Rolling 401k to RRSP -

I have recently moved back to Canada from the US and I have a couplequestions about rolling a 401(k) into an RRSP (I know in generalthis is not the best financial practice, but it looks like thiswould be the best way for me to get access to the funds to use asa down payment on a property).1. I know it's possible to roll and IRA into an RRSP. Is it possible to do so with a 401(k). From everybody I have talked to so far I am getting mixed signals as to whether this is possible, or I have to roll the 401(k) into an IRA first.2. What documentation, if any, do I need to show that I am rolling the 401(k), or the IRA, into an RRSP, so that it simply does not look like a contribution.Thanks!

david ingram replies:

The answer is yes but I am up to my tail end in alligators. Theseolder questions will give you the answer and show you that you are NOTalone.


I was on H1 in US for 6 years before moving to Canada as apermanent resident in April 2007. I have a 401k account from my oldcompany whom I left a couple of months ago. I also have a Roth IRA anda brokerage account. I would like to close all these accounts and usethese as a down payment for my house. Trying to get to 20% downpaymentto avoid CMHC fee. When should I withdraw(this year or next year) andwhat would be the best way to avoid/minimise any witholdings? I have acanadian mailing address. Initially I was thinking of doing all thisnext year to avoid paying any taxes this year, but if the financialinstitutions are going to withhold taxes because I am a non-resident,it will make matters worse. Thanks

david ingram replies:

Withholding tax is not the problem. The withholding tax is only that,a withholding tax. The actual withdrawals will be taxable at the endof the year on your tax return and will usually have a further taxliability.

Taking the money out of your 401(K) before you are 59 1/2 for instance,generates an additional 10% penalty. However, if you are taking it outto buy a house, up to $10,000 is penalty free.

Off the top of my head, I would say you are better off to roll the 401Kinto an IRA. Then take the IRA out and roll some or all into aCanadian RRSP next year.

$20,000 can then be withdrawn under Canadian rules to buy a house. Itbecomes taxable over 15 years or you can pay back one 1/15th a yearover 15 years to avoid the tax but you are usually better off to paydown the mortgage and pay tax on the 1/15th.,

On next year's US income tax, the IRA would come out at the lowest USrate and although taxable in Canada would be a rollover deduction andthen you would get a foreign tax credit on your Canadian return for theforeign tax paid to the US. That would leave you with a 10% penalty onthe excess over $10,000 US but no or very little of actual tax paid atthis time. You would, of course, have a tax to pay when you withdrewit from your Canadian RRSP in the future.

It may also be that you would just be better off paying the tax andusing the excess as a down payment. If having $5,000 more cash (at atax bill of $3,000) saves you $5,000 in CMHC fees, it is worth it.

Sit down and do a spread sheet.

This older question may help as well.
XXX wrote:
Hi,I have recently moved back to Canada from the US and I have a couplequestions about rolling a 401(k) into an RRSP (I know in generalthis is not the best financial practice, but it looks like thiswould be the best way for me to get access to the funds to use asa down payment on a property).1.  I know it's possible to roll and IRA into an RRSP.  Is it    possible to do so with a 401(k).  From everybody I have talked to    so far I am getting mixed signals as to whether this is possible,    or I have to roll the 401(k) into an IRA first.2.  What documentation, if any, do I need to show that I am rolling    the 401(k), or the IRA, into an RRSP, so that it simply does    not look like a contribution.Thanks!
david ingram replies:

I am including a prior reply as an answer.


Dear Sir,

I have been working in California for the 5 years on H1 visa and have401 plan(about 40K)
What should I do with this plan , when I will move to Canada ( I'm aPR.)
Move it to IRA or other option .
Thank you very much


