I'm a Canadian citizen who has been working in California on an H-1B visa. I have a Roth IRA where the fair value is perhaps about $100 over the contribution amount. I understand that if I prematurely withdraw the balance from the account, I'll pay the IRS a penalty and taxes on that $100 earned.
We are in the process of moving back to Canada, and I was wondering what the tax consequences are if I become a Canadian resident before this premature withdrawal can be processed? It's currently a cash-only account, if that makes any difference. Thanks in advance.
Roth IRA withdrawal by non-resident
Moderator: Mark T Serbinski CA CPA
There would be even less consequences in Canada. You would only pay Cdn tax on the growth after you arrived in canada.
Example: You contribute $100, its worth $110 when you leave and $115 when you collapse it.
You owe 10% penalty on the $15. If you had the Roth for 5 years you would owe no income tax. Otherwise you pay incoem tax on $15
In canada you owe tax on $5 (115-110), if you owe tax in US. You can even use the US tax (not penalty) you pay as a credit.
Note: if you leave the roth alone, at some point you will be able to remove it both tax and penalty free in both US and Canada.
Example: You contribute $100, its worth $110 when you leave and $115 when you collapse it.
You owe 10% penalty on the $15. If you had the Roth for 5 years you would owe no income tax. Otherwise you pay incoem tax on $15
In canada you owe tax on $5 (115-110), if you owe tax in US. You can even use the US tax (not penalty) you pay as a credit.
Note: if you leave the roth alone, at some point you will be able to remove it both tax and penalty free in both US and Canada.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best