My family has <$20,000.00 in Resp/TFSA's. We have been advised that we need to close these accounts immediately as they have to be claimed/declared at tax time.
1) Why is this such a burden? Why is it so expensive to deal with?
2) I have been advised to close the accounts, and file my 2016 us taxes as a non-resident. Trouble is, I will be moving to the USA in July, dangerously close to the 183 day mark. What are my options?
Is my only option to avoid horrendous fees to change my arrival date to be below the 183 day mark?
Canadian moving to the United States: TFSA RESP concern
Moderator: Mark T Serbinski CA CPA
1. First, neither is tax-sheltered, so that advantage is lost.
Second, they are considered foreign trusts, which requires sometimes difficult reporting.
Third, the investments within the RESP and TFSA may ALSO trigger special PFUC reporting.
Fourth, most firms handling these accounts do not wish to have US resident clients, due to the regulatory restrictions THEY would face.
The TFSA is easily handled: collapse it. You can always replenish if you go back to Canada.
The RESP is a little more difficult, since collapsing it will trigger Cdn taxation. It would be best to transfer it to a non-US relative before leaving. Otherwise, you may just be stuck with it.
What "fees" are we talking about?
2. I don't know who is "advising" you. Your "choice" to file as a US resident, non-Resident, or full-year resident, is dependent on many factors including days spent in US (even before beginning living there). Those who move before sept/Oct are often better off (tax-wise) filing full year in any event. filing as a non-resident is often punitive tax-wise.
What takes you to US?
Second, they are considered foreign trusts, which requires sometimes difficult reporting.
Third, the investments within the RESP and TFSA may ALSO trigger special PFUC reporting.
Fourth, most firms handling these accounts do not wish to have US resident clients, due to the regulatory restrictions THEY would face.
The TFSA is easily handled: collapse it. You can always replenish if you go back to Canada.
The RESP is a little more difficult, since collapsing it will trigger Cdn taxation. It would be best to transfer it to a non-US relative before leaving. Otherwise, you may just be stuck with it.
What "fees" are we talking about?
2. I don't know who is "advising" you. Your "choice" to file as a US resident, non-Resident, or full-year resident, is dependent on many factors including days spent in US (even before beginning living there). Those who move before sept/Oct are often better off (tax-wise) filing full year in any event. filing as a non-resident is often punitive tax-wise.
What takes you to US?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Allow me to elaborate.
I have accepted a medical training program (residency) in the United States that is slated to start July 1, 2016. This is a 3 year training program. I have full intentions to return to Canada, as we would be entering us as TN status.
I am looking for an accounting firm to advise me on how to prepare for the move, and also to file my us/canadian taxes for me. I have had contact with a different firm (not Serbinski) that has advised me that, if I can not get around claiming the RESP, it would cost me approximately $30,000.00--which I have no idea if that value would be due to the IRS or to the accounting firm?. As you could imagine, I almost fell off my chair.
I was advised that the only way to get around this "$30k fee" is to ensure that I am eligible to file as a non-resident, which for me would be <178 days (the calculation was done for me). Then, I would be filing as a non-resident, filing a part-year return.
As I have no experience with US tax law, I have no idea if this is ludicrous, or if this is "how it is". But I am looking for a second opinion. In addition to posting this message, I have messaged Serbinski directly to discuss my options.
Thoughts.
I have accepted a medical training program (residency) in the United States that is slated to start July 1, 2016. This is a 3 year training program. I have full intentions to return to Canada, as we would be entering us as TN status.
I am looking for an accounting firm to advise me on how to prepare for the move, and also to file my us/canadian taxes for me. I have had contact with a different firm (not Serbinski) that has advised me that, if I can not get around claiming the RESP, it would cost me approximately $30,000.00--which I have no idea if that value would be due to the IRS or to the accounting firm?. As you could imagine, I almost fell off my chair.
I was advised that the only way to get around this "$30k fee" is to ensure that I am eligible to file as a non-resident, which for me would be <178 days (the calculation was done for me). Then, I would be filing as a non-resident, filing a part-year return.
