>From 1998 to February 2005 I worked in the US on a TN visa. I
had a small RRSP fund worth 20000CDN at the time that is worth
approximately 40000 today. I also never contributed to the fund
after 1997.
I moved back to Canada for the remainder of 2005, paid Canadian
taxes and also filed a 1040NR for the two months I was in the US.
Now I have moved back to the US (March 2006), am obtained another
TN visa and recently became married. I would like to cash in my
RRSP to use for a downpayment on a house. What are the tax
implications US / Canadian?
I have been researching this and was not aware I needed to
disclose to the IRS my holdings in the RRSP during the years of
1998 - 2005 or that I was supposed to fill out a form to disclose
any earnings.
Thank you,
----------------------------
david ingram replies:
T3echnically, your TN visa is now invalid because you have
married an American and intend to stay in the USA for ever. The
only exception would be if you have started the process to
sponsor your spouse to Canada whcih would be proff that you did
not intend to stay in the USA.
You should start the Green card process immediately and do NOT
leave the US for any reason until you get it unless you go
through an "ADVANCE PAROLE" process first by filling out Foprmn
!-131 and then only After starting the Green Card process.
You should spend some money with Joe Grasmick at
www.grasmick.com - He has a $285.00 consutlting fee for 1/2 hour.
Use i,.
For your taxes, you obviously should have been reporting but did
not do so but were on a TN and did go home. I would be
astounded if you were fined, etc. However, since the possible
fine for not filing form TDF 90-22.1 to report your Canadian
Accounts is up to $500,000 plus five years in jail and you are
applying for permanent status in the USA, you might want to go
back and send them in retroactively.
Howewver, in any case, I feel you should file an amended 1040X
for your 2005 return and attach a form 8891 for the RRSP and TDF
90-22.1 forms for any Canadian accounts you had. And, you filed
the wrong return for the two months.
Under the substantial presence test, you should have filed a 1040
"Dual status" tax return for 2005 for the time you were in the US
and a blank 1040NR "DUAL STATUS STATEMENT" for the 2005 time you
were not in the US. You can correct that with the 1040X you are
filing now.
When you cash in your RRSP now, the financial institution will
withhold 25% of the gross amount as tax to Canada. The principal
is NOT taxable in teh US but any interest you earned on teh
account while in the US "is" taxable.
Claim the 25% tax paid to Canada as a tax credit by filling in
form 1116 on your US return
================
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