From:           Andrew
Reply_To:       astrorocks@gmail.com
My_question_is: Applicable to both US and Canada
Subject:        RRSP for US citizen working in Canada
Expert:         taxman@centa.com
Date:           Tuesday May 06, 2008
Time:           09:17 PM -0000

QUESTION:

I am wondering if it is possible (and if it is wise) to invest 
in an RRSP as a US citizen working temporarily in Canada.  
My goal is to achieve temporary and long term tax savings 
and to invest some for retirement.  My concern is that the 
hassles of dealing with a Canadian retirement plan 
(assuming I return to the US) will not be worth the hassle.

Also is there any reason I would not be allowed to 
contribute to an RRSP?  On the CRA's "Quick Access" page, 
I was told my RRSP deduction limit for 2008 is zero.  
Could this be b/c I don't have tax withholdings?


  
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david ingram replies:

I m not a fan of RRSP accounts although they do have their uses.  You do not define temporary. If you are only in CANADA for a year and a half, forget it.  If temporary means 30 years, you should likely consider it although i can show you mathematically that you are far better off paying down your mortgage with after tax dollars and using a leveraged loan to make your investment arrangements.

RRSP ROOM or the amount of money you can contribute to an RRSP is determined by LAST year's income.  To contribute in 2008, you have to have had earned income in Canada in 2007.  If you earned  $10,000 in Canada when you came here in Dec 2007 and $120,000 in 2008, you could only put in approximately $1,800 to an RRSP in 2008 because your RRSP room for 2008 would be 18% of your net earned income for 2007 (net is after some deductions for union dues, etc. by the way) For 2009, 18% of $120,000 would be $21,600 but there is a statutory limit of

2007   $19,000
2008   $20,000
2009   $21,000
2010   $22,000


So you could only put in $21,000.

The amount is also limited by membership in a company pension plan

There are also other very stringent reporting rules for you with regard to any financial accounts.  RRSP accounts have to be reported the IRS on form 8891.  As soon as the balance of all your Canadian (or French, German, Iranian, etc) accounts exceeds $10,000 for even a second (maybe while buying a house or a car for instance), every account has to be reported to the Dept of the Treasury on forms T D F 90-22.1.  Failure to file this form is now a minimum penalty of $10,000 and to make it clear, I have seen a 105 year old lady fined $10,000 for failure to file this form as far back as 1995.

I have no idea where you live.  (your email address would indicate an asteroid)  but if you (or anyone else) needs cross border financial management, you need to consult with someone who has done the paperwork to work with people on both sides of the border.  We specialize in the preparation of cross border and dual country tax returns.  If you need your US / Canadian returns prepared while in Canada, you should likely send them here.

At the same time, although i recommend several others who are my competitors for cross border taxes, I only know two at the moment who specialize in cross-border investing.

Read on.

Two ethical people who specialize in selling securities, RRSPs, etc., to US citizens in Canada or Canadians in the US  are:

Dan Walkow
Seabank Financial
White Rock
Local     (604) 541-9952
L D        (866) 541-9952
www.seabankcapital.com

AND

Mr Darrell Thompson
Blackmont Securities
Toronto
Local    (416) 874-8007
LD        (866) 775-7704
www.blackmont.com
__
These two individuals and their companies have gone to the effort to get themselves registered just about everywhere so they can deal with a Canadian in Florida or California or Nevada, etc.
____________________________________

Note that because of their specialty, they tend to deal with accounts in excess of $200,000

However, both parties would welcome an exploratory call.
----------------------------------------------------------------

As for other accountants.


Gary Gauvin is absolutely qualified to deal with you.  He is an old business partner of mine from Ottawa.  He now practices outside of Dallas Texas as a one or 1 1/2 person office.  If you deal with Gary, you will deal with Gary.  He is a US enrolled agent.  You can find his website easily.  Type - income Tax Expert -  into
google.  Gary will come up as number one or two.  Why, because he is.  If I am looking for a first or second opinion, I call Gary. Disadvantage - Gary is a one person office.  Advantage - You will always get to talk to Gary.

Gary likes corporations.  I  and my four associates do not like them. I like dealing with individuals who deal cross-border withOUT corporations.

