Withholding tax - IRA 401k - Canadian citizn lvng in Canada

[helayangu]

I am 66. I am a Canadian citizen and live in Ottawa. I worked in the US for ten years and I have a 401k and an IRA there.

I now wish to withdraw money from my IRA and 401k. The custodian of the plans says that the withholding tax rate is 30%. I had thought it was 15%.

At the 30% rate, the Foreign Tax credit for Canadian taxes is less that the 30% withheld; so this is important to me!

Is there an IRS document which shows that the withholding rate is 15%? I should like to show it to the custodian of my plans.

Many thanks - "worried in Ottawa"

[nelsona]

Please have them refer to IRS Publication 515, for 2103.
Table 1 clearly states that the withholding on Pensions for a Cdn resdsient is 15%.

The treaty Article 18.2 also specifies that US periodic pension withdrawals are limited to 15% for Cdn residents.

[patti]

"US periodic pension withdrawals are limited to 15% for Cdn residents"

Just curious, do they have to be "periodic" or does the same 15% rate apply for lump sum distributions?

[nelsona]

That is why I pointed to the IRS publication, which makes no distinction between periodic and lump-sum withdrawals.

canada, of course, does make a distinction. For CRA, Cdn pensions paid to US residents must be periodic to get the 15% rate, otherwise it is 25% (but which in either case may be reduced using a section 217 election).

[helayangu]

Thank you for the references re 15% withholding. I have told my custodian.

In addition, to facilitate distributions from the plans, the custodian suggested that I roll the 401k into the IRA. He said there were no US tax implications. Are there any Canadian tax considerations if I roll the 401k into the IRA?

Thanks again - "fingers crossed in Ottawa"

[nelsona]

Nope. That is fine. I agree that, since you are now retired, it should all be in one account.

Pity some of it hadn't been put in a Roth before leaving US.