Moving 401K to RRSP in Canada

kakatsu · Post by **kakatsu** » Mon Jun 27, 2011 9:33 pm

Hi!
So I've noticed that this is advised against in most of the posts. Regardless, I do want to do it. But I need help doing it.!

My situation. Im 30 (under 59.5) Finished working in NY for 3 years, have a 401A (supposedly similair to a 401K) which has accumulated about 15K. Half is contributed to by employer. I am a US residen on an alien visa, but in a week , will be a Canadian resident, forfeiting my US status.
I want to move this money (regardless of the taxation cost). My questions.

1) I've read the cost is 30% taxable + 10%? is this right? Does the W8BEN cut this down to 15% + 10%?
2) When I do my US taxes for this last year, what do I need to do?
3) When I do my Canadian taxes what do I need to claim? and can I get any of this back?

Thanks.

nelsona · Post by **nelsona** » Mon Jun 27, 2011 10:09 pm

1) 30% +10%.

2)Include the income in your return, and calculate the tax. Plusd the 10%.

3)If you take it before returning, you report nothing in canada. If you take the money after returning, you include it in your Cdn return, and can get credt for the tax.

Forget putting it in your RRSP.

kakatsu · Post by **kakatsu** » Mon Jun 27, 2011 11:31 pm

What about the W8BEN, when I sent it to 401 company ( TIAA CREF) I've read that it can reduce the 30 to 15%. When does that count, can I use it? If not, why not?

Thanks...

nelsona · Post by **nelsona** » Tue Jun 28, 2011 8:26 am

That is only if you are taking periodic withdrawals. besides, you are going to fiel a full year US return, on which you report the income and calculate the ta, not pay flat tax.

kakatsu · Post by **kakatsu** » Tue Jun 28, 2011 9:53 pm

Thanks...

Ok... so what if I agree to perioidic withdrawal... I talked to TIAA, they said it can be done in as little as 6 months. (I am okay with this). I understand that TIAA will determine the 15 or 30%, so once they agree to the above... I will (potentially) receive my $ with 15% subtracted, not 30%.??
I did not follow your next line...
"besides, you are going to fiel a full year US return, on which you report the income and calculate the ta, not pay flat tax." <- I dont get this. what does this change... I will claim "earning" the say 15K minus 15% versus 30%... what am I missing...?

nelsona · Post by **nelsona** » Tue Jun 28, 2011 10:18 pm

For 2011, regrdless of when you leave, yo uare most likely going to file a full year tax return in order to get best tax rate on the money you have earned so far this year. on this return you will report ALL world income, including whatever money you get from your 401(k), and calculate an overall tax.

So whatever money you have witheld will merely go towrds all the tax you owe, not just specifically your 401(k) income.

Besides, since the income will also be reported in canada ands be taxed there, reducing your US tax does nothing to reduce overall tax, since canada will happily take the rest.

So whether you take the money now or later this year or next, you are going to pay 10% penalty, and are going to pay at leat 30% tax on it, be it in US alone, or split between Canada and US.

If you really are intent on taking the money, just cash it before going back to Canada.
btw, periodic withdrawl means over years, not six months.