keeping 401k and IRA after moving to canada

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nelsona
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Post by nelsona »

They can wonder all they want.

If they ask you, you can tell them what you have.

But NOT at least telling them that you have something foreign, can cost you a big fine.



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

I've just been looking at QuickTax's Help comments on T1135 and it says,
"You only have to report property that is specified foreign property." It then lists examples of specified foreign property. Following that, it goes on: "Specified foreign property does not include: an interest in a U.S. Individual Retirement Account (IRA)". It sounds to me like I don't have to report my $100K on form T1135. I've searched QuickTax Help to see if there was another place where I had to declare it but can't find anything - which doesn't in any way mean that there isn't something that indicates I do have to report it.


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">Specified foreign property does not include: an interest in a U.S. Individual Retirement Account (IRA). <hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

You've read the instructions (I have not), so why are you even asking if it should be reported?



Seems pretty clear, no?


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wildcard
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Post by wildcard »

<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>

Assets, of course, are different than income.

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

<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">

So if I have an IRA in the US, I don't put it <b>anywhere</b> on my T1 or anywhere on my Canadian return? Is that correct?
nelsona
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Post by nelsona »

Correct.

Not until you begin to take funds out of the IRA (or transfer them to a Roth).

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

Well that makes it a little easier then. Sorry to nit-pick, but does it matter if it is a Roth or a traditional IRA? Do the same rules apply?
nelsona
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Post by nelsona »

It makes one HELL of a differnce, a Roth is absolutely NOT recognized as a retirement account, does not get deferral oftaxes, and is treated like any other investment.

You had better search this site and the forum at grasmick.com for a complete discussion of Roths in Canada.

They are a headache.[}:)]

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

Yup, I see what you mean. If I had looked a little closer at some of the old articles on grasmick, I would've found out that they aren't the same.

I was thinking of coverting to a Roth IRA, but I think I'll keep it traditional.

Any ideas how they (CRA) will treat Roth 401(k)'s that will be available next year?

Just out of curiosity, if I was a lay-taxpayer (which I guess I am), where would I find information about this (Traditional IRA - dont include on return, Roth IRA - put on return)? I've looked at the tax guides but couldn't find anything there.
nelsona
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Post by nelsona »

Finance Canada release guidance several years ago.

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

I read here that income earned in an IRA is not taxable in Canada until I start withdrawing it. Once I make a withdrawel it's 100% taxable in both the US and Canada (assuming I'm a Canadian resident at the time).

My question is if I pay US taxes on the withdrawel, can I use that as a foriegn tax credit when doing my Canadian return? In other words no double tax?


wildcard
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Post by wildcard »

Yes, my understanding is that's correct.
nelsona
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Post by nelsona »

That is correct. And if your withdrawals from your IRA are systematic, ie, the required ammount every year, then the US can only tax you 15%.

You would use any US tax (and penalty) towards your Cdn tax obligations on that money.

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

OK, I know my earnings are taxable in Canada on my Roth IRA, what about distributions? Will that get taxed too? Or do I have it backwards or something?
nelsona
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Post by nelsona »

What do you mean by distributions?

If you mean monthly/quarterly dividends: Of course, that is by definition income, even if it doesn't come to you.

If you mean withdrawals: No, Only the income genrated by the withdrawal would be taxable (ie. you sell some funds triggering capital gains for Cdn purposes).

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wildcard
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Post by wildcard »

When I said distributions, I meant withdrawls. OK so that answers my questions on that.

I've got another question then, am I taxed on "growth" in the account AND capital gains?

By "growth" I mean my asset valued at $1000 at the beginning of the year grows to be valued at $1100 at the end of the year. That extra $100 is the "growth" I'm talking about. Let's say $50 of that comes from quarterly dividends and $50 from appreciation of value in the asset itself.

Or is "growth" only considered when selling or withdrawing, at which point it is considered capital gains?

Again this is with a Roth IRA.

I think with a regular IRA I am free from any taxes until I make a withdrawl, which I declare as ordinary income, correct?
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