QUESTION: I'm a Canadian citizen who has a work visa in the U.S.
Should I consider contributing to my company's 401(k) plan? What are my
options when I return to Canada as far as getting the money or rolling into
What are the tax implications in each case?
david ingram replies;
We could likely write 120 pages on this.
If you are living in the US, there is no contiguous problem as far as Canada
If you are commuting an still taxable in Canada, you do NOT want a 401(K)
unless your US employer sis contributing to the plan as well. In that case,
there would be a tax penalty but it would be offset by the money put in by
your employer. Even then, you would be better off having your employer give
you the money and put it all into a Canadian RRSP.
Since you say "When I return to Canada", I am assuming that you are not
Therefore, take your 401(K) now. When you return, leave it in the US but
roll it into an IRA. When you are old enough, use the IRA to purchase
annuity or Pension.
It is possible to get the IRA into an RRSP but it is complicated and I do
not recommend it.
What you would do is withdraw your IRA in the States and pay the tax on it
there. Then you would have to report it on your Canadian return and it
would be taxable. However, you would get the foreign tax credit.
Then you would put the equivalent amount into a Canadian RRSP and get a tax
deduction which would usually be enough to equal the tax paid to the US..
I suggest you leave the money in the USA in an IRA.
CEN-TA Cross Border Services - Tax, Visas, Immigration