Moving from US to Canada (Not a US/Canadian Citizen or PR)

bhramar · Post by **bhramar** » Wed Jul 20, 2016 5:22 pm

nelsona - thanks for your prompt response.

[quote="nelsona"]
make sure you get any US-sourced money paid to you before establishing Cdn residence, including any rollovers to roths. rollovers to IRA can be done anytime[/quote]

When you say 'rollovers to IRA can be done anytime' - does that mean I can rollover my 401(k)/pension plan to an IRA even after I move to Canada?

nelsona · Post by **nelsona** » Wed Jul 20, 2016 11:51 pm

Yes. This wouldn't be a taxable event in either country (transfer to roth would trigger the immediate start of taxation in Canada).

As long as you have the willing firm to deal with (ie. the one that would be holding any current IRAs), you can transfer other accounts into it anytime without issue.

bhramar · Post by **bhramar** » Thu Jul 21, 2016 9:24 am

Thanks a ton!

bhramar · Post by **bhramar** » Fri Jul 29, 2016 4:58 pm

I would like to add to the previous discussion and confirm these two things:

- For 2016 US returns, our status will be Dual Status Aliens and will file as 'Married Filing Separately' as Resident Alien for say Jan-Aug period and as Non-Resident Alien for Sep-Dec period (assuming we moved to Canada effective Sep 1)

- If our filing status is 'Married Filing Separately' because of income limit we will not be eligible to contribute to Roth IRA. But, I am assuming we can do a Backdoor Roth IRA before we move with no tax implications in US or Canada

Thank you!

nelsona · Post by **nelsona** » Sat Jul 30, 2016 9:39 am

That is why you should file full year 1040 for your departure year.

bhramar · Post by **bhramar** » Sat Jul 30, 2016 6:05 pm

I read your previous posts on this topic (Dual Status MFS vs. Resident Alien MFJ) going back to 2005 and they were helpful. I also read this -
IRS publication (Pub 54, Chapter 4 - Foreign Earned Income and Housing: Exclusion â€“ Deduction) https://www.irs.gov/publications/p54/ch04.html

This publication refers to pub. 519 to find out if I am Resident Alien. As per pub. 519 Last Year of Residency section, our residency termination date would be say Aug 30, 2016 but we would still be considered Resident Aliens for 2016 as we pass the substantial presence test. This allows us to file as Resident Aliens Married Filing Jointly - for 2016 forms 1040 and 2555 instead of Dual Status Alien Married Filing Separately (1040 and 1040 NR). To do this, we will have to request IRS an extension to file our tax return till we complete 330 days outside of US, so around a year after we move to Canada. Is this right?

From Pub. 519, one of the criteria to be eligible to get sailing permit by filling form 2063 -
Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax

Based on this I think we don't have to fill out 1040-C and can just fill out 2063 and get our sailing permit before we move out of US. Does filing 2016 return as Resident Alien for full year impact the requirement to get a sailing permit?

nelsona · Post by **nelsona** » Sun Jul 31, 2016 8:52 am

Cdn residents (or those becoming one) don't need sailing permits.

You do not need to meet SPT to still be able to file full year, and nothing speeciual need be filed. You simple don't choose an earlier date than dec 31.

bhramar · Post by **bhramar** » Sun Jul 31, 2016 12:45 pm

Thank you for confirming that we can file as Resident Aliens for 2016. In that case our 2016 Income (US & Canadian combined) will be higher than the Roth IRA contribution income limit. We will have to do a Backdoor Roth IRA and delay the 401(k)/Pension rollover to IRA till 2017 so that IRA balance at end of 2016 is 0. This will help us avoid taxes on IRA to Roth conversion when we do Backdoor Roth IRA. Is this the right approach?

https://www.irs.gov/individuals/interna ... ing-permit
At the above link, the only mention on Canadian residents I found is in Category No. 4 of Aliens who do not a Sailing Permit -
You are a resident of Canada or Mexico who commutes frequently to the United States to work and your wages are subject to income tax withholding.

I don't think this applies to our situation as we will not be commuting to US for work. Is there any other rule or exemption that I am missing that allows Aliens who are going to be Canadian residents to depart US without a Sailing Permit?

Thank you for your patience and for helping me better understand the tax implications of the move.

nelsona · Post by **nelsona** » Mon Aug 01, 2016 9:00 am

Do NOT do a backdoor Roth, because this will mean that you will have made a "Canadian contribution" to a Roth, making income from the Roth taxable in Canada year after year from then on. Your days of contributing/transferring to a Roth are over.

Since you will be filing a 1040, why would you need to file a sailing permit?

In any event, I know of no one who has files such a permit, and (b) been penalized for not filing.

Canada has a treaty with a tax treaty with US, that allows Cdn residents to report in exactly the same way Ia US citizen woul. (Anti discrimination article). Sine a USC would not file a sailing permit when moving to Canada, nor would you.

bhramar · Post by **bhramar** » Mon Aug 01, 2016 9:48 am

Will the Backdoor Roth IRA be considered Canadian contribution if we did it before moving to Canada?

nelsona · Post by **nelsona** » Mon Aug 01, 2016 10:32 am

No. So you have a month to do it.

bhramar · Post by **bhramar** » Mon Aug 01, 2016 10:48 am

Thank you so much for all your feedback and posts on this thread as well as on this forum. All the discussions have been very helpful.

Thank you!

Serbinski Accounting Firms

Moving from US to Canada (Not a US/Canadian Citizen or PR)

Follow-Up Question on Tax Status & Roth IRA