My_question_is: Applicable to both US and Canada
Subject: Canadian living in US and returning..?rollover IRA?
Expert: taxman at centa.com
Date: Wednesday August 09, 2006
Time: 10:46 AM -0700
QUESTION:
We are Canadians with US "green cards" in our late 50's living
in the US and thinking of returning home. Can we roll over
our US pensions (nonRoth IRA, SEP, profit sharing plan) into
Canadian pension plans (RRSP etc) without triggering a
taxable event?
--------------------------------------------
david ingram replies:
The answer is yes IF YOU HAVE HIGH INCOME IN CANADA AFTER YOU RETURN but NOT
if you are retiring and have low income but it is a pain in the neck so to
speak.
And do NOT do it before 59 1/2 or you end up with the US 10% early
withdrawal penalty.
What you do is withdraw from the US pensions and that creates a tax
liability which you have to pay in the US.
You then deposit the whole amount (you might have to borrow the tax part) to
a Canadian RRSP.
When you do your tax return, the US pensions are added to your income at a
high rate but you get an equivalent deduction so they are in fact tax
neutral.
The good part is that you then get to use the tax paid to the US as a
foreign tax credit in Canada which means that you get the refund or do not
have to pay tax on an equivalent amount of Canadian income.
You also should do the calculations in advance. If you earned $50,000 in
Canada and withdrew $100,000 in the US, you would not have enough income to
give you the refund to make up for the US tax.
Better to take about 20% less out of the US plan than you earned in Canada
to get full credit for the taxes paid to the US. Unless you are really tax
skilled, do not do it without help and if the consultant you approach does
not immediately know how to do it, find someone else.
As Kerry Kerstetter (the Tax Guru) says in his "How to pick a Tax Advisor"
at http://taxguru.org/incometax/prepare.htm
deal with someone who knows the rules, not someone who is convenient or a
friend of a friend. Personally, I can only think of about four other tax
people who would automatically understand this.
they are:
Andrew Nelson in California
Gary Gauvin in Rockwall, Texas
Steve Peters in Halifax (with KPMG)
Steve Katz in Vancouver.
Brad Howland in Victoria.
????
Of course there has to be more but I have been doing this for 43 years now
and we are few and far between.
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David Ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
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email to taxman at centa.com <mailto:taxman at centa.com>
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<http://www.david-ingram.com/>
Disclaimer: This question has been answered without detailed information or
consultation and is to be regarded only as general comment. Nothing in
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Prices -
Phone consultations are $400 for 15 minutes to 50 minutes (professional
hour).
This is not intended to be definitive but in general I am quoting $800 to
$2,000 for a dual country tax return.
$800 would be one T4 slip one W2 slip one or two interest slips and you
lived in one country only - no self employment or rentals or capital gains -
you did not move into or out of the country in this year.
$1,000 would be the same with one rental
$1,200 would be the same with one business no rental
$1,200 would be the minimum with a move in or out of the country. These are
complicated because of the back and forth foreign tax credits. - The IRS
says a foreign tax credit takes 1 hour and 53 minutes.
$1,500 would be the minimum with a rental or two in the country you do not
live in or a rental and a business and foreign tax credits no move in or
out
$2,000 would be all of the above and you moved in and out of the country.
This is just a guideline for US / Canadian returns
We will still prepare Canadian only (lives in Canada, no US connection
period) with a three or four slips and no capital gains, etc. for $125.00
up.
With a Rental for $300
A Business for $300 - Rental and business likely $400
And an American only (lives in the US with no Canadian income or filing
period) with about the same things in the same range with a little bit more
if there is a state return.
Moving in or out of the country or part year earnings in the US will ALWAYS
be $400 and up.
TDF 90-22.1 forms are $25 for the first and $10.00 each after that when part
of a tax return.
8891 forms are generally $50.00 to $100.00 each.
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
Capital gains *sales) are likely $50.00 for the first and $20.00 each after
that.
Just a guideline not etched in stone.
David Ingram expert income tax help and preparation of US Canada Mexico
non-resident and cross border returns with rental dividend wages
self-employed and royalty foreign tax credits
This from "ask an income tax and immigration expert" from www.centa.com
<http://www.centa.com/> or www.jurock.com <http://www.jurock.com/> or
www.featureweb.com <http://www.featureweb.com/> . David Ingram deals on a
daily basis with expatriate tax returns with:
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