 ... hang on and I'll check

NPVAdvisor :

Yes, for U.S. tax purposes, an RRSP is treated as an investment account, and an election to defer taxation of accrued income must be made annually, on form 8891. This election, if properly made, defers taxation of income earned within an RRSP, as long as the contributions were made while a resident of Canada. Department of the Treasury form 90.22.1 should also be filed to disclose foreign bank accounts, and the appropriate disclosure should be made on Schedule B of Form 1040.

NPVAdvisor :

You also have the option of filing a Canadian Tax Return and then taking a FTC (Foreign Tax credit on your US return) ... See this:

NPVAdvisor :

What you really should do, is ahave a CPA run the numbers both ways to see which generates the largest tax savings

NPVAdvisor :

Finally, if you want to have it deposited in the Canadian bank account the cleanest (easiest) thing to do would be to file a Canadian Return (because they will probably withhold a flat 25% and you may not really owe that much tax, - thereby generating a refund - based on not having any other Canadian Source income) then file your 1040 as normal, but with the credit for the actual tax paid on the Canadian return.

NPVAdvisor :

Here's the form you use for the Foreign Tax Credit that you would file with your US return: Form 1116

Customer :

Thank you

NPVAdvisor :

I still don't see you coming into the chat .... I'll move us to the "Q&A" mode ... Maybe that will help (We can still continue a dialogue there, just not in real-time chat as we can here) ... Let me know if you have questions

NPVAdvisor :

AHHH there you are, You are very welcome

NPVAdvisor :

If this HAS helped, I would appreciate a feedback rating of 3 (OK) or better … That's the only way they will pay us here.

HOWEVER, if you need more on this, PLEASE COME BACK here, so you won't be charged for another question.

NPVAdvisor :

I see that you're typing .. I'll wait

Customer :

I saw on line eleswhere, that If I convert the RRSP to RRIF Canada will only then deduct 15% which is reasonable I figure. Money earned in Canada, stays there and is spent there.

NPVAdvisor :

Excellent Idea ... Keeps more of the money in your pocket ... sooner

Customer :

It's a small amount in total and wouod hardly be worth paying an accountant to file a return in Canada for me.

NPVAdvisor :

It's all income and what you owe will be based on your total Canadian Income, but less withheld means more immediate gratification :)

Customer :

Thanks again, I gave you a 4

NPVAdvisor :

OK I see, yes, then you'll be done with it

Customer :

Lauryn

NPVAdvisor :

thanks so much!

NPVAdvisor :

YW

NPVAdvisor :

Lane

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