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Dear David,
I am a Canadian, with US residence status. When I left Canada in 1993, I had roughly $50k in RRSPs which now is $67k.
I have been thinking of cashing them in and paying the 25% tax now versus a 50% tax most likely when I retire in 20-25 years. The exchange rate has narrowed which would help at this time as well.
If I do this I would need help filing my taxes for 2003 or 2004 dependent on when I should decide to trade the RRSP in for cash. I look forward to your opinion and assessment.
FXXXX
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david ingram replies:
Glad to help you with the reporting. In the case you describe, only the $17,000 is taxable in the US. the entire $57,000 is taxable in Canada.
However, the internal earning have been taxable in the US since you l;eft from 1993 to 2000 uder REV-PROC 1989-45 and under 2002-23 fro 1001 and 2002.
Yoiu can find the details by going to www.centa.com clicking on Newsletters clicking on 2003 and reading two items in the August 2003 section.
If you have not done this reporting, we need the Dec 31 2001 and Dec 31 2002 year end statements to file a 1040X for 2002. That is more important than when you take the money out..
Taking the money out should depend on your over-all marginal tax rate in the USA. If it is les than 25% including the RRSP withdrawal, it does not matter.
Remember though, that it is unlikely you will be taking it out at 50%. If you leave it until you are 60 and take it out as a RRIF, it will come out at 15% to Canada and whatever your marginal tax rate is in the USA. Of course, if you take it out as a RRIF, it is all taxable in both countries but the tax paid to Canada will likley pay the US and it has the advantage of continuing to grow tax deferred.
If you fell on harder times and your US income was below about 25,000 at the time including your Social Security, the tax would not exceed the 15% paid to Canada,
Do look after the REV-PROC 2002-23 you will find inthe text at http://www.centa.com/CEN-TAPEDE/2003/august/national_post_reprint.htm
David Ingram's US/Canada Services
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
4466 Prospect Road
North Vancouver, BC, CANADA, V7N 3L7
Res (604) 980-3578 Cell (604) 657-8451
(604) 980-0321
New email to [email protected]
www.centa.com www.david-ingram.com
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 & the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent financial, or real estate planner or advisor & appropriately qualified legal practitioner, tax or immigration specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
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another similar question will be as we lump them.
You may find more answers at www.centa.com
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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