My_question_is: Applicable to both US and Canada
Subject: Transfer of Canadian RRSP/LIRA to US
Expert: taxman at centa.com
Date: Thursday August 17, 2006
Time: 06:19 AM -0700
QUESTION:
Mr. Ingram:
You've answered a number of related questions recently, but not this
specific one.
Background:
I am a Canadian citizen living and working in the US (L-1 visa). I crossed
the border in Jan 2006. I still have Canadian RRSPs and LIRAs which I want
to close this year, pay the 25% penalty to the Canadian gov't, and transfer
the proceeds to the US.
Question: Exactly HOW do I close my Canadian RRSPs/LIRAs and bring the funds
to the US? Do I just contact the financial institutions, tell them that I am
a non-resident, and ask that the funds be given to me? I know that I can
bring funds out of my RRSPs, but can I also do it for a LIRA? Are there
different restrictions around the LIRA as compared to the RRSPs?
Thanks in advance - your emails have been an excellent source of information
for my family and I.
Regards,
---------------------
david ingram replies:
Answered it 4 days ago on Aug 15th. However, I did not mention that you have
to be out of the country for two years to qualify to remove the LIRA.
------------------------------------------
To: taxman at centa.com
Subject: RRSP/LIF advice
Hi,
I found your website and email address on the web.
I'm a Canadian citizen living and working in the US on a green card (married
to a US citizen). When I left Canada 8 years ago, I closed out all of my
bank accounts and stuff except for an RRSP and a LIF (I'm from New
Brunswick, I think that might matter). The amount involved are not
significant, so I've been avoiding dealing with any of the issues involved
for a few years now. I haven't filed a return in Canada for 8 years or so
as all of my income is from the US.
My question is how do I go about closing these 2 accounts so that I don't
have to deal with them any more. Can I transfer the money to an IRA or
401k? Can I just get the money directly? What are my options?
Also, is this something that you can help with? Do you offer services that
would help me in my situation?
Thank you very much for your time,
All the best,
----------------------------------
david ingram replies:
Yes, that is the kind of service we offer.
If you were in BC or Alberta, you could remove the money from the LIF after
being gone from Canada for two years by paying a withholding tax of 25% if
allowed. Unfortunately, I do not know the rules for New Brunswick but would
assume that the holder of the account can give you the answer.
You can certainly remove the RRSP by paying a withholding tax to Canada of
25%.
You then have to calculate any increased value of the RRSP and LIF since you
entered the US and reporting the gains on your US tax return. Since you
have already paid 25% tax to Canada, you can claim that as a tax credit on
form 1116 with your 1040.
If you were in the 28% tax bracket in the US, you would usually only owe 3%
more plus any state tax on the earnings only - i.e. the principal amount
when you crossed the border is US Federal and State tax free.
That is the good news.
The bad news is:
Assuming that you have over $16,000 Cdn in these plans, your present
possible US penalties are Up to $500,000 plus five years in jail for failing
to fill out forms T D F 90-22.1 to report the foreign accounts to the US
Department of the Treasury in Detroit (you can see the two questions at the
bottom of Schedule B of you r 1040) and 35% of the amount in the RRSP and
LIF plus 5% of the balance in the account for each year you failed to file
form 8891 or conform to Rev-Proc 89-45 (in force when you moved there) and /
or its successor REV-PROC 2003-25 (see at
http://www.centa.com/CEN-TAPEDE/2003/august/index.htm)
Now, I have never seen a fine under the 89-45, 2003-25 or 8891 RULES.
However, I have seen several fines under the T D F 90-22.1 rules including a
105 year old lady in the Lynn V alley Nursing Home in North Vancouver who
received a $10,000 US fine for failing to report her $38,000 in the Royal
Bank of Canada in Edgemont Village. In addition over 1,000 of Vancouver
financial consultant Jerome Schneider's clients are in the fine process fro
failing to report their offshore accounts on his advice - He received a
$100,000 fine and a jail sentence for telling them not to report the
accounts. SO REPORT THE ACCOUNTS!!
However, I have also never seen anyone fined who came forward with the TDF
90-22.1 reports voluntarily.
YOU CAN READ ABOUT THE JEROME SCHNEIDER CASE BELOW:
---------------
This is sent out as the reply to a question from a Status Indian in Ontario
who is thinking of moving to Thailand and keep his "on reserve tax free
business in Canada" going to provide him income in Thailand.
I had to tell him that his present tax free income would all become taxable
in Thailand.
XXXX - this does not deal with Canada or Thailand, but it does show what
the international community is doing.
Most of what you hear is folklore. I assure you that if it was easy to do
what you want, I would have offices in twenty major cities. The practical
fact is that people are being arrested right - left - and centre.
You have the "best" tax shelter in existence right now. If you go to a
Treaty
country, you will be taxed on money that is tax free right now.