OR   KPMG in Vancouver. The last time  I checked they had 22 people in their US/Canada department.  call (604) 691-3025.  Advantage - Lots of Backup.  Disadvantage - It will be hard to get the same person to deal with you three times in a row.

OR   Steve Peters with KPMG in Halifax (902) 492-6011

OR    Kevin Nightingale in Toronto (416) 733-9595

OR     Len Vandenberg with BDO Dunwoody in Kelowna, BC.  (250) 763-7600

OR    Brad Howland in Victoria, BC at 250-6258

OR     Steve Katz in Vancouver at (604) 732-1515

Whoever you choose, you would likely do well to consult with me for one or two hours a year.  If I have a suggestion, it will be worth it.  If I can't come up with anything, you will know that what you are doing is likely the best track.  I will compare it to my dentist.  When I went in the fall of 2005, I ended  up with $16,000 to $18,000 of dental bills, a bunch of pain, and a lot of nice new caps, etc. 

When I went for an inspection on Jan 29th, he could not find anything wrong except that I was not flossing.  Which one did i appreciate more?

Well both - the first time was expensive but dealt with years of neglect.  The second said I am on the right track.

Good luck.



SUGGESTED PRICE GUIDLELINES - April 26, 2008

david ingram's US / Canada Services
US / Canada / Mexico tax, Immigration and working Visa Specialists
US / Canada Real Estate Specialists
My Home office is at:
4466 Prospect Road
North Vancouver,  BC, CANADA, V7N 3L7
Cell (604) 657-8451 -
(604) 980-0321 Fax (604) 980-0325

Calls welcomed from 10 AM to 9 PM 7 days a week  Vancouver (LA) time -  (please do not fax or phone outside of those hours as this is a home office) expert  US Canada Canadian American  Mexican Income Tax  service help.
pert  US Canada Canadian American  Mexican Income Tax  service and help.
David Ingram gives expert income tax service & immigration help to non-resident Americans & Canadians from New York to California to Mexico  family, estate, income trust trusts Cross border, dual citizen - out of country investments are all handled with competence & authority.
 
Phone consultations are $450 for 15 minutes to 50 minutes (professional hour). Please note that GST is added if product remains in Canada or is to be returned to Canada or a phone consultation is in Canada. ($472.50 with GST if in Canada) expert  US Canada Canadian American  Mexican Income Tax  service and help.
This is not intended to be definitive but in general I am quoting $900 to $3,000 for a dual country tax return.

$900 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only (but were filing both countries) - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,200 would be the same with one rental
 
$1,300 would be the same with one business no rental
 
$1,300 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,600 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,700 would be for two people with income from two countries

$3,000 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $200.00 up. However, if you have a stack of 1099, or T3 or T4A or T5 or K1 reporting forms, expect to pay an average of $10.00 each with up to $50.00 for a K1 or T5013 or T5008 or T101 --- Income trusts with amounts in box 42 are an even larger problem and will be more expensive. - i.e. 20 information slips will be at least $350.00
 
With a Rental for $400, two or three rentals for $550 to $700 (i.e. $150 per rental) First year Rental - plus $250.
 
A Business for $400 - Rental and business likely $550 to $700
 
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $900 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.

Catch - up returns for the US where we use the Canadian return as a guide for seven years at a time will be from $150 to $600.00 per year depending upon numbers of bank accounts, RRSP's, existence of rental houses, self employment, etc. Note that these returns tend to be informational rather than taxable.  In fact, if there are children involved, we usually get refunds of $1,000 per child per year for 3 years.  We have done several catch-ups where the client has received as much as $6,000 back for an $1,800 bill and one recently with 6 children is resulting in over $12,000 refund. 

Email and Faxed information is convenient for the sender but very time consuming and hard to keep track of when they come in multiple files.  As of May 1, 2008, we will charge or be charging a surcharge for information that comes in more than two files.  It can take us a valuable hour or more  to try and put together the file when someone sends 10 emails or 15 attachments, etc. We had one return with over 50 faxes and emails for instance. 

This is a guideline not etched in stone.  If you do your own TDF-90 forms, it is to your advantage. However, if we put them in the first year, the computer carries them forward beautifully.
 
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david ingram expert US CANADA cross border non-resident income tax help and preparation by five tax experts with years of experience with Canadian and American and Mexican income tax

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