Roth 401k (Early) Distribution Filing Requirements

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

Roth 401k (Early) Distribution Filing Requirements

Post by flyingmonkey » Sun Mar 03, 2019 2:35 pm

Moved back to Canada from US in 2018. Right before I moved I rolled over my Roth 401k into my Roth IRA. Balance of Roth 401k was 0 when I entered Canada. A few weeks after establishing residence I received the final contribution to my Roth 401k from my last paystub in the US. The contribution was 385.16.

In October 2018, my Roth 401k institution told me I needed to close the account since it didn't meet the minimum balance. I decided to just withdraw the funds since they were valued at 364.61, a 20.55 loss. I figured I would not owe anything despite it being an early withdrawal since there are no gains for which a 10% early withdrawal penalty could be assessed or any taxes for that matter to be assessed (the total is entirely after-tax contributions).

I will be filing an election with the CRA for this Roth 401k account to defer taxation on this account. The election will be filed with my 2018 return. I never received any tax form from my institution mentioning this distribution.

Questions:
1) Do I need to mention this distribution to the IRS in my 2018 return? I think no as despite it being an early withdrawal I did not receive a form and I do not believe any amount of it to be taxable or penalizable.
2) Do I need to mention this distribution to the CRA in my 2018 return? Again, I think no since I am filing the election and assuming the answer to (1) is no then there is no tax to be assessed.

nelsona
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Re: Roth 401k (Early) Distribution Filing Requirements

Post by nelsona » Sun Mar 03, 2019 4:41 pm

You do realize that you made a "Canadian contribution" to your Roth, and have this 'broken' the Roth.

Read the CRA instructions on how to handle this in the election notice.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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

Re: Roth 401k (Early) Distribution Filing Requirements

Post by flyingmonkey » Sun Mar 03, 2019 8:22 pm

To clarify, the contribution arrived in the account after I physically entered Canada, however, the contribution arose from a paycheck dated before I entered Canada. I asked this question in another post and you explicitly told me that this was not a Canadian contribution.

Post is here: viewtopic.php?f=2&t=12632&p=48924#p48924

nelsona
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Re: Roth 401k (Early) Distribution Filing Requirements

Post by nelsona » Sun Mar 03, 2019 9:22 pm

A few days and a few weeks are quite different. Which is it?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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

Re: Roth 401k (Early) Distribution Filing Requirements

Post by flyingmonkey » Sun Mar 03, 2019 10:05 pm

Entered Canada April 4th. Contribution showed up in account on April 10th. Contributions were made on paystubs dated March 31st.

nelsona
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Re: Roth 401k (Early) Distribution Filing Requirements

Post by nelsona » Mon Mar 04, 2019 11:04 am

"A few weeks after establishing residence I received the final contribution". "Entered Canada April 4th. Contribution showed up in account on April 10th".

You can see the confusion, yes?
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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

Re: Roth 401k (Early) Distribution Filing Requirements

Post by flyingmonkey » Sat Mar 09, 2019 11:58 am

"You can see the confusion, yes?"

Yes, apologies. So are you still of the opinion that it is a not a Canadian contribution? Additionally, I just received a 1042-S from Fidelity that seems to claim an income of 385.00 (the contribution amount). This seems to suggest the IRS/Fidelity are treating the contribution as a contribution made as a foreign person of the US? No withholding was made.

The above question are regarding the contribution. I still also have my original questions regarding the distribution:
1) Do I need to mention this distribution to the IRS in my 2018 return? I think no as despite it being an early withdrawal I did not receive a form and I do not believe any amount of it to be taxable or penalizable.
2) Do I need to mention this distribution to the CRA in my 2018 return? Again, I think no since I am filing the election and assuming the answer to (1) is no then there is no tax to be assessed. Alternatively I mention the distribution but claim that all of it is not taxable?

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

Re: Roth 401k (Early) Distribution Filing Requirements

Post by flyingmonkey » Sat Mar 09, 2019 12:26 pm

Addendum to the first part of my last post: I just did a bit more digging and it seems the 1042-S is in relation to the distribution NOT the contribution. It seems the 1042-S lists the gross distribution as 385 (the contributed amount), however the net is 365 which is 385 minus a loss (they call it a deduction) of 20. Still no tax withheld.

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