I started my Career in Canada and moved with a major Corporation to the US in 1997. During the 13 years my wife and I have become US citizens and now have dual citizenship. I have been offered an opportunity in the Toronto area so am considering moving back. After reviewing this excellent forum I am hopefull you can confirm or answer a few more questions.
1. To minimize tax liability for retirement convert my 401K to a Roth IRA, correct?
2. Is there a benefit (TAX favorable) in cashing in RRSP's while still in the US before returning to Canada.
3. Do I need sell my primary residence before I leave the US to return to Canada to be eligible for Capital gains exemptions?
4. I have flexibility on a move date before I need to transfer to Canadian payroll - I presume the longer I stay in the US the lower my tax liability, yes?
5. If my wife terminates her employment and returns in the summer but I remain in the US for several months - could this be a benefit or liability?
6. Is there any tax benefit or liability if I continue to own property in the US?
7. I previously worked for a major telecommunications company (guess who) that went bankrupt and my US pension is now managed by the US PBGC. Is there any action I would need to take wrt this?
Thanks in advance.
Dual Citizen returning to Canada after working in the US.
Moderator: Mark T Serbinski CA CPA
1. Yes. Keep in mind that you will pay US tax right now on your conversion, but then its tax-free forever after that, if you do it before returning to Canada.
2. Yes. The advantage is not as great as if you had decided to do this when you first moved to US (as you will have unusable foreign tax), or if you had converted to RRIF and paid 15% over the years, but I would still do this, unless you were about to retire in <5 years.
3. You need to sell your home within 3 years of leaving.
4. Regardless of payroll, if you live in canada you will be taxed there. Your payroll change should coincide with your move.
5. As long as YOU do not spend much time in canada in the intervening months, your wife will have one arrival date and you will have another.
6. none that I can think of.
7. I do not believe anything special need be done.
You will need to advise any retirement broker that you are becoming Cdn resident, and make sure they are OK keeping your business. Non-sheltered investments held in US brokerages should be moved to Canada, or sold.
2. Yes. The advantage is not as great as if you had decided to do this when you first moved to US (as you will have unusable foreign tax), or if you had converted to RRIF and paid 15% over the years, but I would still do this, unless you were about to retire in <5 years.
3. You need to sell your home within 3 years of leaving.
4. Regardless of payroll, if you live in canada you will be taxed there. Your payroll change should coincide with your move.
5. As long as YOU do not spend much time in canada in the intervening months, your wife will have one arrival date and you will have another.
6. none that I can think of.
7. I do not believe anything special need be done.
You will need to advise any retirement broker that you are becoming Cdn resident, and make sure they are OK keeping your business. Non-sheltered investments held in US brokerages should be moved to Canada, or sold.
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
On point 3 the selling of your US home within 3 yrs of departure I would try to sell it as fast as possible because if you buy a home in Canada and want to shelter any accrued gains in value from the date of arrival here remember Canada will only let you and your wife designate only one home as a principal residence so if you were to sell you US home in say 3 yrs time and owned another home in Canada at the same time then you would need to designate one or the other during that period as a principal residence to shelter any amount of gain and by doing so the other home will not be sheltered for that period against any subsequent gains when you actually dispose of it except for a 1 year free bump period.
FOr me you should sell it as fast as you can depending of course on market price fluctuations based on the value when you arrived and the selling price which will only effect the Canadian tax returns.
FOr me you should sell it as fast as you can depending of course on market price fluctuations based on the value when you arrived and the selling price which will only effect the Canadian tax returns.
JG
Thank you both for the advice.
On point 2. RRSP's - I presume I would have to file returns for 2011 (year of move) with both Canada and the US. As long as they are cashed out while I am residing in the US I won't have to pay any early withdrawal penalties for the period following my entry to Canada when my residency starts there? I.E I cash them in Feb and move back to Toronto in August.
On point 2. RRSP's - I presume I would have to file returns for 2011 (year of move) with both Canada and the US. As long as they are cashed out while I am residing in the US I won't have to pay any early withdrawal penalties for the period following my entry to Canada when my residency starts there? I.E I cash them in Feb and move back to Toronto in August.
There is never early withdrawal penalty for RRSP's, neither in canada nor US. You will have 25% Cdn NR tax on your RRSP withdrawal, and will have to include the taxable portion on your US return.
You will ALWAYS be filinga return in both US and canada as long as you live in canada and are a US citizen.
You will ALWAYS be filinga return in both US and canada as long as you live in canada and are a US citizen.
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