Hi,
I was a non-resident of Canada (have the paperwork) for 4 years and stopped paying Can tax during that time. While working and living in the US I contributed to an employer matching 401(k). When I left my job I rolled that over into a self-directed IRA in States. I then re-entered Canada, declared myself a resident, starting paying Can tax, stopped paying US tax (I filed my split-year on the year I left).
Last year, as a resident of Can, non-resident US Alien, I took a lump-sum distribution from my IRA and closed the account. I received a 1042-S, filed a 1040NR and paid the balance due to the US Treasury. The US monies from the distribution were deposited, and are still, in a US bank tied to my US TIN. They have not yet entered the country. I have claimed no tax treaty benefits on the US side of things. I have yet to file tax for 2010 in Canada.
I called CCRA twice. Once in Jan 2010 and once in Jan 2011. Last year they told me I did not owe any Can tax on the monies as the monies in the IRA where funded when I was a non-resident. This year, they told me I had to pay Can tax on the money as foreign income.
My Questions:
1. Do I owe Can tax on this distribution?
2. How do I claim this on my Can tax?
I can not find *any* mention of this situation on any CCRA publication. Any help or links are greatly appreciated!
CAN Taxes due on IRA Dis. funded when I was a Non-Resident
Moderator: Mark T Serbinski CA CPA
1, Yes, it is fully taxable in canada
2. You report the income, and then you use the foreign tax credit lin to get credit for the US tax, but not any early withdrawal penalty.
The money is considered pension money, plain and simple. The only way *some* of the withdrawal woud not be taxed is if you had contributed to it as a Cdn resident, and, since back then 401(K) contributions were not deductible, that portion that you constributed would come out tax free in canada.
Where the money is kept means nothing.
Out of curiosity, what was the withdrawal, how much tax did you pay (it should have been a flat 20% + 10% if under age 59) and how much penalty was imposed (10% early withdrawal) on your 1040NR.
Technically you probably didn't need to file 1040NR.
2. You report the income, and then you use the foreign tax credit lin to get credit for the US tax, but not any early withdrawal penalty.
The money is considered pension money, plain and simple. The only way *some* of the withdrawal woud not be taxed is if you had contributed to it as a Cdn resident, and, since back then 401(K) contributions were not deductible, that portion that you constributed would come out tax free in canada.
Where the money is kept means nothing.
Out of curiosity, what was the withdrawal, how much tax did you pay (it should have been a flat 20% + 10% if under age 59) and how much penalty was imposed (10% early withdrawal) on your 1040NR.
Technically you probably didn't need to file 1040NR.
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