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innocent
New Member

Distribution from CDN RRSP

I closed a CDN RRSP, that is, taken a distribution. The bank withheld 25% CDN tax payments since I am not a CDN resident. Three questions.

 

First, what do I report in total and taxable distribution? In previous Q&As of this Community RobertB4444 and DawnC (https://ttlc.intuit.com/community/taxes/discussion/rrsp-withdrawal-reporting-in-tt/00/3141767) say total and taxable distribution are the same. But LindaS5247 (https://ttlc.intuit.com/community/retirement/discussion/how-do-i-determine-the-taxable-part-of-a-can...) says taxable is after deduction of CDN tax withholdings. Which is it?

 

Second, I guess the distribution and taxes paid are entered in USD?  Do I have to use the IRS exchange rate closest to the time of distribution, or the average exchange rate during the year? Do I have to enter the exchange rate I am using somewhere?

 

Third, I am supposed to enter the foreign tax paid in a 1066 form. How do I navigate to that form in the desktop version of Turbotax? When I start from Foreign Taxes in 'Deductions & Credits' the software asks for 1099 forms, which I don't have since my documents were issued by CDN institutions, so NR4 forms.

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1 Reply
DaveF1006
Employee Tax Expert

Distribution from CDN RRSP

 Assuming you are filing a US tax return:

 

  1. The distribution amounts and taxable amounts are the same as RobertB4444 and DawnC have stated.
  2. Use the average exchange rate during the year to convert to USD. you do not need to mention the exchange rate.
  3. Here is how to enter your Foreign Tax paid to enter the credit assuming you listed the income elsewhere in your return.
  4. Go to Federal
  5. Deductions and credits 
  6. Estimate and other taxes paid 
  7. Foreign Tax Credit>start or revisit
  8. When it asks We just need to check if you have any uncommon situations indicate I paid foreign taxes on income I earned while working in another country. 
  9. At some point in the interview, it will ask if you wish to take a deduction or a credit. If you are able to itemize deductions, you may consider taking the deduction.
  10. There will be questions in the next screen asking you the description of the Foreign Taxes paid and the amount.
  11. If you find that this has no effect on your tax return, you may circle-back and choose you wish to take a credit.
  12. Navigate and record the entries that the program asks for and when you reach the page that mentions Foreign Tax Credit Worksheet, this is where you take notice.
  13. The first that you will be asked is what category of income is it, you will say Passive income.
  14. Next screen will say Country Summary, select add a country 
  15. When it says Other Gross Income - XXXX, Here you put in the Gross Amount you earned in that country. 
  16. Then you will navigate through the screens until you come to a screen that says Foreign Taxes Paid - XXXX, here is where you record the amount paid under Foreign Taxes.
  17. Finish out the section. 
  18. When it asks for 1099's, ignore it.

Regarding the 1066 form, what type of transaction was this and how did you report the income? The purpose of the foreign tax credit is to prevent double-taxation for the same income.

 

@innocent 

 

 

 

 

 

 

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