Good morning David,
My question(s) are US/Canadian/RRSP related.
This last fall my family imigrated from the US to Canada (we are
Canadian citizens) after a period of working in the US. As part of my
separation from the US company I was working for I am continuing to be
paid in my absence for a defined period of time in lou of severence.
This pay is still being taxed in the US. I am assuming that I will
need to file US returns for 2004 and also a Canadian return for my
earnings from the date we moved in the fall. A couple of questions
related to this.
Can I contribute to my Canadian RRSP on the income reported on my
Canadian return and if so what percentage of that income can I
contribute? Is it the standard 18% or since that income is in lou of
severance can I contribute up to 35%?
I'm also assuming that I will claim any Canadian taxes due on my US
return as foreign tax credits.
What I am confused by is how the overall taxes due are calculated.
Suppose I was able to reduce my taxable income for the last 3 months
(since I moved) such that I should be paying less tax than what was
withheld by my employer in the US. How does this get sorted out?
Hope this isn't too confusing. In this situation how do I minimize
the tax I pay in both contries without contributing more than
necessary to my RRSP account?
Take care .
=======================
david ingram replies:
The wages received in Canada are NOT taxable in Canada as the Henry
Hewitt case shows. If anyone has a different opinion I would
appreciate hearing it.
The following is from my 1991 Income Tax Guide.
But June, 1989 was a good month for Henry Hewitt. He had been a
non-resident living in Libya for four years and received some back pay
after returning to Canada. DNR tried to tax him on the money but Judge
Mogan of the Tax Court came to the rescue. He ruled that although
Canadians were usually taxable on money when received, that assumed
that the money itself was taxable in Canada, which was not true in
this case.
Therefore you will file a 1040NR for the money received in the USA and
NOT put it on your Canadian return.
And, before you put any money into an RRSP, you should attend one of
our free seminars at our new tax office at 1764 west 7th in Vancouver
at Fred Snyder's Dundee Wealth Management Office.
Every Thursday evening Fred Snyder and I hold a free seminar at Fred's
office at 1764 West 7th (corner of Burrard in the Spence Diamond
building) in Vancouver.
The topics are:
Seg funds and an alternative to the traditional RRSP.
Making your mortgage income tax deductible
Critical Care insurance for disasters.
coffee and sometimes cookies of course.
Phone 604-731-8900 to reserve your seat -and, you are welcome to bring
your brother, your sister, your mother or father, your children, your
best friend, your worst enemy or your own financial advisor who hasn't
explained how to make your mortgage deductible.
Answers to this and other similar questions can be obtained free on
Air every Sunday morning.
Every Sunday at 9:00 AM on 600AM in Vancouver, Fred Snyder of Dundee
Wealth Management and I, David Ingram host a LIVE talk show called
"ITS YOUR MONEY"
Those outside of the Lower Mainland will be able to listen on the
internet at
www.600AM.com
Local calls are taken at (604) 280-0600 and Long Distance calls are
taken at 1( 866) 778-0600
Callers to the show are invited to attend free seminars on financial
planning with such specialities as deductible mortgage interest. They
are held at Fred Snyder's Office at 1764 West 7th in Vancouver - (604)
731-8900 for more information.
=========================================
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