Past dues received from Canada while on TN in US
Moderator: Mark T Serbinski CA CPA
Past dues received from Canada while on TN in US
Prior to moving to the US on TN, I worked for a Canadian company in Canada for over 15 years. Canadian company shut down in 2002, but did not pay any severance to any employee. It is likely that we'll be able to extract something now. What is the best strategy to minimize Canadian/US taxes? Can the severance (or whatever name they give to it) be treated as severance received in 2002, by refiling 2002 Canadian tax, and/or transferring most of it to RRSP (as per special provisions for severance)? Will Canadian financial institutions mechanism allow any fresh transfers to RRSP to be treated for past years? Will these funds be required to be included in 2005 US income? Kindly advise. Thanks.
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote">Can the severance (or whatever name they give to it) be treated as severance received in 2002, by refiling 2002 Canadian tax, and/or transferring most of it to RRSP (as per special provisions for severance)?<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
It will be treated as being received THIS YEAR, by both CRA and IRS (reportable in both). The ammount should only be taxed 25% Non-resident flat tax in canada, as it is viewed as 'retirement' income in canada, but fully taxable wages in US. To the extent that you can put some of it in an RRSP, it will avoid the Cdn tax, but not US tax, so I wouldn't be too quick to try and find a way to put it in an RRSP (which will be difficult), as this will not save you much tax overall.
<i>nelsona non grata... and non pro</i>
It will be treated as being received THIS YEAR, by both CRA and IRS (reportable in both). The ammount should only be taxed 25% Non-resident flat tax in canada, as it is viewed as 'retirement' income in canada, but fully taxable wages in US. To the extent that you can put some of it in an RRSP, it will avoid the Cdn tax, but not US tax, so I wouldn't be too quick to try and find a way to put it in an RRSP (which will be difficult), as this will not save you much tax overall.
<i>nelsona non grata... and non pro</i>