Canadian RRIF Income - what to enter as taxable distribution

[abc19]

I need to report Canadian RRIF income, in Turbotax there are 2 lines..the total distribution in 2020 and the taxable part of the distribution. What needs to be entered in the taxable part of the distribution? Is it equal to the total distribution? I have already paid taxes in Canada on the income.

[ColeenD3]

You need to know if the entire amount was taxable. If it was all taxable to Canada, it will be here as well.

Please see this answer from KarenJ.

You need to report your RRIF income as follows in Federal section of TurboTax:

1. Click on Wages & Income at the top of the page
2. Scroll down to Retirement Plans and Social Security
3. Scroll down to Canadian Registered Pension Income
4. Click Start and enter your income

To report your Canadian tax paid on your retirement for foreign tax credit:

1. Click on Deductions & Credits
2. Scroll down to Estimates and Other Taxes Paid
3. Scroll down to Foreign Taxes
4. Click 'Yes" you paid foreign taxes
5. Click through the screens regarding foreign interest and dividends
6. Click yes that you have reported all your foreign income already in TurboTax
7. Click that you want to take a credit
8. Answer question about the Simplified Limitation Election
9. Choose income type for pension - it will be Passive income
10. Add Canada as the country
11. Enter description -Canadian RRIF
12. Enter Income amount that you previously reported in TurboTax
13. Enter your taxes you paid on your foreign retirement in the box "Other income"
14. Continue through ALL the foreign tax credit screens until done.

[vasukadambi]

I have an Candian RRIF account.  I got districution with Canadian tax deducted.  How do I enter the distribution on my 2021 IRS form.  The NR4 does not have a payer Federal ID.

[DaveF1006]

@vasukadambi  Reporting this is a two-prong process.  First report your Canadian Distribution.

1. In the program, from the top, select tab Federal taxes 
2. Go to Retirement Plans and Social Security>Canadian Registered Pension Income>start
3. Answer all the questions regarding the distribution.

Now to claim a foreign tax credit for taxes paid to Canada.

1. Go to federal>deductions and credits

2. Estimates and Other Taxes Paid>foreign tax credit

3. To complete this section, you need to complete form 1116, which is not available until 3/03. As you complete this section, Turbo Tax will inform you that Form1116 isn't ready yet.

To enter a foreign tax credit on form 1116, go to:

1. After sign into your account, select Take me to my return

2.  At the right upper corner, in the search box , type in foreign tax credit and Enter 

3.  Select Jump to foreign tax credit 

4.  Start with screen Foreign Taxes and select Continue  to follow prompts.

[rbh53]

How does this work in TurboTax Online Premium 2023?

The method seems to have changed.

[DaveF1006]

It depends to whether or not it was fully taxable in Canada. If so, then you would enter the entire distribution as being taxable.  If not, then you would need to know the taxable distribution amount (in USD) reported on your Canadian return   

Please refer to this Turbo Tax post written by ColeenD3 for further information including how to claim a foreign tax credit for the taxes paid in Canada.

Canadian RRIF Income - what to enter as taxable distribution

[asark391]

read through and completed reporting RRIF incoe in federal taxes section.

However reporting canadian tax paid on retirement for foreign tax credit was very confusing.

Multiple option chains are present and it was not clear as to which path to go down. I would have much preferred to see a initial section which asked how much tax was witheld and then ask questions required to fill out needed forms. Instead in TurboTax the questions about which countries and payments these are linked to was unclear and could not figure out what was meant and as to which options to select and how to fill out. It even looked like there was a duplicate entry of amount of money received in RRIF to be filled in along with tax paid - I was not sure if this would be treated as (yet) another RRIF payment or would be linked to the amount entered when entering the RRIF payment in the previous section.

Can you please clarify with an example for distributions received from a single RRIF account over the year as to how to fill in the RRIF information and how to enter the Canadian Taxes withheld for tax credit.

I would suggest that TurboTax consolidate this ssction by asking for RRIF distributions received and the Withheld tax in one page (section) and then ask necessary questions and populate all required forms guiding the user during the process.

TIA

[DaveF1006]

First of all, let's go through one step at a time and hopefully, when done, this will clarify to you how to record this information.

To record all distributions from RRIF, you will report these here.

1. Log into your account
2. Select Wages and income
3. Less Common income
4. Miscellaneous Income, 1099-A, 1099>start
5. Scroll to the bottom of the page to Other Reportable Income
6. Other taxable income, answer yes
7. Then give a brief description of the income and the amount listed..
8. Once this appears in a summary screen, click on the Add Miscellaneous Income Item and then call it  RRIF Distributions and the amount of both distributions 

Once this is entered as income, you need to claim a foreign tax credit for the amount of foreign tax paid in Canada.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5. 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.
6. The first that you will be asked is what category of income is it, you will say Passive income.
7. Next screen will say Country Summary, select add a country Here you will say Canada.
8. When it says Other Gross Income - XXXX, Here you put in the Gross Amount you earned in that country. This is the total Gross amounts of the RRIF pensions you received and reported in Step 8 above.
9. 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 total amount paid under Foreign Taxes.
10. Finish out the section.

Note: You do not need to make separate entries for each RRIF. The IRS does not require this at this time so you may make consolidated entries in declaring income and the foreign tax credit in the manner i just described.

@asark391 

[asark391]

Hi DaveF1006,

thanks for your reply. I am using Turbotax installed from CD onto my computer and the instructions seem a little different. I am wondering if the steps you have given are for an online version of TurboTax?

I entered the RRIF information in the Retirement plans and Social Security under the "Canadian Registered Pension Income" section where it first asks to enter a name for refering to this Canadian RRSP or RRIF income.

After filling out above section questions (re income tax deferment election and if this was first year distribution was received, and amount of distribution for the year I moved tothe deductions and credit section

in the deduction and credits  I go to the foreign taxes credit as noted but after a bunch of questions TurboTax bumps me back to the Estimates and Other taxes Paid group under which the foreign taxes credit section is based. I was able once to get to the part where it asked me about kind of income - I put in passive and was able to enter amount of tax paid - it calculated everything and said only a part  of the foreign tax paid was deductible and the rest would have to be carried forward or carried back. Also it said that I would have to consider amount of credit that could be applied and that there was a AMT minimum that would also kick in - I was confused by this because the tax credit allowed was only $638 out of $1951 witheld for Canada Revenue Agency. So I cleared the data and started to reenter the deduction information and now it is kicking me back to the Estimated and Other Taxes Paid group and not getting to the part where it asks to enter type of income where passive is an option.

Please elaborate

Thanks

[DaveF1006]

Once you reported the income information, here are the steps to claim the foreign tax credit.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5. 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. 
6. 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. otherwise, take the credit.
7.  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.
8. The first that you will be asked is what category of income is it, you will say Passive income.
9. Next screen will say Country Summary, select add a country 
10. When it says Other Gross Income - XXXX, Here you put in the Gross Amount you earned in that country. 
11. 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.
12. Finish out the section. 

If you discover that you are only getting credit for $691 or less than $1951, this may be the actual credit you are entitled to this year. Your Foreign Tax Credit is a non-refundable credit that cannot be more than your US tax liability reported on line 16 on your 1040. If the foreign ax exceeds your US tax liability, then the remainder of the credit will be carried forward to offset any other foreign income for a period of ten years.

@asark391