IRA withdrawal by US/Cdn citizen residing in Canada

bigrandy · Post by **bigrandy** » Sat Apr 29, 2006 12:50 pm

I am a US & Cdn citizen residing in Canada.
I have become disabled and withdrew my entire IRA in 2005. 100k. No taxes were withheld at source. I am reporting it on both my US & Cdn returns and claiming the applicable foreign tax credit in Canada after paying full US tax on it.

Is there any deduction or anything I may be missing on this?

Regards

nelsona · Post by **nelsona** » Sat Apr 29, 2006 1:07 pm

Are you over 60? if not you need to pay 10% early withdrawl tax on any non-qualified withdrawals.

It is unusual for a firm to allow yo uto withdraw IRA moneys without any withholding.

In any event your entire IRA is reportable in canada, and you can claim the normal US tax as a credit.

bigrandy · Post by **bigrandy** » Sat Apr 29, 2006 3:46 pm

I am not over 60 and am considered disabled. They do not withhold tax if the withdrawl is for disabiltiy reasons aparently.

nelsona · Post by **nelsona** » Sun Apr 30, 2006 12:14 am

I would be checking with IRS on this, otherwise you might get hit with a estimated tax underpayment penalty as well.

Disability does not majically make your IRA non-taxable, so your firm wasn't doing you any favor. Nor does disability, in itself, absolve you of the 10% penalty, only huge medical expenses can be written down.

nelsona · Post by **nelsona** » Sun Apr 30, 2006 12:21 am

Correction: your disabled status does exempt you from the 10% extra tax.

The firm should have withheld (probably at 20%) in any event.