QUESTION:
We have watched the Cdn$ rise against the US$ and now wonder what the impact is if we cash in the RRSP's and bring the cash back to the USA. It seems that the exchange rate would offset the tax impacts 9presuming of course that the exchange rate is temporarily high).
Logically there is Cdn penalty withholding and then the cash would be taxed at non resident rates. Can we cash in smaller amounts to get reduced rates?
In the US what would happen?
david ingram replies:
I am one of the people that thinks the Canadian Dollar will be worth $1.20 US. However, I have been wrong before and will be wrong again. However, you might want to hedge yiuor bets and just transfer 50% and be happy you did not do it three years ago.
A non-resident of Canada owes the Canadian governemnt 25% withholding tax when he or she withdraws an RRSP as a non-resident.
The principal part of the RRSP is not taxable in the US.
The total withdrawal (including the tax deducted) goes on line 15a and the taxable portion goes on line 15b on put zero on 15b and put the actual growth on schedules B and D if you know what the interest, dividends and capital gains portions of the increase are. The increase in exchange will go on Schedule D for instance.
The taxable portion is the increase in value since the day you crossed the border to the US and will be the part you have been reporting and exempting every year on form 8891 and the previous reporitng you did under 89-45 and 2003-57, etc., etc.
Any tax paid to Canada will be deductible as a foreign tax credit on US form 1116 on a pro-rata basis.
You have also, of course been reporting the existence of the RRSP on form TDF 90-22.1 - the hint about these two forms are the two questions at the bottom of schedule B. The 8891 is a new simpler form for the last three years and takes the place of the draconian 3520 mentioned in the bottom question.
This older Q & A will help you I hope.
I am a Canadian citizen and legal US resident. I've lived in Florida
for 25 years and now, at 65, I'm considering taking distributions from a spousal
RRSP with Royal Bank.
Unfortunately, income tax information I've received from different
sources is terribly conflicting and, at worst, indicates that my nest egg will
be gobbled up by governments. Is this something you can steer me straight
on?
----------------------------------------------------------
david ingram replies:
If you roll the RRSP into an RRIF (Registered retirement investment Fund), The payer will have to deduct 15% non resident withholding tax under the terms of Article XVIII of the US . Canada Income Tax Convention (Treaty).
You will then report it again on form 8891 of your 1040 and there may or may not be US tax to pay. If your income is high enough that youare in a federal 28% tax rate, there 'will' be tax to pay on the RRIF.
You will claim the 15% tax paid to Canada on US form 1116.
---------------------------------------
Now, you have been supposed to report the existence of that account to the Department of the Treasury in Detroit on form TDF 90-22.1 since 1989 when that law was passed and shown in bulletin 89-45. Failure to report can be a penalty of a minimum of $10,000 to a maximum of $500,000 PLUS up to 5 years in jail for each year you did not report it. See the bottom question on schedule B of your 1040 where your foreign trust requires the preparing and filing of a 3520.
Thankfully, you do NOT have to do a 3520. the 8891 takes it place and is much easier.
The penalty for not also reporting the RRSP and its internal earnings to the IRS (it was the Dept of Treasury above) is 35% of the principal plus 5% for each year it was not reported since 1989 when the reporting rules started. The form 8891 is an exemption for paying the tax on those internal earnings.
See form 8891 at: http://www.irs.gov/pub/irs-pdf/f8891.pdf
RELIEF
Although I know of over 1,000 people who have paid $10,000 fines for not filing form TDF 90-22.1, I (at this time) do not know personally of a single individual who has been fined under the 8891 / 3520 rules. I also have NEVER seen a person fined for filing the TDF 90-22.1 forms late and voluntarily.
In my opinion, you should file the TDF 90-22.1 forms retroactively for six years.to the Department of the Treasury.
See Form TDF 90-22.1 at http://www.irs.gov/pub/irs-pdf/f90221.pdf Note the penalty of up to $500,000 plus five years in jail for failure to file. The minimum fine is now $10,000.
You should file retroactive 8891 forms with a 1040X to the IRS for the same years. Note that you are the BENEFICIARY so follow the Beneficiary rules. The 8891 form is actually only 3 years old. Before that, you just wrote out the information on a free form page but it is a convenient form to use retroactively.
Hope this helps and we would be glad to assist if needed.
-------------------------------------------------------------------------
On November 10, 2007, David Ingram
wrote:
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. e bankruptcy expert US Canada Canadian American Mexican Income Tax help
However, I regularly search for the words"PAYING CUSTOMER" and
always answer them first if they did not get spammed out. For the last two
weeks, I have just found out that my own email notes to myself have been spammed
out and as an example, as I write this on Oct 18, 2007 since June 16th (124
days), my 'spammed out' box has 34,939 unread messages, my deleted box has 11854
I have actually looked at and deleted and I have actually answered 1078 email
questions for clients and strangers without sending a bill. I have also
put aside 622 messages that I am maybe going to try and answer because they look
interesting. -e
bankruptcy expert US Canada Canadian American Mexican Income Tax
help
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax help.
