2018 tax planning, end of US moving potentially back to Canada

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jixca
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2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Thu Oct 25, 2018 7:11 pm

May 2016: Entered US on TN, file dual 1040NR + 1040 for IRS and regular tax until departure to CRA
2017: 1040 for US only. Non resident of Canada
Oct 2018: TN layoff, left US immediately then back in a week as B2 to wrap up.

Currently in US, leaving shortly and need to plan for 2018 and 2019 tax and I have the following:
- Roth 401k with Vanguard, planning to rollover to existing Roth IRA with TD Ameritrade.
- Investment stock account with TD Ameritrade, planning to sell and close account after fully moved to Canada
- Roth IRA with TD Ameritrade, plan to keep as TD is registered in both countries
- Several bank saving and checking accounts
- HSA
- Apartment rental, with lease thru 2019

While I’m still not yet decided on where I will be next (there are US job offers pending TN application, and potential employment in Canada), I’d like to make informed decision in worst case scenario where I have to move back to Canada.

In the above scenario, I will record the value of the investment account and report to CRA on the day I move back. For 2018 US tax, I can either fill dual status or full year I believe but I need to check which is more favorable as I’m single.

1. For the Roth 401k rollover to Roth IRA, do I need to do it before I return to Canada? I might not be able to do so as there’s a month of waiting before action can be done and I’ll be back to Canada then.
2. I will sell stocks in 2019, that way it's not going to be related to 2018 tax and I will not be resident to US and gains are only applicable for CRA reporting.
3. For the apartment, can I sublet or rent (on Airbnb) while I am not physically present in US?
4. HSA I believe I can keep, and just use when I come to US and need to visit doctor. Is there a CRA reporting requirement after becoming resident?

5. If, however, I end up with another TN and can remain in the US before end of 2018, will there still be any reporting needed for Canada? I may end up in Canada for the month of November and December while waiting for application, and may take on a contract job, will this basically create a residency? If so, do I just report entering and leaving Canada in a short time (1-2 months)?

I realize the above is only applicable after 2018 is fully over, but I want to make sure I don’t miss anything in any scenario. Thanks for any inputs.

nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Thu Oct 25, 2018 7:33 pm

Do not mistake the fact that TD has orgs in both countries, that Ameritrade is "registered" in both vountries. It is not. If you want to keep any of your retirement plans alive, you MUST contact the firm(s) and get written acknowledgement that they will keep you on board after you move. The letters 'TD' mean nothing in this regard. Do this before leaving.

1. No you do not. This is merely a transfer between roths, which does not cause any problems for Canada.

2. Correct, and only the gains after arriving in Canada. You should probably wait until you ae sure that you will not file full year 1040 for 2019 before selling.

3. Sure

4. No. As long as you use the funds for eligible expenses, it will not be taxable in US, or penalized, and will thus not be taxable in Canada. You can use the HSA funds against Cdn medical expenses too.

For your Roth401(K): If you had company match, that match will be in in a 401(k). What do you plan to do with that portion? If you want to put it in Roth and pay the tax, you must do so before becoming Cdn tax resident, or you violate the Roth rules for Canada.
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nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Thu Oct 25, 2018 7:36 pm

5. If you are unsure of your future for the next 2 months, just be careful not to establish "too many" ties in Canada. But generally, if you come back very temporarily to Canada, you will not become resident. Once you sublet apartment and get one in Canada, start collecting UI, you have moved back to canada
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jixca
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Thu Oct 25, 2018 7:58 pm

Thanks.

There is a match for my Roth 401k, but I'm not vested so it'll be gone by the time I can move the money.

I thought I read somewhere on this forum that TD Ameritrade allows non-residents, as they operate as TD Waterhouse in Canada, I will follow up with them to confirm. I plan on closing the investment account anyway so the only concern is the Roth IRA, with roughly 5k + 5k (converted with Roth401k) which is close to the initial contribution since there's no gain really. I'm 30 and single, so could the withdrawl also be an option? Would it be ok to do that in 2019 (or after 5 years for the 401k convert) once I set plans on moving back to Canada?

For the apartment, if I rent on AirBnB I'll get issued income statement, and I also may need to return to US regularly on a weekend (say once a month) to clean up and what not, will this create an issue with CBP? I'm not even sure if I would enter as B1 or B2 in this case.

For the Canadian residency, there's a chance that I may take a job in Canada and then quit for US job if approved. I'm going to assume that creates residency, so for CRA's consideration, can I be a resident only partially for a month or so during the year and then become non resident again and do they expect me to file a unwind of deemed deposition and then report another?

nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Fri Oct 26, 2018 9:48 am

It will depend on your living arrangements. Working in Canada by itself does not make you resident. I would be living in a very temporary arrangement until you finalize your TN life. From your posts on the other site, you appear to still be in pursuit of one or more TNs.
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nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Fri Oct 26, 2018 9:52 am

Whether TDW allows Cdn IRA clients has nothing to do with the letters in their name. It is a decision to be made by the US corp. In fact having a Cdn wing may make their decision NOT to have Cdn clients make more sense, since they would wouldn't want to compete against each other.

