I am a Canadian citizen and a US permanent resident living in the US. I withdrew my Canadian RRSP pension in 2021. Canadian Revenue Agency withheld 25% non-resident tax. Now I am figuring my US Taxes. I ended up with a carryover equal to more than half of my foreign tax credit and with a few thousand dollars of federal taxes due. The US bank where the money was wired used an exchange rate different from the formal Federal Reserve exchange rate for the day of withdrawal/date of transfer. As a result, I also ended with more than a US$ 1,000 less in my bank account. Now, when I use Form 1040, Turbo Tax asks me to enter the total amount of the distribution and the taxable amount converted using the Federal Reserve formal rate, thus paying taxes, including on money collected by the bank.
Can I deduct that US$ 1,000 collected by the bank? If so, how can I do it? Is it correct to enter taxable amount (Form 1040, Line 5b) equal to the gross amount (Form 1040, Line 5a) reduced by those US$ 1,000? Do I need to create a substitute Form 1099-R, that would trigger additional e-filing issues, such as Payer ID? Should I do something else?
Thank you.