If you genuinely move to the
Bahamas, Grand Caymans, Turks and Caicos, Dubai (full of wealthy tourists
who would pay a fortune for your work), Saudi Arabia, and a few other tax
free and non-treaty countries, you can escape tax. However, I personally
consider Thailand to be an extremely dangerous place to do what you want to
do.
Following is an old question.
QUESTION:
If an American citizen had a consulting company incorporated offshore, but
the work was all in the U.S., would it be beneficial to become a Canadian
citizen?
----------------------------------------------------
david ingram replies: - Short question - long but important answer
An American Citizen Must file a US tax return every year they are alive no
matter where they live, no matter where the money is coming from and no
matter what other citizenships they might have.
Watch out for OFFSHORE corporations as well. Jerome Schneider who set up as
many as anyone else over a 12 year period, was recently convicted. As part
of his plea bargain for a lesser sentence, he turned in over 1,000 clients
he had set up. You can read the full story at
http://www.quatloos.com/Jerome_Schneider_exhibit.htm
In his plea bargain, Jerome Schneider (who used a lot of "my" material
inappropriately) agreed to pay a restitution of $100,000 (supposedly all he
had left after millions of fees and more importantly turn in all the
clients, their lawyers, bankers and anyone else involved. You can read his
plea bargain here.
http://www.quatloos.com/Jerome_Schneider_Plea_Agreement.pdf
I attended one of his seminars at the Waterfront Hotel and found it a joke.
Also spotted a whole bunch of my material in his handouts. It was obvious
that the material had come from my faxed monthly newsletters from Oct 93 to
August 1998. He was a paid subscriber at $125.00 per year.
In addition, if you have an offshore corporation, you are liable to file a
form 5471 each year. Failure to file the 5471 form (which makes all the
internal finances of the offshore corporation part of your 1040 Income tax
return) can accrue a fine (per year) of $10,000 for the first 90 days and
$10,000 every 30 days thereafter. Note that this fine does not require the
corporation to have made a profit or even done any business. It is a
parking meter type of fine for being the proud owner of an OFFSHORE (Canada
and Mexico are offshore for this purpose) corporation and not reporting it
to the IRS. Over 1,000 of Jerome Schneider's clients can expect major fines
form this because he was advising them NOT to file the form.
In addition, if that Offshore corporation (or just you) have signing
authority over foreign accounts totalling $10,000 or more, you need to file
forms T DF-90.22 for each bank account you have a signing authority over.
This would include a trust fund you have set up in Canada for your
grandkids' education or a church or boy scout account if you could sign
them.
Failure to file form T DF-90 to report the bank account for your offshore
corporation can earn a fine of up to $500,000 PLUS five years in jail,
Should you become a Canadian? EVERYONE should become a Canadian. Canada is
a great country with everything good that the US has plus more. You have
everything to gain and NOTHING to lose in becoming a Canadian.
However, becoming a Canadian does not save you any income tax as long as you
remain a US citizen. You will still have all the Income tax liabilities you
have now.
The Instructions for form 5471 can be read here
http://www.irs.gov/pub/irs-pdf/i5471.pdf
The actual form is at:
http://www.irs.gov/pub/irs-pdf/f5471.pdf
Some of the extra schedules are at:
Schedule J
http://www.irs.gov/pub/irs-pdf/f5471sj.pdf
Schedule M
http://www.irs.gov/pub/irs-pdf/f5471sm.pdf
Schedule N
http://www.irs.gov/pub/irs-pdf/f5471sn.pdf
Schedule O
http://www.irs.gov/pub/irs-pdf/f5471so.pdf
Read the fine print at the bottom of form TD-F.90-22 -
http://www.irs.gov/pub/irs-fill/f9022-1.pdf
We had a 105 year old lady with a $10,000 fine for not filling in form TD
F-90.22
A 68 year old lady had a $60,000 fine.
=========================
Answers to this and other similar questions can be obtained free on Air
every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee Wealth
Management and I, David Ingram host a LIVE talk show called "ITS YOUR
MONEY"
Those outside of the Lower Mainland will be able to listen on the internet
at
www.600AM.com <http://www.600am.com/>
Local calls are taken at (604) 280-0600 and Long Distance calls are taken at
1( 866) 778-0600
Callers to the show are invited to attend free seminars on financial
planning with such specialities as deductible mortgage interest. They are
held at Fred Snyder's Office at 1764 West 7th in Vancouver - (604) 731-8900
for more information.
