US Expat with RRSP's working in Canada now returning to US
Moderator: Mark T Serbinski CA CPA
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bigbryan36
- Posts: 4
- Joined: Thu Dec 03, 2009 10:30 am
US Expat with RRSP's working in Canada now returning to US
I'm a US ex-pat originally from Philadelphia, PA USA. I've been working in Toronto for the last 8 years or so. I'm finally moving back to the US. I have an RRSP with my current employer funded solely with pre-tax contributions. I also have another RRSP I opened prior to joining my current company and that RRSP is funded solely with post-tax contributions. Finally, I believe I may even have one with both pre- and post-tax contributions. Is there any general guidance I can rely on as to where I can move this money when I go back to the States? Can i roll these accounts over to an IRA? My new job in the US sponsors a 401k plan so can I roll the pre-tax account there? Do I have to worry about any mandatory withholdings or foreign tax credits? Any advice would be welcome! I'm 42 and don't have any plans on touching any of this money for a long time but if there is a way I can move the post-tax account from Canada to a US equivalent (like a Roth IRA) I'd like to.
First off, there is no mechanism that allows the RRSP to be moved or transferred to any US retirement account. Taking any of this money out of the RRSP would be considered taxable in both Canada (flat tax 25% on lumpsum) and US (partially taxed as I will describe). It would then be yours to do what you want with, but not as a 401(k) rollover. The best that you could do would be to fund a IRA/Roth upto your yearly limit.
So not advisable if retirement funding is your goal.
You will likely have to move the RRSPs toa abroker that is willing to deal with you as a US resident. TD waterhouse is one of the few discount brokers that will deal with you. There are a few full-service brokers that will also manage your RRSP.
To determine what portion of your RRSP that IRS views as non-taxable, you must determine YOUR contributions that were not considered deductible by IRS. Before 2009, that would be all your contributions, be it to a private plan or an employer-sponsoreed plan. Since 2009, contributions you make to an employer plan are deductible in US, thus no longer are considered free of tax for IRS purposes.
So, you will need to come up with the total contributions YOU made to all your RRSPs, per year, in then-current US$. this will be come your 'investment' in your RRSP for IRS purposes. All other employer contributions and growth will be taxable by IRS.
The IRS tax will only kick-in when you start taking the RRSP money; most people choose to view their withdrawal as a blend of taxable and non-taxable funds, and use the Cdn tax (15% when taken slowly rather than lumpsum) to offset the US tax on the RRSP.
Another thing, you need to have 8891 forms filed every year for every RRSP that you have, and should have been doing this ever since you began having RRSPs. I trust you've been filing your 1040 yearly? There are threads on catching up on these....
So not advisable if retirement funding is your goal.
You will likely have to move the RRSPs toa abroker that is willing to deal with you as a US resident. TD waterhouse is one of the few discount brokers that will deal with you. There are a few full-service brokers that will also manage your RRSP.
To determine what portion of your RRSP that IRS views as non-taxable, you must determine YOUR contributions that were not considered deductible by IRS. Before 2009, that would be all your contributions, be it to a private plan or an employer-sponsoreed plan. Since 2009, contributions you make to an employer plan are deductible in US, thus no longer are considered free of tax for IRS purposes.
So, you will need to come up with the total contributions YOU made to all your RRSPs, per year, in then-current US$. this will be come your 'investment' in your RRSP for IRS purposes. All other employer contributions and growth will be taxable by IRS.
The IRS tax will only kick-in when you start taking the RRSP money; most people choose to view their withdrawal as a blend of taxable and non-taxable funds, and use the Cdn tax (15% when taken slowly rather than lumpsum) to offset the US tax on the RRSP.
Another thing, you need to have 8891 forms filed every year for every RRSP that you have, and should have been doing this ever since you began having RRSPs. I trust you've been filing your 1040 yearly? There are threads on catching up on these....
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
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bigbryan36
- Posts: 4
- Joined: Thu Dec 03, 2009 10:30 am
Thank you so very much
I can't thank you enough for that quick posting. I thought as much regarding the rollover issues. A co-worker said a rollover could be done but I thought all along that it could not. Regarding filing the form 8891 each year and filing my 1040 each year, the answer is that I have filed each every year. Thank you for asking. And thank you for the TD referral. I would not have guessed that there were only a few brokers willing to work in this space. Wow, thanks again for all your help.