Hi,
Question similar to some below but just want to clarify.
I became a permanent resident of the US after moving end of September 2005. (CR1 spousal Visa)
1. I am not working as yet here and need to withdraw some RRSP funds.
Can I assume a flat 25% tax penalty on the amount withdrawn and that's it? Or will I assume a 25% penaly now and then have to declare it as income for 2005 and get hit again? My bank manager said that I am correct in that a 25 per cent "withholding" would apply. What does that mean?
2. I worked in Canada up until Sept 30th. Will I have to fill out both a Canadian and US Taxes for 2005? (9 months were in Canada)
3. Finally, when should I send in the Determination of Residency Status form? Now or when filing taxes next year? I basically rented in Canada...and while maintaining a Cdn bank account have ended both medical cards and driver's permit. I assume I satisfy the spouse and house rule.
One more thing...As I work for the Federal Gov. in Canada..I never quit my job..but took a year leave without pay...intending to quit when I set up shop in the US. Is this a problem for classification as a a non CDN resident/ Permanent US citizen?
Thank you for your input and I appreciate the time taken to answer my questions.
Best,
Kevin
US/ Canada Tax Treaty and RRSP's
Moderator: Mark T Serbinski CA CPA
The 25% non-resident tax (it's not a penalty) is the only Cdn tax obligation you have on that money.
You will also have to declare the ammount you withdraw on your US tax return, but the taxable ammount should be almost zero. Therea re plenty of threads on RRSP taxation in US on this site.
Your CDn departure return, filed next spring with a departure date of dd/09/2005 will be the only notification you give CRA. There is no need to voluntarily file the NR73.
From what you state, you are a non-resident of Canada for tax purposes. Your leave of absence would only be a factor if you actually returned to that job in a year or so.
Your US tax return will be done in either of ways: a dual-status return, partial 1040NR, partial 1040 OR a full-year 1040, likely joint with your spouse. On the full-year one you would declare all world income, taking advantage of foreign tax credits, or foreign income exclusion. Filing in this manner, although it would appear to yield a US tax bill for you, will make your spouse's taxes less, and total less overall. One prepares both ways and then chooses the one yielding lowest tax.
More about these options at tax time....
<i>nelsona non grata... and non pro</i>
You will also have to declare the ammount you withdraw on your US tax return, but the taxable ammount should be almost zero. Therea re plenty of threads on RRSP taxation in US on this site.
Your CDn departure return, filed next spring with a departure date of dd/09/2005 will be the only notification you give CRA. There is no need to voluntarily file the NR73.
From what you state, you are a non-resident of Canada for tax purposes. Your leave of absence would only be a factor if you actually returned to that job in a year or so.
Your US tax return will be done in either of ways: a dual-status return, partial 1040NR, partial 1040 OR a full-year 1040, likely joint with your spouse. On the full-year one you would declare all world income, taking advantage of foreign tax credits, or foreign income exclusion. Filing in this manner, although it would appear to yield a US tax bill for you, will make your spouse's taxes less, and total less overall. One prepares both ways and then chooses the one yielding lowest tax.
More about these options at tax time....
<i>nelsona non grata... and non pro</i>
Maybe I'm just an idiot here and not getting something[xx(] My bank Manager told me that they (the bank) witheld 25 per cent after removal. For a 1000 dollar RRSP I receive 750.00...I assumed I would pay 25 per cent flat penalty at tax time from Rev Canada? Is she saying that in addition to this 25 per cent witholding is another penalty (as income declared..)at tax time?
Here's her e-mail:
Hi Kevin,
Yes we do hold the 25% off the top ...then you do taxes & whatever the
outcome you may pay more or get some back. Does that make sense???
Kathy
Not really...Can you clarify[?]
Best,
Kev
Here's her e-mail:
Hi Kevin,
Yes we do hold the 25% off the top ...then you do taxes & whatever the
outcome you may pay more or get some back. Does that make sense???
