Can CRA withold my non-residency status due to tax dispute?

[Sailor]

Good morning to you all.

My wife and I are moving to the USA in 2013. We already have a green card, which we’ll exercise in June next year.

By then we’ll have cut all significant ties to Canada: DL, Health card, and so on. We already sold our principal residence in BC, and purchased a home in USA, which right now is being constructed, and will be finished by Jan 2013. We do travel back and forth to see how things are progressing.

My income is strictly a pension from Canada, nothing else. My wife may opt to work in US after a while, but not at first.

Out tax home base will be USA, and we have every intention of making it so.

But here come the questions:

Since we have a legal issue being debated before the Supreme Court of Canada (Taxation Branch), in which CRA alleges we owe them tax money and we say no, we don’t owe them money (as a mater of fact, this is case involving at least 4,000 Canadian people), then, for the reason described,

1. Can CRA deny my non–Canadian resident status for tax purposes?

2. What is the likelihood CRA will grant me the non–resident status and any money owed (or not) will be settled after I’ve moved my tax home to the US?

3. If my Pension Corp. keeps withholding taxes at source even after I declare non–residency (they may want a ‘letter’ from CRA stating my non–residency), will I be able to deduct my Canadian taxes when I declare my income in the US? (As per tax treaty)

From prior posts it seems to me the true test of my non–residency is simply proven by the fact that I no longer live in Canada, with my only ties being a Canadian pension (no RRSP) and a few relatives and friends.

Thanks a lot everybody.

Sincerely,

J.

BTW, the CRA web site and pamphlets are hopelessly confusing.

[newbie12345]

I am not expert. My understanding is
1. Cra should not hold you status. They may collect the tax from your pension income if you lost in the court.
2. According to u.s. Canada tax treaty, if you report tax as resident in one country, you can not be resident on the other
3. If you Chang your address to u.s. address, the pension plan should do non resident withholding, they may not do that for the year you moved since you could be partial resident. Did you talk with your pension plan agent yet? Did they say they need the letter of residence determination to do withholding?
There Might be a form to fill so that they could do the right withholding rate.

[Sailor]

Hi again.

I still have to confirm the 'letter' my pension plan requires. If i recall correctly they did mention on the telephone CRA issues a 'letter' to them, but my memory may be playing tricks with me. I will get a more official answer from the pension plan.

I also expect, but I need confirmation, CRA should not deny/withhold my non-resident status because of a tax dispute, the info on CRA is not straight.

Thanks!

[nelsona]

Your Cdn pension will ALWAYS be taxable in Canada (at a flat 15%) which you will report on your US return )and taje credit for the 15% tax). You need aonly inform your pension fund that you are a US resident.

If CRA wants your money then they can get a judgement and start garnishing your pension, subject to the current laws on that process.

They cannot prevent you from becoming non-resident, neither by their own rules nor by the treaty.

[Sailor]

Thanks Nelsona.

This is helpful, to know my pension will always be taxed here in Canada at 15%, and said tax deducted from my US tax.

My Pension Plan (PSPP, Public Service Pension Plan) confirmed to me I need to have the answer CRA provides to me through their NR73 form and process determining (or rendering an opinion really) on my non-resident status. I was not going to do the NR73 for the many reasons stated on this site, but it seems PSPP does want to see the 'official' response from CRA.

I'm flexible on my moving plans, all this information will help me select the best time to do it.

Sincerely,

[nelsona]

Once you legally live in US, you are by treaty a US tax resident, and regardless of your ties in canada, you are classified as a deemed non-resident.

[Sailor]

Hello again,

Just one more question...

My pension plan is in reality a 'private' pension plan, with no links or dependencies from the Government of Canada.

Even though I receive me private pension now, I still have not applied for my CPP.

Is the 15% flat tax applied to just my CPP, or to any 'private' pension plan?

Thanks again,

[nelsona]

All Cdn private pension plans are taxed 15% for US residents.

CPP however is NOT taxed at all for US residents. You report and pay tax only in US.

[nelsona]

same for OAS.