My Moms Financial Advisor transferred my Mom's IRA and ROTH IRA to her RRSP. She is a Canadian citizen but she is a US permanent resident for tax purposes. She lives in Ontario for about 5 months a year and Florida 7 months a year. She is only required to file a US tax return.
She is turning 71 this summer and plans to move back to Canada permanently in the next two years or so. She receives OAS & CPP and Social Security. She had to pay about $4500 in tax for 2016 due to the IRA transfer (since it was considered a deemed disposition and not a transfer on the US side).
But now the IRA is tax free and the ROTH IRA is after tax $, but the funds are in her RRSP, on which she will be taxed when she withdraws income = double taxation.
Can we apply to CRA to withdraw the amount that went in to her RRSP without any tax withheld - since it should not have gone in there in the first place? It would be better in a non-registered account and she pays the tax annually on the growth. There was no RRSP receipt issued in Canada, as it was treated as a transfer in.
Thanks in advance for your advice!
IRA & ROTH IRA Transfer to RRSP
Moderator: Mark T Serbinski CA CPA
Just to correct, the Roth was tax-free and the IRA is taxable.
This advisor was crazy. To do this as a non-resident was of absolutely no benefit, even for the IRA portion, since she had to pay the tax up front and it now continues taxable. But it is unforgivable that the Roth was put in there.
Once transferred in however, there is little that can be done in my opinion. She can check wit the firm that accepted the funds first, if there is anything they can do, and then ask CRA.
But she should be filing some form of complaint against the moronic advisor.
This advisor was crazy. To do this as a non-resident was of absolutely no benefit, even for the IRA portion, since she had to pay the tax up front and it now continues taxable. But it is unforgivable that the Roth was put in there.
Once transferred in however, there is little that can be done in my opinion. She can check wit the firm that accepted the funds first, if there is anything they can do, and then ask CRA.
But she should be filing some form of complaint against the moronic advisor.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
As I said, talk to the RRSP manager, THEY will have dealt with is question before. And it will be THEM that will need to get permission from CRA, not you.
If it is not possible, then removing the funds will be viewed as a taxable withdrawal, subject to 25% tax.
Only then, would you call CRA (good luck) and see what they say. But, if the transfer has already been made (it seems like it was done in 2016, so that is out), then there really isn't any way to reverse it at this point.
If it is not possible, then removing the funds will be viewed as a taxable withdrawal, subject to 25% tax.
Only then, would you call CRA (good luck) and see what they say. But, if the transfer has already been made (it seems like it was done in 2016, so that is out), then there really isn't any way to reverse it at this point.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
The RRSP manager (investment company) is the one who promoted this IRA rollover to an RRSP and the advisor followed their marketing. The advisor thought Mom was a Canadian resident for taxes.
So far the investment company has not helped at all, only the advisor trying to help.
Is there an advantage to leaving the funds in her RRSP to grow tax sheltered?
So far the investment company has not helped at all, only the advisor trying to help.
Is there an advantage to leaving the funds in her RRSP to grow tax sheltered?
Even if she were a Cdn resident, she (a) would NEVER collapse a Roth to put in an RRSP, and (b) would only collapse an IRA in an RRSP if she had other Cdn income taxable in Canada. That $4500 in US tax was a complete waste.
Next year, whether she moves to Canada or not, she will have to convert this to a RRIF and slowly start taking the funds out. This will be fully taxable in Canada, and in US (if she has a Green card). So she will have to start taking it out soon anyway. So, other than her minimum withdrawals which will start soon, the only reason to keep it in the RRSP/RRIF is if she doesn't need the money.
At the very least, she should move ALL her business to another company immediately. Hopefully that new firm won't have a bone-headed advisor working for them.
I would also be contacting a media person like Jonathan Chevreau, Ellen Roseman or Tim Cestnick to alert the public of this firm's buffoonery.
Next year, whether she moves to Canada or not, she will have to convert this to a RRIF and slowly start taking the funds out. This will be fully taxable in Canada, and in US (if she has a Green card). So she will have to start taking it out soon anyway. So, other than her minimum withdrawals which will start soon, the only reason to keep it in the RRSP/RRIF is if she doesn't need the money.
At the very least, she should move ALL her business to another company immediately. Hopefully that new firm won't have a bone-headed advisor working for them.
I would also be contacting a media person like Jonathan Chevreau, Ellen Roseman or Tim Cestnick to alert the public of this firm's buffoonery.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Re: IRA & ROTH IRA Transfer to RRSP
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