=========================================
David Ingram's US/Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321 Fax (604) 980-0325
Email to taxman at centa.com <mailto:taxman at centa.com>
www.centa.com <http://www.centa.com> www.david-ingram.com
<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
this message is or should be construed as advice in any particular
circumstances. No contract exists between the reader and the author and any
and all non-contractual duties are expressly denied. All readers should
obtain formal advice from a competent and appropriately qualified legal
practitioner or tax specialist in connection with personal or business
affairs such as at www.centa.com <http://www.centa.com> . If you forward
this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
==============================
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:
multi jurisdictional cross and trans border expatriate problems for the
United States, Canada, Mexico, Great Britain, the United Kingdom, Kuwait,
Dubai, Saudi Arabia, Thailand, Indonesia, Japan, China, New Zealand, France,
Germany, Spain, Italy, Russia, Georgia, Brazil, Peru, Ecuador, Bolivia,
Scotland, Ireland, Hawaii, Florida, Montana, Morocco, Israel, Iraq, Iran,
India, Pakistan, Afghanistan, Mali, Bangkok, Greenland, Iceland, Cuba,
Bahamas, Bermuda, Barbados, St Vincent, Grenada,, Virgin Islands, US, UK,
GB, and any of the 43 states with state tax returns, etc. Rockwall, Dallas,
San Antonio and Houston Texas
Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax and Immigration
Tips, Income Tax and Immigration Wizard Income Tax and Immigration Guru
Income Tax and Immigration Consultant Income Tax and Immigration Specialist
Section 216(4) 216(1) NR6 NR-6 NR 6 Non-Resident Real Estate tax specialist
expert preparer consultant expatriate anti money laundering money seasoning
FINTRAC E677 E667 4789 4790 TDF-90 Reporting $10,000 cross border
transactions
=========================
Alaska, Alabama, Arkansas, Arizona,
California, Colorado, Connecticut,
Delaware, District of Columbia, Florida,
Garland, Georgia, Hawaii, Idaho, Illinois,
Indiana, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland,
Massachusetts, Michigan, Minnesota,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey,
New Mexico, New York, North Carolina,
North Dakota, Ohio, Oklahoma, Oregon.
Pennsylvania, Rhode Island, Rockwall,
South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia,
West Virginia, Wisconsin, Wyoming,
British Columbia, Alberta, Saskatchewan,
Manitoba, Ontario, Quebec City,
New Brunswick, Prince Edward Island,
Nova Scotia, Newfoundland, Yukon and
Northwest and Nunavut Territories,
Mount Vernon, Eumenclaw, Coos Bay
and Dallas Houston Rockwall Garland
Texas Taxman and Tax Guru and wizzard
wizard - consultant - expert - advisor -advisors consultants - gurus - Paris
Prague Moscow Berlin
Lima Rio de Janeiro, Santaigo
============================
New York, Boston, Sacramento, Minneapolis, Salem, Wheeling, Philadelphia,
Pittsburgh, Atlanta, Pensacola, Miami, St Petersburg, Naples, Fort Myers,
Cape Coral, Orlando, Atlanta, Arlington, Washington, Hudson, Green Bay,
Minot, Portland, Seattle, St John, St John's, Fredericton, Quebec, Moncton,
Truro, Atlanta, Charleston, San Francisco, Los Angeles, San Diego,
Sacramento, Taos, Grand Canyon, Reno, Las Vegas, Phoenix, Sun City, Tulsa,
Monteray, Carmel, Morgantown, Bemidji, Sandpointe, Pocatello, Bellingham,
Custer, Grand Forks, Lead, Rapid City, Mitchell, Kansas City, Lawrence,
Houston, Albany, Framingham, Cambridge, London, Paris, Prince George, Prince
Rupert, Whitehorse, Anchorage, Fairbanks, Frankfurt, The Hague, Lisbon,
Madrid, Atlanta, Myrtle Beach, Key West, Cape Coral, Fort Meyers, Berlin,
Warsaw, Auckland, Wellington, Honolulu, Maui, Kuwait, Molokai, Beijing,
Shanghai, Tokyo, Manilla, Kent, Winnipeg, Saskatoon, Regina, Red Deer, Olds,
Medicine Hat, Lethbridge, Moose Jaw, Brandon, Portage La Prairie, Davidson,
Craik, Edmonton, Calgary, Victoria, Vancouver, Burnaby, Surrey, Edinburgh,
Dublin, Belfast, Glasgow, Copenhagen, Oslo, Munich, Sydney, Nanaimo,
Brisbane, Melbourne, Darwin, Perth, Athens, Rome, Berne, Zurich, Kyoto,
Nanking, Rio De Janeiro, Brasilia, Colombo, Buenos Aries, Squamish,
Churchill, Lima, Santiago, Abbotsford, Cologne, Yorkshire, Hope, Penticton,
Kelowna, Vernon, Fort MacLeod, Deer Lodge, Springfield, St Louis, Centralia,
Bradford, Stratford on Avon, Niagara Falls, Atlin, Fort Nelson, Fort St
James, Red Deer, Drumheller, Fortune, Red Bank, Marystown, Cape Spears,
Truro, Charlottetown, Summerside, Niagara Falls, Albany
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
What's Related