How to bring by RRSP into the USA

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nelsona
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Post by nelsona »

What rate was the pension withdrawal made at? You didn't mention this, and, are you sure she will be able to access this money? Pension funds are usually locked-in and can't be simply taken.

But, if you can, these would be lumped with your RRSP, and eligible for 217, so that would efinitely have to change your strategy.

Any foreign income she has is simply listed as foreign income. Her Cdn income would go ion the regular lines of the return (pension and RRSP withdrawal) and fed into the return tby filling the form (T4-RSP, T4-P).
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canadian-to-america
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Post by canadian-to-america »

Yes she is sure she can access her pension from her former employer, which says that the pension becomes unlocked once she is no longer a resident of Canada.
nelsona
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Post by nelsona »

How does the pension manager propose that she prove this?
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michaelthef
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Post by michaelthef »

Hi Nelsona - would the same apply for a LIRA or is there in fact a 2 year minimum of being out of Canada before this can be unlocked as I believe I have read? In other words, are all pensions LIRAs? Or is the specific poster's situation here different in that the pension plan manager has specified that it will be unlocked if the person ceases to be a Canadian resident?

Am I understanding correctly that the 217 election results in a refund if you would have otherwise paid less tax on the distribution while a US resident? So if my wife were to break the RRSP (about 20k worth) and have 25% witthheld, what circumstance would result in a 217 being successful? Would it be only if our combined marginal tax rate were less than 25%? Otherwise, if I understand correctly the 25% tax withheld in Canada would be used as a foreign tax credit and then we would pay incremental tax on the such that the overall distribution gets taxed at approximately the US marginal rate. Please let me know if am thinking of this right.

Thanks, as always.
nelsona
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Post by nelsona »

On the subject of breaking LIRA/pension: that s why I anm asking the poster the question about proof. Not sure all jurisdictions follow the 2 year requirement for LIRA, but all require an NR73 determination from CRA.

On whether all pensions must either remain pensions or become LIRAs: That I do not know, it may be that a pension can be collpsed without being converted into a LIRA, but that would depend on some criteria (ie. size of pesnion, vesting, age, etc).

On whther 217 is beneficial:

Your quaestion seems to be two-fold: when would a 217 reduce Cdn tax, and when would such a reduction in overall US/Cdn tax

For canada: Each taxpayer would file their own 217, it would not be based on joint income, since Canada doesn't have joint filing.The spouse's income would oly be used in determining if any spousal amounts can be used on schedule 1. While it works best when income is almost strictly Cdn pension income, it wil stil lresult in lower Cdn tax for world incomes of less than about 60K.

For US taxation, it is almost impossible for all the 25% tax to be credited on one's US tax return (by the mechanisms of form 1116), so, it is always best to file 217 even if it reduces Cdn tax by only 1 or 2%.

If living and working in US, you would NOT pay "incremetal" taxrate on the RRSP, you would pay at the marginal rate. Your credit would be at the average rate. Thus the impossibility of using all 25%.
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nelsona
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Post by nelsona »

Note that it is sometimes possible to have pension income withheld at 15% while RRSP income is withheld at 25%.

In such cases, if, say, the 217 return would yield a rate of 17%, one would request the refund (8%) for the RRSP withholding, and leave the pension tax at the withheld amount of 15%.

But you would need to include both incomes, along with all other world income, on the 217 return.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
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Post by nelsona »

Sorry, got carried away there. If you elsect to file 217, then ALL Cdn pension income would fall under the election. This was changed a few years ago.

The danger here becomes that if you ahve some income that has a lower NR taxrate and some that does not, you may end up effectively paying more on the lower-0taxed item, to have the higher taxed income taxed at a lower rate.

This is most likley to arise in the case of CPP/OAS which would not normally be taxed in canada, but, if filing a 217 return to reduce NR tax on other pension income, the OAS/CPP would be included to come up with the calculation, which would reduce the effectiveness of the 217 election overall.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
eloboostlol
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Post by eloboostlol »

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