As I have no experience with US tax law, I have no idea if this is ludicrous, or if this is "how it is". But I am looking for a second opinion. In addition to posting this message, I have messaged Serbinski directly to discuss my options.
Thoughts.
I am not affiliate with serbinski, so please take my advice to RUN from that firm quickly. they know NOTHING about cross-border taxes.
Note however, that having a cross-border firm handle your taxes will cost your well over $1500 per year. Your situation is not that complicated. Sell of tfsa. Period. Transfer your RESP to your parents or have a specialist file the 2 forms you need.
Filing as a non-resident will cost you a LOT in US taxes.
Note however, that having a cross-border firm handle your taxes will cost your well over $1500 per year. Your situation is not that complicated. Sell of tfsa. Period. Transfer your RESP to your parents or have a specialist file the 2 forms you need.
Filing as a non-resident will cost you a LOT in US taxes.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
I apologize for the repetition in my answer...
But to make sure I am clear on what you are suggesting.
We should be able to sell off/close TFSA's, transfer our daughter's RESP to a family member, and then we should be able to file as a US resident?
There are no egregious fees, fines, etc. in this situation? Would we still need to claim the TFSA/RESP that we held for the month of January 2016 (prior to closing TFSAs, and transferring RESP) to the IRS as a "foreign trust" at tax time? If so, is this a "huge pain in the ___" to do? and should it cost an arm and a leg as the "not to be mentioned" firm suggested?
But to make sure I am clear on what you are suggesting.
We should be able to sell off/close TFSA's, transfer our daughter's RESP to a family member, and then we should be able to file as a US resident?
There are no egregious fees, fines, etc. in this situation? Would we still need to claim the TFSA/RESP that we held for the month of January 2016 (prior to closing TFSAs, and transferring RESP) to the IRS as a "foreign trust" at tax time? If so, is this a "huge pain in the ___" to do? and should it cost an arm and a leg as the "not to be mentioned" firm suggested?
I didn't say that. the poster was NOT working with serbinski. I told him to run from that OTHER firm.
I don't care if one uses serbinski or not, but I certainly would not recommend another firm while using his forum.
Do you let visitors piss in your living room?
I don't care if one uses serbinski or not, but I certainly would not recommend another firm while using his forum.
Do you let visitors piss in your living room?
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Sorry I must have read that out of context. I thought it was odd and ballsy to say that in this thread.
This is what I read
"I am not affiliate with serbinski, so please take my advice to RUN from that firm quickly. they know NOTHING about cross-border taxes. "
Which if someone were reading would think you were referring to Serbinski and not another firm which you were referring to.
Thanks for clearing this up, I didn't mean to be rude in any way if that's what came across.
This is what I read
"I am not affiliate with serbinski, so please take my advice to RUN from that firm quickly. they know NOTHING about cross-border taxes. "
Which if someone were reading would think you were referring to Serbinski and not another firm which you were referring to.
Thanks for clearing this up, I didn't mean to be rude in any way if that's what came across.
My two cents from personal experience (also in the US for my husband's medical residency training, but under a J-1/2 visa instead):
Whether to file as US resident/non-resident depends on whether you still have significant residential ties to Canada (house, bank accounts, you intend to go back within a short time etc). See http://www.howlandtax.com/articles/tnvisa.htm for such considerations under the US-Canada Tax Treaty.
If you do file as a US non-resident, it's fairly simple as you don't have to report world-wide income, just what you earn in the US (1040NR or 1040EZ). You also have to keep track of how many days you are in the US, so quick weekend trips should be recorded in your calendar (they also have rules on whether to count the half day you're in the US while in transit). You get less credits and deductions so not as big a refund, but it is probably possible to do your US tax return yourself. You will have to report US earnings in Canada as a tax resident though.
If you file as a US resident, you get the same tax credits and deductions as a US citizen but have to file forms reporting worldwide income, which is a pain in the butt (as I'm finding out).
