Canadian RRIF distribution- foreign tax credit for tax year 2021

[smod67]

I received a 2021 Canadian NR4 indicating my RRIF distribution Code 26 with 15% tax on Box 17.  How do I claim this foreign tax through Turbotax.  It shows the Form 116 being available and updated today (3/3/2022)  but I am do not see how to claim this credit.  Can you help please with clear instructions on which section.  Thanks.

[MarilynG1]

First, enter your Canadian pension income in Wages & Income > Retirement Plans & Social Security > Canadian Pension Income (screenshot).

Then, in the Foreign Tax Credit section, you will report this amount as 'General Category' income and the amount of tax paid on the income.

Click this link for more info on Claiming the Foreign Tax Credit.

[smod67]

Thank you but answer this does NOT reduce my taxes paid on my 1040.  Why is that?  Am I missing something?  I should not have to be double taxed in the US and Canada on RRIF income.

Can you explain please why Turbo tax does nothing in reducing my RFIF taxes paid (really equivalent to US RMD distribution).  Perhaps this needs to be treated like a 1099R? 

[DaveF1006 · Accepted solution]

No you will report this as MarilynJoy has described above. Don't try to report this on a 1099R. You need to do a foreign tax credit to receive the credit for your taxes paid. To claim this, go to:

1. Federal>income and expenses>deductions and credits>estimates and other taxes paid>foreign tax credit
2. As you navigate through the system, when it asks what type of income this is, indicate passive income.
3. Then it will ask you to pick a country, pick Canada.
4. Then it asks for other gross income-Canada Indicate Canadian RRIF then the amount of the pension
5. Then when you get to the screen Foreign Taxes Paid - Canada, enter that amount as Foreign Taxes on Other Income Be sure to to enter a date at the bottom of the form as when they were paid
6. Then you should see a country summary page next. Select Done.
7. Then continue through the screens until you get to Foreign Tax Credit Carryovers. if you had foreign tax carryovers from previous years you will enter those here.

8. Continue through the screens and in the end, the program will tell you how much of a foreign tax credit you will receive for this year. 

[smod67]

Thank you DaveF1006.  This detailed explanation worked.  However I do have a carryover adjustment to FTC which shows up as an alert to say Form 116 Schedule B needs to be updated in TurboTax.  Do you know when this form will be available? 

[DaveF1006]

Yes, this form will be available 03/31 if you are using Turbo Tax online or 03/17 is using the software version. 

[abc19]

So to clarify, the Rrif income does not need to be reported under wages and income first? Under Canadian registered pension income as total and taxable part of distribution??

it just needs to be reported under the foreign tax credit section?

[MarilynG]

Yes, you do need to report the Canadian Pension income under Wages & Income, then report the Foreign Tax paid on the income in the Foreign Tax Credit section (under Deductions & Credits). 

• Across the top, select tab Federal taxes / Wages & Income 
• Scroll down to Retirement Plans and Social Security / Canadian Registered Pension Income, select Start

Click this link for detailed steps on Entering Canadian Pension Income and Claiming the Foreign Tax Credit. 

@abc19