If there is no gain there is no problem when you make the withdrawal. You can always put the funds in a TFSA.
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jixca
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Mon Oct 29, 2018 11:45 am

TD Ameritrade said the account will be switched to sell only once address changes to Canada. Thanks for bringing it up, either way it should not have too much impact as I plan to withdraw the Roth contribution at some point in the future.

Another question I have is if I need to enroll in COBRA at all? I'm likely not covered for Nov/Dec of 2018, but I believe I can claim exception on form 8965 as either non-resident (if I file dual 1040+1040NR for 2018) or short coverage gap of less than 3 months (if I file full 1040 in 2018), is that correct?

Obviously I still won't have actual health coverage even in Canada as I need to first establish presence, but for the US tax penalty sake I think it shouldn't be a worry.

nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Mon Oct 29, 2018 8:41 pm

Sell-only is not acceptable for Roth. Are you sure they did not think you were talking about your investment account? You should seriously consider finding another brokerage.

For COBRA, I'm not talking about penalty, I'm talking about medical coverage.
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jixca
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Tue Oct 30, 2018 11:41 am

Thanks Nelsona, can you please clarify what you mean?

For TD Ameritrade, even if they lock the Roth IRA account to sell-only, I would still be able to transfer to another brokerage and/or withdraw the assets after I become US non-resident right? I don't think I need to do this immediately, at least until 2019 once my future plan firms up.

I asked about enrolling in COBRA to avoid tax penalty of non-coverage in 2018 Nov/Dec, but as I mentioned previously on claiming form 8965 exceptions, I believe CBORA is not necessary. Plus I'll be in Canada and it wouldn't be practical. Is that assumption valid?

nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Tue Oct 30, 2018 2:44 pm

A firm that freezes your Roth is one step away from asking you to close your account, which may not be at a time when it is convenient for you. The reason that one needs to take care of this before leaving is (a) they will be more eager to get your business before you leave and (b) some have policies that precluded taking new business from non-residents.
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jixca
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Thu Nov 15, 2018 10:34 pm

So I checked with Vanguard who has my employer's sponsored Roth 401k and they will allow me to keep the account either as US or non-US resident. While I did inquire about being a Canadian resident, they didn't mention anything against it. So I'm assuming as long as they allow non-US resident to hold account I should be fine right?

In this case, I think it's better to:

1. Transfer existing Roth IRA from TD Ameritrade to Vanguard
2. Convert Roth 401k to Roth IRA at Vanguard

Also, can/should I still contribute to Roth IRA for the 2018 year? I mean if there's a chance I won't be US person in 2019 onwards, the money is better spent at TFSA I believe.

nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Thu Nov 15, 2018 10:40 pm

Yes, I would be transferring all files to Vanguard, but you probably should have mentioned Canada for clarity.
I would top up my Roth while you can and have contribution room, TFSA can be filled anytime in the future as contribution room is never lost.
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jixca
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Sun Jan 27, 2019 7:59 pm

So I managed to secure a new TN for new employer and started work in US NY again in 12/2018.

I also moved the Roth 401k to Roth IRA, from TDAmeritrade to Vanguard, the old employer contribution was automatically forefeited. I think nothing needs to be done financially now until my life plan changes again.

Question for tax return for 2018:I will file full year 1040 normally just like 2017 with worldwide income, and only interest income in Canada so no CRA tax responsiblity

I have one month of no health coverage (Nov) while I was not present in US. I assume I can just claim short gap exemption due to employment change.

Are any of the expenses incurred potentially eligible to be claimed as job search expense for the purpose of tax duduction? If so, does it include only the US side one or can I also include the expense incurred in other countries where I was looking for work? These include travel cost to/from interview places, visa fees...etc

nelsona
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by nelsona » Sun Jan 27, 2019 9:27 pm

Trump removed moving expenses as a deduction already, so nothing there.
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jixca
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Re: 2018 tax planning, end of US moving potentially back to Canada

Post by jixca » Mon Jan 28, 2019 1:34 pm

Yes I'm aware of the 2018 changes with the deduction removed at Federal level on 1040.

But it looks like at the state level (NY) it is possible to claim on Form IT-196, lines 21 through 24 per https://www.tax.ny.gov/pit/file/itemized-deductions.htm

So if I want to, what portion of the job search related expense is allowed?

Transportation cost to my current US job interview that I'm working?
Transportation cost to other interviews in US that I did not end up working at?
Transportation cost to other interviews outside US that I did not end up working at?

The total cost is roughly ~1k to 3k, so not sure if it's worth reporting.

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