TFSAs and RESPs trigger foreign trust reporting and require two forms, a 3520-A due March 15th and a 3520 due the same date as your income tax return - these forms are also filed separately to another IRS Service Center in Ogden UT. There are two threads in this forum that contain information about how people have tried to fill these in, as the forms are not really intended for use with TFSAs/RESPs.
There is also an FBAR reporting form that is due June 30th, for ALL foreign accounts that total $10,000 or more (so in aggregate, not per account) - this would include any universal/whole life insurance policies that have cash surrender values, RRSPs, bank accounts, and investments.
Canadian banks should also withhold tax from interest income if you are a non-resident so report your residency status to them before you move.
All in all, it's very complicated to comply with the IRS Tax Code as a resident so close down as many foreign accounts as you can and make sure you know the filing requirements for the ones you keep.
I wish I had discovered this forum last year...
Whether to file as US resident/non-resident depends on whether you still have significant residential ties to Canada (house, bank accounts, you intend to go back within a short time etc). See http://www.howlandtax.com/articles/tnvisa.htm for such considerations under the US-Canada Tax Treaty.
If you do file as a US non-resident, it's fairly simple as you don't have to report world-wide income, just what you earn in the US (1040NR or 1040EZ). You also have to keep track of how many days you are in the US, so quick weekend trips should be recorded in your calendar (they also have rules on whether to count the half day you're in the US while in transit). You get less credits and deductions so not as big a refund, but it is probably possible to do your US tax return yourself. You will have to report US earnings in Canada as a tax resident though.
If you file as a US resident, you get the same tax credits and deductions as a US citizen but have to file forms reporting worldwide income, which is a pain in the butt (as I'm finding out).
TFSAs and RESPs trigger foreign trust reporting and require two forms, a 3520-A due March 15th and a 3520 due the same date as your income tax return - these forms are also filed separately to another IRS Service Center in Ogden UT. There are two threads in this forum that contain information about how people have tried to fill these in, as the forms are not really intended for use with TFSAs/RESPs.
There is also an FBAR reporting form that is due June 30th, for ALL foreign accounts that total $10,000 or more (so in aggregate, not per account) - this would include any universal/whole life insurance policies that have cash surrender values, RRSPs, bank accounts, and investments.
Canadian banks should also withhold tax from interest income if you are a non-resident so report your residency status to them before you move.
All in all, it's very complicated to comply with the IRS Tax Code as a resident so close down as many foreign accounts as you can and make sure you know the filing requirements for the ones you keep.
I wish I had discovered this forum last year...
csauve (sorry that so many other people are posting on your thread),
Its not a question of whether you CAN file as a US resident. You MUST eventually file as a US resident, and should right now. the question is how easy/difficult it will be if you do not rid yourself of TFSA and RESP.
You will have these pains for 2015 and now 2016. That is why it is called cross-border PLANNING and not cross-border REPAIRING.
Its not a question of whether you CAN file as a US resident. You MUST eventually file as a US resident, and should right now. the question is how easy/difficult it will be if you do not rid yourself of TFSA and RESP.
You will have these pains for 2015 and now 2016. That is why it is called cross-border PLANNING and not cross-border REPAIRING.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
hi Nelsona,
1. What do you mean by filing a tax as non-resident will cause you a lot?
1b. how much difference are we talking about? double?
2. so if i stay only 6 weeks in US, can I choose to file tax as resident?
3. what consequences will that be?
4. if i move to use on Nov 14, and i choose to file as non resident. Can I close tfsa on 31 dec (without incurring US tax)?
5. so, as you said, if i choose to file as resident, how much less tax I am going to pay? (suppose I collapse my tfsa & resp)?
1. What do you mean by filing a tax as non-resident will cause you a lot?
1b. how much difference are we talking about? double?
2. so if i stay only 6 weeks in US, can I choose to file tax as resident?
3. what consequences will that be?
4. if i move to use on Nov 14, and i choose to file as non resident. Can I close tfsa on 31 dec (without incurring US tax)?
5. so, as you said, if i choose to file as resident, how much less tax I am going to pay? (suppose I collapse my tfsa & resp)?