Canadian citizen, US permanent resident. Withdrew RRSP from Canadian bank for 2013 and this money was the only source of living in 2013. The taxes withheld by Canada was 25%. Completed 1040 for 2013, filled in 8891, made an election under 217 and mentioned in 1040 the whole sum withdrawn from RRSP. Taxes withheld (25%) were mentioned in 8891. Also, sent T4 to Canada CRA for 2013. After my calculation, I was owing $0 to IRS and. Now, I received a letter from IRS saying that I owe about $4000. Not only the money was withdraw in a different currency (CAD) but it looks like I was double taxed, first by Canada and then by US. I have to call IRS to clarify this. Question: Is 1116 form needed? What should I make to correct this situation? Meanwhile, I received a check from Canadian CRA as a result to the tax return completed for 2013.
Note: I mentioned the 25% taxes withheld for the whole RRSP taken in 8891 form and IRS mentioned that amount from 8891 (the taxes withheld) cannot be used as a credit on line 53 on 1040 form.
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