Kathy
Not really...Can you clarify[?]
Best,
Kev
The 25% <i><u>tax</u></i> that the bank witheld <i>is</i> the Cdn tax that you owe. The bank withholds it (they must) and remits this to CRA and that is it. I repeat that this is not a penalty: it is Non-resident (NR) tax, which almost all income your will now make in Canada will be subject to. It's a flat tax regardless of other income.
You will not report this RRSP withdrawl, nor the tax you paid on it, on your 2005 Cdn 'departure' return, which will be a special return based on the instructions found in CRA's Emigrant guide.
Maybe it is the term 'withholding' that is confusing you. In this contect withholding means the holding back of TAX money from a payment to you. It is not a penalty. It is exactly like Fed/Prov tax and other ammounts were withheld from your paycheck.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"> ...then you do taxes & whatever the
outcome you may pay more or get some back<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
This statement only applies to residents who withdraw RRSP funds. Their withdrawal, and the tax withheld, is added on to their tax return at tax time. This is generally not the case for non-residdnts.
There are certain situations when a non-resident can (at tax time) elect to have this income treated differently ( a 217 election) and *maybe* get some tax back, but this would depend on your income in 2005, both before and after moving. Because you withdrew the money in the same year you left canada, but after you became non-resident, there is a special calculation that must be done by CRA. If you make anything over about $25K this calendar year (excluding the RRSP) it isn't worth the hassle.
But under no circumstances will the tax be MORE that the 25% that you've paid (ie. that has been withheld). If it is, you simply don't make the election, and let the NR tax stand as-is.
In a sense, you should be glad that the bank has handled this correctly for you, as <u>many</u> people in your situation only get 10-15% withheld because the bank fails to realize that their client is non-resident, and then come tax time the person is responsible for 10-15% tax shortfall.
<i>nelsona non grata... and non pro</i>
You will not report this RRSP withdrawl, nor the tax you paid on it, on your 2005 Cdn 'departure' return, which will be a special return based on the instructions found in CRA's Emigrant guide.
Maybe it is the term 'withholding' that is confusing you. In this contect withholding means the holding back of TAX money from a payment to you. It is not a penalty. It is exactly like Fed/Prov tax and other ammounts were withheld from your paycheck.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"> ...then you do taxes & whatever the
outcome you may pay more or get some back<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
This statement only applies to residents who withdraw RRSP funds. Their withdrawal, and the tax withheld, is added on to their tax return at tax time. This is generally not the case for non-residdnts.
There are certain situations when a non-resident can (at tax time) elect to have this income treated differently ( a 217 election) and *maybe* get some tax back, but this would depend on your income in 2005, both before and after moving. Because you withdrew the money in the same year you left canada, but after you became non-resident, there is a special calculation that must be done by CRA. If you make anything over about $25K this calendar year (excluding the RRSP) it isn't worth the hassle.
But under no circumstances will the tax be MORE that the 25% that you've paid (ie. that has been withheld). If it is, you simply don't make the election, and let the NR tax stand as-is.
In a sense, you should be glad that the bank has handled this correctly for you, as <u>many</u> people in your situation only get 10-15% withheld because the bank fails to realize that their client is non-resident, and then come tax time the person is responsible for 10-15% tax shortfall.
<i>nelsona non grata... and non pro</i>
-
Rickerbucks
- Posts: 40
- Joined: Tue Oct 25, 2005 3:43 pm
As I read the response from the banker I think she is confused herself. She seems to suggest that they withhold 25% and then there is some balance or settlement when you file.
That is not the case. As nelsona suggests, there is a flat 25% off the top and thats the end of it.
*****************************
It's not that I can't SPELL, it's that I can't TYPE
That is not the case. As nelsona suggests, there is a flat 25% off the top and thats the end of it.
*****************************
It's not that I can't SPELL, it's that I can't TYPE