Distributions in my CDN RRSP [reinvested]

[user17766499932]

Hello, I am a Canadian citizen, currently a non-resident and have distributions [being reinvested] within my RRSP account. The bank does not issue a slip for this distribution amount. It is simply a statement.

Please note: I do not have any employment income in Canada, hence, do I or do I not need to report the distribution amount and do I need to file taxes?

If yes, in which form of Turbo Tax Canada do I report?

Secondly, can I claim donations made to a registered charitable organizations in Canada and in USA?

Can I claim other eligible expenses like fees paid to a professional organization?

Thanks!

[TurboTax_Susan]

You are only taxed on RRSP withdrawals and overcontributions, not on reinvestments or capital gains within your RRSP account. You can't claim any fees you paid for services in connection with your RRSPs.

On your Canadian tax return, you can claim donations to both Canadian & US charities. You can only claim US donations if you have US income, though. 

As to whether or not you need to file a return in Canada, this Canada Revenue Agency (CRA) website might help: Who should file a tax return
 

[user17766499932]

Hi Susan,

Your responses are correct, however, it applies to a Canadian citizen or resident living in Canada to my understanding. I am now a non-resident of Canada living in the USA with no employment income in Canada.

Could you please revisit my questions and respond accordingly at your convenience.

Thanks,

Razi

[MonikaK1]

This conversation is appearing in the US user Community. If you are a user of the Canadian version of TurboTax, you may wish to access the Canadian Community and participate in those discussions. 

If you are filing a US return, you can claim charitable deductions to US-based charities.

 A Canadian citizen residing in the U.S. typically files Form 1040 (U.S. Individual Income Tax Return) as a tax resident to report worldwide income, or 1040-NR if a non-resident alien. They must also report foreign financial assets (FBAR) and may need to file a final Canadian departure return, potentially followed by non-resident tax returns if they still have Canadian income sources.

For U.S. Residents Reporting Canadian RRSPs:

• Use the "Foreign Tax Credit" section to report RRSP income and claim credits for Canadian taxes paid.
• Report RRSP withdrawals, dividends, and earnings under the "Retirement Plans" section.
• It is crucial to use the appropriate exchange rates for the date of distribution.

The Canada-U.S. Tax Treaty (Article XVIII) treats RRSPs as tax-deferred accounts, meaning reinvested dividends are not taxed annually as they would be in a Canadian TFSA. You must properly declare the tax-deferred status of your RRSP on your U.S. tax return to maintain this advantage. While reinvested dividends are deferred, actual withdrawals from your RRSP are fully taxable as ordinary income in the U.S. 

Some U.S. states (notably California) do not recognize the Canada-U.S. tax treaty and may tax the reinvested dividends annually, even if the federal government does not.

See this discussion on a related topic.

@user17766499932 

[user17766499932]

Hi Monika, thanks for your response, much appreciated.

I thought I was on the Canadian side. Noted, I'll check the link you forwarded.

I will go through the US Canada Tax Treaty and fetch the details. So, based on what I understand from your email, the distribution which is reinvested in a Canadian RRSP should not be taxed but the distribution reinvested in Canadian TFSA, should be taxed in USA by IRS?

Note: In the USA, I am considered a resident for tax purposes.

Could you please confirm.

Thanks,

Razi

[MonikaK1]

If you are not a U.S. citizen, you are considered a nonresident of the United States for U.S. tax purposes unless you meet one of two tests. You are a resident of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 – December 31). See this IRS webpage for more information.

According to the Canadian Tax Foundation, distributions reinvested in a Canadian Tax-Free Savings Account (TFSA) are fully taxable by the IRS for U.S. citizens or residents. The U.S. does not recognize the TFSA as tax-advantaged; it is treated as a taxable foreign trust, requiring annual reporting of all interest, dividends, and capital gains.