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Dear David,
I would like to ask you a question about U.S citizenship, and I thought I would send it in an email first and you could let me know if I need to see you for a consultation.
I am a Canadian/British citizen living in the U.S as a permanent resident. I have lived in the U.S since 1990 and obtained a green card in 1993.
Initially I worked for XXXXXXX, currently I operate a small consulting business in WA state.
I have cut all tax ties with Canada as described in your excellent book excerpt on the web site, i.e. I own no property in Canada, no Canadian drivers' license, no bank account, no medical coverage etc.
In the next few months I need to either renew my permanent resident status or apply for U.S citizenship. I would like to ask your advice on which option you think might be more advantageous in the long term.
Upon retirement although I would spend a little time in the U.S., I would like to return to Canada and plan to live on Vancouver island. I should be working for another 5 - 7 years. I will be eligible for a U.S pension at age 65.
I am wondering if it would be easier in the long term to simply renew my permanent resident status in the U.S. and then let it lapse when I retire.
My (limited) investments are also in the U.S as is my life insurance. Do you know if there are any issues or problems associated with claiming a U.S pension, and other U.S retirement fund payouts while not actually a U.S resident (or a citizen)?
Given this information, could you comment on whether it would be more advantageous to remain as a green card holder or to take out U.S citizenship? Are there any other issues I might be unaware of?
You might ask why I am even considering taking out U.S residence? Some of the work I do would require a security clearance from the U.S DOE and I would need citizenship to pursue this. But if citizenship would cause me a long term problem after retirement then I might not pursue this option.
Thank you in advance for your comments and advice,
Regards
HXXXXXXXXXX
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david ingram replies:
Well, I have to say that it is always better to come and see me. If I make no recommendations for the exorbitant figure charged, you can be proud of the fact that in my opinion at least, you are on the right track.
If I come up with anything, it is usually of great signifcance and value.
For instance, a genuine resident of the US does NOT have to give up every Canadian credit card, etc. Article IV of the US/Canada Tax Treaty (find it at about screen at www.centa.com click on US/Canada Income tax) staters quite clearly that if you are living in the US, you are taxable in the US only on your world income. The only time it is necessary to get rid of "everything" is if you are living on a temporary basis in a country like Saudi Arabia or the Grand Cayman Islands where there is NO income tax and therefore no Income Tax Treaty.
With regard to the receiving of US pensions when you return to Canada as a non-US citizen, there are also no significant problems.
A corporate pension will have 15% tax deducted at source and you will get 85%. You will then convert to Canadian Dollars and report it on line 115 of your Canadian Return. Claim the 15% tax paid to the States as a foreign tax credit and you will get dollar for dollar credit in Canada.
Your social Security will not have any tax deducted. You will again convert to Canadian Dollars and report the gross on line 115 (added to the other one of course). Then DEDUCT 15% of the US Social Security on lie 256 of the Canadian Tax return.
This means that 100% of private pensions (401 K, IRA, Keough) are taxable in Canada but only 85% of Social Security.
There is NO US return to file in the above circumstsnces.
On the other hand if you take out US citizenship, you must continue to file a US return and the calculated tax on the US social Security and pension in the US might be significant.
The end result is that you will have to do some fancy foreigh tax calculations to get back the "more than 15%" paid to the US on your private pensions and any CPP and OAS you receive from Canada will also have to be shown on your US return.
However, vacationing in the US will be easier and you will still be free to take on a US consulting job in your 80's at will.
My immediate "of fthe cuff" advice is to take out the Citizenship for the purposes of present, future and way into the future employment and travel possibilities.
A private interview with you could have a completely different outcome
Hope this helps
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
US CANADA Real Estate Taxation Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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