$1,700 would be for two people with income from two countries
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be $150 to $500.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc.
Just a guideline not etched in stone.
David Ingram expert income tax and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty advice on bankruptcy
It is very unlikely that blind or unexpected email to me will be answered. I receive anywhere from 100 to 700 unsolicited emails a day and usually answer anywhere from 2 to 20 if they are not from existing clients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject line and get answered first. I also refuse to be a slave to email and do not look at it every day and have never ever looked at it when I am out of town. e bankruptcy expert US Canada Canadian American Mexican Income Tax help
Therefore, if an email is not answered in 24 to 36 hours,
it is likely lost in space. You can try and
resend it but if important AND YOU TRULY WANT OR NEED AN ANSWER from 'me', you
will have to phone to make an appointment. Gillian Bryan generally accepts
appointment requests for me between 10:30 AM and 4:00 PM Monday to Friday
VANCOUVER (Seattle, Portland, Los Angeles) time at (604) 980-0321.
david ingram
expert US Canada Canadian American Mexican Income Tax
help.
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
North Vancouver, BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325
Calls welcomed from 10 AM to 9 PM 7 days a week Vancouver (LA) time - (please do not fax or phone outside of those hours as this is a home office) expert US Canada Canadian American Mexican Income Tax help.
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
for expert help, assistance, preparation,
or consultation in connection with personal or
business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
e bankruptcy expert US
Canada Canadian American Mexican Income Tax
help.
David Ingram gives expert income
tax & immigration help to non-resident Americans & Canadians from
New York to California to Mexico family,
estate, income trust trusts Cross border, dual citizen - out of
country investments are all handled with competence &
authority.
Phone consultations are $400 for 15
minutes to 50 minutes (professional hour). Please note that GST is added if
product remains in Canada or is to be returned to Canada or a phone consultation
is in Canada. expert US Canada Canadian American Mexican Income
Tax help.
This is not intended to be definitive but in
general I am quoting $900 to $2,900 for a dual country tax
return.
$900 would be one T4 slip one W2 slip one or two
interest slips and you lived in one country only (but were filing both
countries) - no self employment or rentals or capital gains - you did not move
into or out of the country in this year.
$1,100 would be the same with one rental
$1,300 would be the same with one business no
rental
$1,300 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.
$1,600 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
$1,700 would be for two people with income from two countries
$2,900 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 two or three slips and no capital
gains, etc. for $200.00 up.
With a Rental for $400, two or three rentals for
$550 to $700 (i.e. $150 per rental) First year Rental - plus
$250.
A Business for $400 - Rental and business likely
$550 to $700
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 $900 and up.
TDF 90-22.1 forms are $50 for the first and $25.00
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.
Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be $150 to $500.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc.
Just a guideline not etched in stone.
This from "ask an income trusts tax and immigration expert"
from www.centa.com or www.jurock.com or 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, 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 Houston, Denmark, Finland,
Sweden Norway Bulgaria Croatia Income Tax and Immigration Tips, Income Tax
Immigration Wizard Antarctica
Rwanda Guru Consultant Specialist Section 216(4) 216(1) NR6
NR-6 NR 6 Non-Resident Real Estate tax specialist expert
preparer expatriate anti money laundering money seasoning
FINTRAC E677 E667 105 106 TDF-90 Reporting $10,000 cross border
transactions Grand Cayman Aruba Zimbabwe South Africa Namibia help USA US Income
Tax Convention. Advice on bankruptcy e bankruptcy expert US Canada Canadian American
Mexican Income Tax help.
David Ingram expert income tax and immigration help and preparation of US Canada Mexico non-resident and cross border returns with rental dividend wages self-employed and royalty foreign tax credits family estate trust trusts income tax convention treaty advice on bankruptcy
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,
Hamburg, 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, income trust, Income Tax Treaty Convention. - e bankruptcy expert US Canada
Canadian American Mexican Income Tax
help.
david ingram International
non-resident cross border expert income tax & immigration help estate family
trust assistance expert preparation & immigration consultant, income
trusts experts on rentals mutual funds RRSP RESP IRA 401(K) & divorce
preparer preparers consultants Income Tax Convention Treaty.
advice on bankruptcy expert US Canada Canadian
American Mexican Income Tax help.
Be ALERT, the world needs more
"lerts".
bankruptcy expert US Canada Canadian American Mexican Income Tax
help. -
expert us Canada Canadian Mexico income tax
help
No virus found in this incoming message.
Checked by AVG Free Edition.
Version: 7.5.503 / Virus Database: 269.16.11/1161 - Release Date: 30/11/2007 12:12 PM
