Canadian Non-resident contributed to 401k

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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ducky
Posts: 4
Joined: Tue Nov 23, 2021 12:43 am

Canadian Non-resident contributed to 401k

Post by ducky »

Hi everyone! As the year draws to a close, I've taken a closer look at my tax situation. I wish I looked into it earlier and I'm fairly lost.

I just graduated this July and I landed a job in the states. This is my first job and the first time I've had to file "serious" taxes.

I obtained TN status on July 8th, 2021. Since then I've went back to Canada on two separate occasions; in October for 10 days and in November for 9 days - in addition, I plan on returning to Canada for around 2 weeks during christmas. Because of that I don't think I pass the substantial presence test so I am a US non-resident Alien. From my understanding I'm still considered a Canadian tax resident and I should pay Canadian taxes this year.

Other facts: I liquidated my questrade tfsa account in july before moving to the states and I recieved a ~$3k scholarship from my uni in 2021.

Right now the thing I'm really concerned about is the 401k I've been contributing to. I am the first Canadian employee my company hired and I don't think they know much about the tax situation either. They've allowed to contribute to a 401k and to be honest I didn't really read the agreement and just checked the boxes. Now that I'm taking a closer look it seems like only US residents are allowed to contribute to a 401k!?

1. What should I do for my 401k? Do I need to reverse my contributions?
2. I also heard about Roth IRAs and Treasury I Bonds from a co-worker. Can I contribute to a Roth IRA or buy treasury I bonds this year?
3. Do I still need to file US taxes if I'm not a US resident? How do I avoid getting double taxed if I do?
ducky
Posts: 4
Joined: Tue Nov 23, 2021 12:43 am

Re: Canadian Non-resident contributed to 401k

Post by ducky »

Sorry I can't figure out how to edit my original post. I have around 30k CDN in osap/federal student loans and I'm set to take home about 40k USD this year. Is my situation complex enough to warrant serbinki's services? This free forum is amazing but the tax preparation costs are a bit much for me right now. I'm willing to pay to get things done right but ideally I'd like to save money if I can. How can I figure out how to file my own taxes? I'm afraid of missing a form I don't know about.
nelsona
Posts: 17293
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian Non-resident contributed to 401k

Post by nelsona »

First, you are NOT a Cdn resident based on your post. You left to live and work on July 8th and that is your departure date. You file a regular return for your proving, but as an EMIGRANT, with a departure date on page 1. Cdns go by the tax treaty when it comes to residence, and once you live and work in US, you are US resident for Cdn tax purposes.
CRA has a guide for what should and should not be reported on what called your departure return. Nothing from your US life will need to be reported on that return.

So now you are like any other US worker, so there is no restrictions as to what you can invest in, etc, But even if you weren't you would still be allowed to contribute to 401(k). there is no prohibition on this. cra even has a form that commuters used to report and deduct their 401k contributions.

as to your UDS taxes this year, you will be able to file a 1040NR if you wish, reporting only the US income you earned.

your situation is not so complex to need a tax pro.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
ducky
Posts: 4
Joined: Tue Nov 23, 2021 12:43 am

Re: Canadian Non-resident contributed to 401k

Post by ducky »

@nelsona thank you for the response.

I'm a bit confused. From your post it seems like Canada considers me a US resident for tax purposes, but when I look at the US requirements I do not pass the SPT (less than 183 days). Just to confirm, the US considers me a non resident but Canada considers me a resident?

> So now you are like any other US worker, so there is no restrictions as to what you can invest in, etc, But even if you weren't you would still be allowed to contribute to 401(k). there is no prohibition on this. cra even has a form that commuters used to report and deduct their 401k contributions.

Does the same apply to a Roth IRA? When I looked it up it said that I had to be a US resident.

> as to your UDS taxes this year, you will be able to file a 1040NR if you wish, reporting only the US income you earned.

I thought I had to file a 1040NR as a US non resident alien? Your reply seems to imply that I have other options? What's my alternative?
nelsona
Posts: 17293
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian Non-resident contributed to 401k

Post by nelsona »

You are a Cdn non-resident. You are a US tax resident. However, the IRS system wants you to be resident for a certain number of days before they allow you to file a resident 1040 tax return (this doesn't matter for CDns, because of the treaty). In any event, you will have the choice to file 3 different ways in US. Doesn't change your Cdn tax residency as I described before.

The choices you will have have been described here many times, I won't repeat them here. 1040NR will be good enough in your simple case.

You are allowed to fund a roth as well.

And when you say "looked it up", Where? There is no US residency requirement for Roth.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
ducky
Posts: 4
Joined: Tue Nov 23, 2021 12:43 am

Re: Canadian Non-resident contributed to 401k

Post by ducky »

I looked through the posts but this site won't let me search common terms like "treaty", "1040", etc. It seems like I can file a 1040 or a 1040 NR, what's the third option? Also what treaty allows me to files a 1040 wihtout passing the spt?
nelsona
Posts: 17293
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: Canadian Non-resident contributed to 401k

Post by nelsona »

You could file dual-status. We''ll look at that in the spring. I think your initial questions have been answered.
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
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