david ingram replies:
------------------------------------------QUESTION: Hello,In the US since 2001 and there is a 50-50 chance I will move back to Canadain 2007 or beginning of 2008. What should I do with the following:1.401K : I have a 50K+. Should I let it grow? Rollover in a IRA? should Iwithdraw when I know for sure that I will move back? (I heard you canrollover an IRA or 401K into a RRSP) what are the tax implications?2. In the event I move to Canada, can I use my 401k or IRA toward thepurchase of my first home and not be taxed on my withdrawal.(I currentlyrent in the US and never bought a property in Canada) Will the US recognizea property bought in Canada as eligible for the first time home buyerprogram?3. We wanted to contribute to a Coverdell education saving account this yearfor our first child. Will Canada tax me upon distribution?4. Is there a best time to move back to Canada, (late 2007 or beginning of2008)Thank you for your time----------------------------------------------------david ingram replies:Your 401(K) can be rolled to an IRA.  Your IRA can then be rolled into anRRSP but the US will not recognize it as a rollover and want to penalize you10% for early withdrawal if you have not yet reached the exalted age of 591/2 at the time of withdrawal.By buying a house, you can exempt up to $10,000 of the withdrawal from the10% penalty.Rolling it into the RRSP involves reporting the IRA as income on yourCanadian return and then claiming the deduction for the rollover. Becausethe tax paid to the is a foreign tax credit in Canada, you get to claim thetax paid to the USA against other income in Canada.Therefore, it is necessary to have significant other income in Canada foryou to get the equivalent of a tax free rollover.  In other words, do NOTmove to Canada at the end of a year.  You should move at the start of ayear, i.e. Jan 15 to May 15 or so that you can get a lower tax rate on yourIRA withdrawal in the USA and maximum benefit for the foreign tax credit inCanada.The alternate if you do move at the end of a year is to wait until the next year to do the rollover. Done properly, and with the RRSP money in the account long enough in Canada,you can then withdraw up to $20,000 Canadian (tax deferred) to use as a downpayment on your Canadian house.------the following previous email talks about it as well.QUESTION:worked in CA for 4 yrs. returned to BC in Apr.'04.  Need to transfer myretirement fund but having difficulties with bank and credit union.  USspecifies that I must roll it over to IRA accounts (Individual retirementaccount.  I do not want to be subject to the 20% withholding fee for IRS.What would be the best way to get the funds to me here in Canada.david ingram replies:1.  move it to an IRA and leave it there in one of the world's strongesteconomies.  Most financial advisors are trying to get "more" of theirclients' money into US funds.2.    If you just have to have it in Canada, you have to cash it in in theUS and pay your tax to the US.  take what is left, add the amount (even ifborrowed) of the tax you paid to the US and buy your Canadian RRSP.  Thatwill give you a tax deduction which should be larger than the tax you paidto the US.When you get the refund, pay back the loan.  You will have transferred themoney quite handily.The amount you took out is also taxable on your Canadian return.  Pay thattax with the tax you paid to the US as a foreign tax credit.You will likely need help.Don Walkow of Seabank Capital Management in Surrey, BC is one Canadian whocan help you with the process while you are still in the United States.  Hislicensing allows him to deal with 401(K) plans, IRA's, RRSP's and straightsecurities in any state in the US - He is one of two people I know of whocan do this. - His North American telephone number is 1-800-541-9952 and youcan find out more at Thompson of Blackmont Securities is the other person and is locatedin Toronto.  His phone number is 866-775-7704If you are in Canada and in BC in particular, Fred Snyder, host of "Its YourMoney" every Sunday Morning from 9:00 to 10:30 AM Vancouver Time can alsolook after you but can NOT talk to you if you are in the US. (999 out of1,000 other Representatives in Canada can NOT talk to you either).  You canlisten to this Canadian Program (I am a guest on the fourth Sunday of everymonth) live at to this and other similar  questions can be obtained free on Airevery Sunday morning.Every Sunday from 9:00 AM to 10:30AM on 600AM in Vancouver, Fred Snyder of Dundee WealthManagement and I will be hosting an INFOMERCIAL but LIVE talk show called"ITS YOUR MONEY"Those outside of the Lower Mainland will be able to listen on the Internetatwww.600AM.comLocal phone calls to (604) 280-0600 - Long distance calls to 1-866-778-0600.Old shows are archived at the site.----------------------------------------------------------
On February 11, 2008, DavidIngram wrote:

It is very unlikely that blind or unexpected email to me will beanswered. I receive anywhere from 100 to 700 unsolicited emails a dayand usually answer anywhere from 2 to 20 if they are not from existingclients. Existing clients are advised to put their 'name and PAYING CUSTOMER' in the subject lineand get answered first. I also refuse to be a slave to email and donot look at it every day and have never ever looked at it when I am outof town.
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However, I regularly search for the words"PAYINGCUSTOMER" 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 notesto myself have been spammed out and as an example, as I wrote this onDec 25, 2007 since June 16th, my 'spammed out' box has47,941 unread messages, my deleted box has 16645 I have actually lookedat and deleted and I have actually answered 1234 email questions forclients and strangers without sending a bill. I have also put aside847 messages that I am maybe going to try and answer because they lookinteresting. -e bankruptcy expert US Canada Canadian American Mexican Income Tax service and help
Therefore, if an email is not answered in 24 to48 hours, it is likely lost in space. You can try and resend it but if important AND YOU TRULY WANT OR NEEDAN ANSWER from 'me', you will have to phone to make an appointment. Gillian Bryan generally accepts appointment requests for me between10:30 AM and 4:00 PM Monday to Friday VANCOUVER (Seattle, Portland, LosAngeles) time at (604) 980-0321. david ingram expert US Canada Canadian American Mexican Income Tax service and help.
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Disclaimer: This question has been answered without detailed information orconsultation and is to be regarded only as general comment. Nothingin this message is or should be construed as advice in any particularcircumstances. No contract exists between the reader and the author andany and all non-contractual duties are expressly denied. All readersshould obtain formal advice from a competent andappropriately qualified legal practitioner or tax specialist for experthelp, assistance, preparation, or consultation in connection withpersonal or business affairs such as at If you forward this message, this disclaimer must beincluded." e bankruptcy expert US Canada Canadian American Mexican Income Tax service and help.
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This is not intended to be definitivebut in general I am quoting $900 to $3,000 for a dual country taxreturn.
$900 would be one T4 slip one W2 slipone or two interest slips and you lived in one country only (but werefiling both countries) - no self employment or rentals or capital gains- you did not move into or out of the country in this year.
$1,200 would be the same with onerental
$1,300 would be the same with onebusiness no rental
$1,300 would be the minimum with amove in or out of the country. These are complicated because of theback and forth foreign tax credits. - The IRS says a foreign tax credittakes 1 hour and 53 minutes.
$1,600 would be the minimum with arental or two in the country you do not live in or a rental and abusiness and foreign tax credits no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above andyou 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 andno capital gains, etc. for $200.00 up.
With a Rental for $400, two or threerentals for $550 to $700 (i.e. $150 per rental) First year Rental -plus $250.
A Business for $400 - Rental andbusiness likely $550 to $700
And an American only (lives in the USwith no Canadian income or filing period) with about the same things inthe same range with a little bit more if there is a state return.
Moving in or out of the country orpart year earnings in the US will ALWAYS be $900 and up.
TDF 90-22.1 forms are $50 for thefirst 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 - (maybeamalgamate 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 theCanadian return as a guide for seven years at a time will be from $150to$600.00 per year depending upon numbers of bank accounts, RRSP's,existence of rental houses, self employment, etc. Note that thesereturns tend to be informational rather than taxable. In fact, ifthere are children involved, we usually get refunds of $1,000 per childper year for 3 years. We have done several catch-ups where the clienthas recieved as much as $6,000 back for an $1,800 bill and one recentlywith 6 children is resulting in over $12,000 refund.

This is aguideline not etched in stone. If you doyour own TDF-90 forms, it is to your advantage. However, if we put themin the first year, the computer carries them forward beautifully.
This from "ask an income trusts tax service andimmigration expert" from or or David Ingram deals on a daily basis with expatriate taxreturns with multi jurisdictional cross and trans border expatriateproblems for the United States, Canada, Mexico, Great Britain, UnitedKingdom, 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, StVincent, Grenada,, Virgin Islands, US, UK, GB, and any of the 43 stateswith state tax returns, etc. Rockwall, Dallas, San Antonio Houston,Denmark, Finland, Sweden Norway Bulgaria Croatia Income Tax andImmigration Tips, Income Tax Immigration Wizard AntarcticaRwanda Guru Consultant Specialist Section 216(4) 216(1) NR6 NR-6 NR 6Non-Resident Real Estate tax specialist expert preparer expatriate antimoney laundering money seasoning FINTRAC E677 E667 105 106TDF-90 Reporting $10,000 cross border transactions Grand Cayman ArubaZimbabwe South Africa Namibia help USA US Income Tax Convention. Adviceon bankruptcy e bankruptcy expert US Canada Canadian American Mexican Income Tax service and help .

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