NR4 form for type 43 income from RRSP withdrawl

[Traned408]

I am an expatriated Canadian living full time in USA and married filing jointly in USA.  I made a withdraw from my Canadian RRSP in 2021 and received an NR4 for income type 43. I was able to post the income in my Turbotax Deluxe however I can not find where to post the non-resident tax withholding from box 17. The instructions in the forum from 2019 don't work on this years version of Turbotax.

[DaveF1006]

You will actually need to claim a foreign tax credit to recover some of that amount on your tax return. 

1.  Federal
2. deductions and credits
3. estimates and other taxes paid
4. foreign tax credit.
5. Reach out if you have additional questions.  Be sure if it asks what type of income it is, indicate it is passive income.

[Traned408]

Thanks David, I actually followed those steps with the Q&A part of the app but it only lets me choose Dividends, it doesn't offer me a place to record the tax withholding for my RRSP withdraw or for my Canadian Pensions. I follow this path:

1. Deductions & Credits

2. Estimates and Other Taxes Paid

3. Foreign Taxes

4. Continue

5. Tell Us About Your Foreign Taxes: None of these apply, continue

6. A separate form 1116 must be applied... continue

7. Take A Credit

8. Reporting foreign taxes paid, continue

9. Country, select Canada, continue

10. Select a country from the list below on which to report each 1099-DIV, report income

Here I can only select a single income for a dividend I reported, nothing for the RRSP withdraw or the Canadian pension income.

Any thoughts?

[Traned408]

Ignore this post

[DaveF1006]

It depends. Tell me which Turbo Tax program you are using, online or Desktop, and I can tell you how to enter this unless you have figured this out already.

@Traned408

[Traned408]

Dave, I have been able to enter my Canadian tax withholding (thank you!). However, the program says I am unable to claim all of my withholding as a credit for this tax year. After doing some on line research I found that "To get your maximum credit amount you’ll divide your foreign-sourced taxable income amount by your total taxable income, then multiply that result by your U.S. tax liability."

However, since TurboTax wants me to enter my Foreign pension income in the same place as my US pension income, TurboTax thinks I have very little foreign income. So TurboTax naturally believes I have too much Withholding tax to allow a full foreign tax credit for this year - hence the need to carry over.

But TurboTax also expects me to pay US tax on my Canadian pensions that I had to enter with the US pensions so my tax burden is very high.

I hope I am making sense, any ideas how to get around this issue?

[DaveF1006]

The tax code is a  very confusing process but I will explain it the best I can. According to the IRS, your foreign tax credit cannot be more than your total U.S. tax liability multiplied by a fraction. The numerator of the fraction is your taxable income from sources outside the United States. The denominator is your total taxable income from U.S. and foreign sources. That same fraction is used in determining your foreign tax credit, which may greatly reduce your foreign tax credit.

Whatever is not claimed this year, you may have a foreign tax carryover, which means You can carry back for one year and then carry forward for 10 years the unused foreign tax.

Please read this IRS source document on how to figure the foreign tax credit.

[Traned408]

Thanks Dave,

I confirm my understanding of the formula. My concern is the way TurboTax treats my Foreign pension income. I received Foreign taxable income from a Canadian pension that had no withholding of foreign tax. I have other foreign income that did have withholding. TurboTax has me put my Canadian pension income lumped together with my Social Security income in the box for US Social Security. Therefore my Canadian (foreign) pension income is NOT included in the numerator of foreign taxable income. This reduces the percentage and therefore the amount of foreign withholding tax I can claim for this year. I understand I can carry it over to next year but I don't want to, effectively I will be paying double tax on some of my income this year and it is likely that given my situation I will never claim 100% of the foreign tax withholding let alone be able to utilize a carry over from a prior year.

Is there another way I can report my Canadian Pension income other than adding it to my US Social Security?

Thanks, Andy

TurboTax Deluxe Windows

[DaveF1006]

No, there is no other way to report this income and have the amount appear separately in the numerator of the foreign taxable income since you did not pay tax on it.  Besides if you reported this separately, you would lose the tax benefit of having this taxed as a social security benefit as the entire amount of the pension distribution would be ordinary income. Best not to get too cute with this.

[shardy2]

This is where I was told to send a client with your tax issue:
https://turbotax.intuit.ca/tax/software?sectionHero[]=promoTaxBreak

I hope this helps someone with NR4 reporting issues get guidance and instructions to get their maximum tax benefits. 

[Traned408]

Thanks, but I finally gave up and went to a tax accountant who specializes in Expat taxes. He saved me over $5K over what Turbo Tax said. I think I will be going that route from now on.