My question is: Applicable to both US and Canada
QUESTION: I'm a Canadian citizen living in Virginia. I've been here about 3
years now and my only real tie to Canada aside from citizenship is a bank
account and my RRSP.
Recently a stock in my RRSP did very well and I decided to sell it. When I
went to make the trade however I found that I although I was able to sell
the stock, I couldn't buy anything new within my RRSP because I live in
Virginia.
Virginia is one of 5 states (Delaware, Georgia, Louisiana and Nebraska are
the others) that only allow Canadians to sell stocks in their RRSP
accounts - they prohibit purchasing anything new.
My questions:
Is there any way to get around this issue and purchase something else or am
I stuck with a significant amount of money in my RRSP earning very little
interest?
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David Ingram replies:
Youare caught in the conundrum of multi-state jurisdictions. If it makes
you feel any better. If your RRSP was with your brother in Saskatchewan and
you had moved to Ontario, your brother could not deal with it either unless
he licenced himself in Ontario as well as Saskatchewan. George Hatton, CA,
the Cartier Partners RRSP specialist in our office is licenced in albert and
BC as an example.
If you look around, you may be able to find a Canadian broker who has
licenced the comapny in Virginia but I do not know of any. Many Canadian
firms have licenced themselves in canadian hotbeds like Florida, California,
and Arizona but I have not heard of anyone with Virginia on their list.
What you can do, but do not tell anyone I suggested it, is use a brother or
friend's address in Canada and move your self-directed RRSP to a different
address using a Canadian address.
You are absolutely circumventing the law but I bet I could come up with 300
people in a day who are doing just that.
What is more important is the reporting rules for RRSP's.
Are you repoprting your Canadian RRSP and your Bank Accounts on forms
TDF-90. (see the bottom two questions on Schedule B of your 1040 tax
return.
If you are not, the penalty can be a fine of up to $500,000 PLUS FIVE years
in jail. Your Canadian RRSP HAS to have its internal earnings reproted to
the IRS EVERY year. penalties for failingto comply with these regulations
found in REV.PROC 2002-23 is $35% of the principal in your RRSP and 5% per
year that you fail to report PL:US tax on the withdrawal . In its purest
form, it works out to 135% US tax and penalty on the principal in your RRSP.
If you do not know what I am talking about, you need a phone consultation
with me (or someother knowledgeable person) That consultation would cost
you $300 Canadian for up to an hour and might be the best $300 you ever
spent.
Contact details are below.
David Ingram of the CEN-TA Group
US / Canada / Mexico income tax and Working Visa 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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