I am a Canadian citizen who worked in the US for the past 10 years on TN visa. I recently got laid off from the company in August 2010. Since being laid off I have not moved back to Canada but decided to retire in Malaysia. I plan to be in Malaysia at least for a year after which I may or may not return to Canada.
For 2010 US tax filing, do I file as a resident or non resident? If there is a choice, is there any tax benefit in filing one over the other? My previous US tax filings have been very simple with my filing status as Single with two children as dependents and no other deductions.
Also, I am planning to convert my IRA to Roth IRA in 2010 to take advantage of splitting the tax burden to 2011 and 2012. I presume this can be done while I am living in Malaysia and not in the US? Would CRA recognize the Roth IRA conversion while I am living in Malaysia as valid and hence not liable for Canadian taxes in future years?
Thank for any advice.
Tax filing and Roth conversion questions
Moderator: Mark T Serbinski CA CPA
Good question.
Putting aside any issues between Canada/US and malaysia which are beyond the scope of this board...
1. You will likely file a full 1040, reporting world income for the whole year, thus benefitting from the full standard deduction and exemptions. If you file a part year resident return ,you probably need to itemize. See IRS Pub 519 for your options in "last year of residence". The fact that you will not likely be earning any money for the remainder of the year outside US, makes full 1040 simplest.
2. You can take advantage of this for 2010. I would take care of this before leaving US soil, to ensure that all your transfers take place properly. You wil need to file a US return in 20011 and 2012 as well.
This will NOT be considered a Cdn resident Roth contribution undr the Canada US treaty, so your Roth will still be protected. The income treated as arising in 2011 and 2012 is only with respect to your US tax return. It would not be reported on any other countries return for that year.
Consider also converting any 401(k) and pensions to Roth as well if permitted.
Putting aside any issues between Canada/US and malaysia which are beyond the scope of this board...
1. You will likely file a full 1040, reporting world income for the whole year, thus benefitting from the full standard deduction and exemptions. If you file a part year resident return ,you probably need to itemize. See IRS Pub 519 for your options in "last year of residence". The fact that you will not likely be earning any money for the remainder of the year outside US, makes full 1040 simplest.
2. You can take advantage of this for 2010. I would take care of this before leaving US soil, to ensure that all your transfers take place properly. You wil need to file a US return in 20011 and 2012 as well.
This will NOT be considered a Cdn resident Roth contribution undr the Canada US treaty, so your Roth will still be protected. The income treated as arising in 2011 and 2012 is only with respect to your US tax return. It would not be reported on any other countries return for that year.
Consider also converting any 401(k) and pensions to Roth as well if permitted.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Just wante to clarify that even if you take advantage of this Roth income deferral, as long as you return to canada after the transfer, your Roth will still be safe.
The fact that you need to report the income in 2011 and 2012 in US does NOT make this a Cdn contribution, even if you move to canada in 2010 (so long as it is after the rollover).
The fact that you need to report the income in 2011 and 2012 in US does NOT make this a Cdn contribution, even if you move to canada in 2010 (so long as it is after the rollover).
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
A txpayer moving funds from an IRA to a Roth has the option of either paying tax in 2010, or deferring tax to 2011 and 2012. He must do one or the other, not any combination of the two. However for a couple filing jointly, can one move funds from an IRA to a Roth and pay the tax in 2010, while the other moves IRA to Roth and defers tax to 2011/2012?
Yes, each spouse is free to make an independant election, regardless of filing status.
As you stated, man with 2 roth conversion must either report ALL income now or report ALL income later, no combiantion. But spouse can do what she wishes, too.
So long as all conversions tied to the one SSN have the same election applied.
As you stated, man with 2 roth conversion must either report ALL income now or report ALL income later, no combiantion. But spouse can do what she wishes, too.
So long as all conversions tied to the one SSN have the same election applied.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best