CARES Act - IRA Withdrawal

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deltrave
Posts: 5
Joined: Tue Dec 15, 2020 2:02 pm

CARES Act - IRA Withdrawal

Post by deltrave »

I am eligible to withdraw $100K from my IRA account without penalty under CARES Act. Before moving to Canada as a permanent resident in Sep 2020, I made the withdrawal. If I choose to consider the $100K withdrawal as pro-rated income over three years, will I need to pay Canadian taxes on the 2021 and 2022 allocations (as part of worldwide income) and then claim foreign tax credit for taxes paid to the US?

If I choose to deposit the money back into my IRA account within three years of withdrawal, other than potentially having to refile the tax returns for 2020-2022 with both IRS and CRA, will there by any complications / restrictions on the Canadian side?

Thanks for all answers!
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: CARES Act - IRA Withdrawal

Post by nelsona »

By treaty, Canada views pension income as income the same as IRS does.' So whatever is taxable on your 2021 and 2022 returns will be taxable in Canada to the same extent.

The 2020 portion will not be taxable since it occurred before you became Cdn resident in September. So while spreading the income will definitely benefit you for US taxes, there will be higher taxes to pay in Canada on that income.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
nelsona
Posts: 16673
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Re: CARES Act - IRA Withdrawal

Post by nelsona »

Putting the money back will not adversely impact either US or Cdn tax returns or regulations.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D
deltrave
Posts: 5
Joined: Tue Dec 15, 2020 2:02 pm

Re: CARES Act - IRA Withdrawal

Post by deltrave »

Yes I did think that most likely I might have to pay taxes to CRA on the withdrawal if I pro-rated the withdrawal over 3 years. But was hoping that it might be a special accounting case. Thank you for the confirmation.
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