reporting Roth IRA

[yeebuddy]

Since Roth IRA is not considered as pension in Canada, do I need to report earnings from this account even if I don't withdraw it? How and when do I report it?

[nelsona]

Yes. You report the income just as if the account were not sheltered (which it isn't in Canada). So you report interest dividends and cap gains just like you would your investment accounts in canada. The cost basis is based on the arrival date in canada.

Alternatively, you can contact CRA and request that they permt you to defer tax on the Roth until you withdraw. They can allow you to do this, but you will eventually pay cdn tax on the growth after return to Canada.

[mgl]

I'm a Cnd living in Canada. i cashed in my Roth IRA because of the reporting issues here and because I was getting nickle and dimed on fees because it wasn't growing above the level required to avoid excessive fees.

Vanguard sent me a 1042-S showing that they had withheld 30% US tax. My advisor tells me I can't get this back, that if I filed a 1040-NR this year, I'd still not be able to get this back. I'm sure he's right, but this feels wrong since I've already paid tax on this money when I was in the US. The capital gains were minimal, it's the 30% of the original amount that is bothering me since I paid taxes on it before.

Is my advisor right?

Thanks.

[nelsona]

Your advisor is dead wrong, unless you haven't waited five years since the Roths inception.

A 1040Nr should be filed, only the growth will be reported as taxable income, the 10% penalty will obly be only on the growth, and the rest of your withholding you will get back.

You will have nothing to report in Canada except the income that the Roth generated in 2005.

Tell your advisor to wkae up.

[mgl]

Your advisor is dead wrong, unless you haven't waited five years since the Roths inception.

A 1040Nr should be filed, only the growth will be reported as taxable income, the 10% penalty will obly be only on the growth, and the rest of your withholding you will get back.

You will have nothing to report in Canada except the income that the Roth generated in 2005.

Tell your advisor to wkae up.

I'm finally doing this now. Thank you for your help. One final question. On page 5 of 1040NR, section M, I assume I enter Canada as the tax treaty country but what else do I enter in this section? Do I write "capital gains" and the amount of the capital gains?

Thanks for your help once again.

[mgl]

I just realized I should have written my question more clearly. I know I enter Canada as the country. Are my capital gains from a Roth IRA effectively connected or not effectively connected? Which section do I write my capital gains into, if either? As well, it asks for the tax treaty article. ???

Then the next question in M are: were you subject to tax in that country on any of the income you claim... I assume that is yes, since capital gains on a Roth IRA are taxable in Canada.

Thanks

[nelsona]

Nothing form your Roth IRA is considered capital gains by the IRS.

It is reported as IRA income line 16a and b.

It is strictly in Canada that any of the gains would have been reported as such.

Don't forget the 0% penalty on the taxable portion (if any) reported on 16b, which will go on line 55 of 1040NR.

You will not be relying on any treaty provision when reporting this income, you are simply like any other non-resident with a Roth from any country, with or without a treaty.

[nelsona]

I meant 10% penalty.

[mgl]

Thank you. I approached it wrong. I put the 10% on line 53 instead of line 55. I'll change that and erase the info I entered on page 4 in the capital gains section.

I had entered the tax withheld at source on line 66. Should that now be entered on line 59 since I have a 1042-S?

One last question: what do I enter, if anything, on page 4 now?

Thank you

[nelsona]

I'm sure you can figure out the rest.