Closing/Withdrawing Traditional IRA in Canada

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flyingmonkey
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Joined: Tue Mar 07, 2017 11:51 am

Closing/Withdrawing Traditional IRA in Canada

Post by flyingmonkey » Sun Apr 08, 2018 5:05 pm

I just recently moved back to Canada after living/working in US. I followed all the advice I could including moving all funds to a Roth IRA with Fidelity before leaving (Fidelity told me I can buy/sell/trade with my Roth IRA as a Canadian resident no problem).

In the rush and business of moving, I forgot to close out my Traditional IRA. I have already moved and it is sitting there with 14 cents in it. It was only ever used for Backdoor Roth's, so I assume the 14 cents are gains made during the time my backdoor Roth money sat in the Traditional IRA.

How should I close this account, while in Canada, to minimize the reporting burden? It's 14 cents, I don't care if I get charged 100% withholding tax, I just want to minimize the reporting burden and keep things as simple as possible. Thanks!

nelsona
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Post by nelsona » Mon Apr 09, 2018 6:47 am

Close it and include 14 cents on your Cdn return
Not sure what you were worried about
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

flyingmonkey
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Post by flyingmonkey » Mon Apr 16, 2018 10:09 pm

Okay, I will close the account. It is my understanding that the following will then happen:

Institution holding the account will charge me a 30% or 15% withholding tax. If they charge a 15% withholding tax, I need to file form W-8BEN to them.

When I file my 2018 US taxes, I pay a 10% penalty on the withdrawal. Do I also get charged regular income tax on it as well? Is this all done on the 1040 or 1040NR? (I haven't decided whether I will file full year or as dual status).

When I file 2018 Canadian taxes, I treat the withdrawal as income. I can claim a foreign tax credit, but for 14 cents it's not worth the effort.

nelsona
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Post by nelsona » Tue Apr 17, 2018 9:33 am

Just close the account, even if you pay 14 cents tax. It won't matter. Don't bother with W-8 or foreign tax credit.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

flyingmonkey
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Joined: Tue Mar 07, 2017 11:51 am

Post by flyingmonkey » Wed Apr 18, 2018 9:51 pm

Makes sense to not bother with W-8 or foreign credit.

I know I have to include this withdrawal as income on my Canadian 2018 return. Do I need to include it on my US 2018 return? My understanding is that if I file a full-year 1040 I would include the 0.14 cents as taxable distributions and then also include the withdrawal penalty. Is there anything different if I instead choose to file as dual status and use a 1040NR?

nelsona
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Post by nelsona » Wed Apr 18, 2018 9:56 pm

It is US sourced income, it must be reported, unless their is tax withheld and yo uare a non-ressint, and don't want a refund.

C'mon, I think you can figure this out.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

flyingmonkey
Posts: 24
Joined: Tue Mar 07, 2017 11:51 am

Re: Closing/Withdrawing Traditional IRA in Canada

Post by flyingmonkey » Sun Mar 03, 2019 2:05 pm

Digging this post back up since I am currently filing...

I closed the account and received the 0.14 cent distribution. The thing that confuses me is that no tax was withheld. I don't think it really matters, but shouldn't tax have been withheld? As I understand the default is 10% and I had not elected anything else otherwise. Additionally, I had thought as a foreign person there would be mandatory withholding.

nelsona
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Re: Closing/Withdrawing Traditional IRA in Canada

Post by nelsona » Sun Mar 03, 2019 4:37 pm

there would be no withholding on such a small amount. Report the income in Canada
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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