keeping 401k and IRA after moving to canada

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andyyan
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Joined: Wed Mar 30, 2005 2:41 pm

Post by andyyan »

Hi,

I am a Canadian citzen who has just started working in the US. My US employer has a 401(k) that offers dollar for dollar matching. I plan to return to Canada within 3-5 years. Is it wise to enroll in my employers 401(k) in speculation that I will return to Canada very soon? If I do enroll in the 401(k) plan and later quit my job, is it true it is "difficult" to manage my plan when I'm in Canada?

Thanks,
Andy
nelsona
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Post by nelsona »

It may indeed be difficult, but I would be hard-pressed to find a reason to pass up on any matching that my employer might provide.

That matching is a 100% return on investment.


<i>nelsona non grata... and non pro</i>
theautomatik
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Joined: Fri Apr 01, 2005 12:32 pm

Post by theautomatik »

Hi,

I've read through this thread and a few others related to this topic, but I am wondering: is it possible to contribute to an IRA in the U.S. whilst living in Canada as a Permanent Resident?

I have a 401K that I plan to roll over into an IRA, but I would like to:

1. Be able to earn some interest on the monies in the IRA whilst living and working in Canada
2. Not be taxed by Canada or the U.S.
3. Not have my husband taxed by Canada (although the account is currently in my name only)

Is any of this even possible? I have read some comments about putting the money in an RRSP, but I don't want to get taxed on the money when I do that. If there is a penalty for doing that, does someone know how the penalty is determined?

I move to Canada permanently on 4/17, so I need to figure this out now. I don't want to be in a situation where I put the money somewhere and then can do nothing with it since I don't live in the U.S. anymore.

I'll keep reading other threads in the hopes of finding more answers. Thanks for you help in advance!

Leslie
nelsona
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Post by nelsona »



Any income earned in the IRA is not taxable in Canada until you start withdrawing it, at which time it will be 100% taxable in US and Canada.

You probably can continue to contribute to an IRA ($4000/ yr) assuming you have the required earned income each year, and you continue to file a 1040.

Such a contibution however, will not save you any taxes, as your primary tax burden will be in Canada, and an IRA contribution is NOT tax deductible on your 1040.

<i>nelsona non grata... and non pro</i>
theautomatik
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Joined: Fri Apr 01, 2005 12:32 pm

Post by theautomatik »

One person said that they didn't understand why I would want to keep an IRA in the US--my thinking is that if I put it in an RRSP there will be penalties. Another person said I can't contribute to an IRA if I'm not earning income in the U.S. Is that correct?

I think I have to file a 1040 until I die, U.S. income or not. Even if it says, "No income earned in the U.S." and I sign it.

So I am taxed in Canada on the contributions I made on my U.S. IRA? Or is it just not deductible?
Thanks again for your help.
nelsona
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Post by nelsona »

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"> One person said that they didn't understand why I would want to keep an IRA in the US--my thinking is that if I put it in an RRSP there will be penalties. Another person said I can't contribute to an IRA if I'm not earning income in the U.S. Is that correct?<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Both these persons are wrong.

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">I think I have to file a 1040 until I die, U.S. income or not. Even if it says, "No income earned in the U.S." and I sign it<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

You will have to file every year. Not quite as simple as you say, but you probably won't owe any tax.

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">So I am taxed in Canada on the contributions I made on my U.S. IRA? Or is it just not deductible? <hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">


Just not deductible. But you will have to have earned income to be allowed to make a contribution.


<i>nelsona non grata... and non pro</i>
theautomatik
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Post by theautomatik »

Forgive me for being slow, but I want to clarify:

I CAN contribute to a U.S. IRA whilst living and earning money in Canada, correct?
nelsona
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Post by nelsona »

You can, if you <i>otherwise</i> meet the requirements for making IRA contributions, which is EARNED INCOME of at least the ammount you wish to contribute, up to (this year) $4000. If you file ointly with a spouse who has earned income, he can put in upto $4000 for you.

If neither of you <i>earn</i> any money (basically wages), you can't contribute to an IRA. that applies to anyone, living in US or elsewhere.

<i>nelsona non grata... and non pro</i>
theautomatik
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Post by theautomatik »

Thank you. Slowly but surely, I'm learning. [:)]
theautomatik
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Post by theautomatik »

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by nelsona</i>

If you file ointly with a spouse who has earned income, he can put in upto $4000 for you.
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Sorry, I wanted to discuss this point further. I was under the impression that as far as filing taxes I must file as "married filing separately" if my spouse does not have U.S. residency or citizenship status UNLESS we fill out an additional form declaring that our global income is less than $80,000.

Is this correct? If that's the case, then my spouse would probably not be able to contribute to my IRA. My 401K is not currently a joint account and since it's in the U.S. I'd prefer to keep it that way after rolling it into an IRA.
nelsona
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Post by nelsona »

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">I was under the impression that as far as filing taxes I must file as "married filing separately" if my spouse does not have U.S. residency or citizenship status UNLESS we fill out an additional form declaring that our global income is less than $80,000.<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

Don't know what the $80,000 figure has to do with the choice to file jointly or not.

The $80,000 is the limit for the foreign earned income exclusion. The decision to file jointly has no such limit.

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">My 401K is not currently a joint account and since it's in the U.S. I'd prefer to keep it that way after rolling it... <hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

There is no such thing as a joint 401(k) or IRA account.

<i>nelsona non grata... and non pro</i>
theautomatik
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Joined: Fri Apr 01, 2005 12:32 pm

Post by theautomatik »

Sorry to bring this up again, but I spoke with someone today who assured me that unless I am earning money IN THE U.S. of at least the amount I want to contribute to an IRA, I cannot contribute to an IRA.

An earlier reply on this thread said that I could contribute to an IRA whilst living and working in Canada, but I guess I needed to clarify that I would ONLY be living and working in Canada and NOT working or living in the U.S. at all.

So if I am living and earning in Canada ONLY, can I or can I not contribute to my IRA in the U.S.?

Thanks.
Bill
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Joined: Fri Dec 10, 2004 2:56 pm

Post by Bill »

As a Canadian resident filing and paying Canadian taxes, if I have an IRA from which I have extracted no money, do I have to file the Canadian tax form T1135 (Foreign Income Verification Statement)? My IRA is the only asset I have in the US. The form basically asks the value of the assets I hold outside of Canada, where they are and "the total income reported on your tax return in the year from the above assets". I had zero income and reported zero income.
nelsona
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Post by nelsona »

Assets, of course, are different than income.

But even if your IRA did produce income, it's not reportable on T1.

But the existence of the IRA, if it and your other foreign <b>assets </b> is greater than C$100K, is reportable.

<i>nelsona non grata... and non pro</i>
Bill
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Joined: Fri Dec 10, 2004 2:56 pm

Post by Bill »

That's what I was thinking. Thanks for the confirmation, nelsona. I note that there's no place on T1135 to indicate that my funds are in an IRA. Don't they wonder how I can have >$100K and report zero income from it?
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