I am both a US and Canadian citizen, currently living in Asia. I have been deemed non-resident by Canada since 2007. I currently have a LIRA and an RRSP account and plan to unlock my LIRA and transfer the funds to my RRSP. Both the LIRA and RRSP are reported on my US return 8891 forms. It has been confirmed that my LIRA is eligible to unlock. I also still have approximately $90k unused RRSP contribution headroom from my last CA tax filing. Amount of transfer will be $21k.
Questions:
1) Do I need to make any filings with CRA for the tax year regarding the unlock and transfer? I have no other reason for filing a Canadian return. My broker is handling the unlock/transfer paperwork. I am not sure how the RRSP headroom comes into play.
2) How do I handle this from a US tax perspective and 8891 form reporting? This is essentially the equivalent of an IRA rollover, but not sure if the US sees it this way.
I am hoping to complete this by year end. Thank you and I appreciate any comments and direction to make sure I can handle the accounting aspects of the process.
Unlock LIRA/transfer to RRSP as non-resident
Moderator: Mark T Serbinski CA CPA
First off, be very careful that the LIRA unlocking rules for the province of jurisdiction don't require that if you are using the fact that you are non-resident, that you WITHDRAW the funds. Many require this (ontario, manitoba for example). The typical purpose of giving unlocking rights is to give YOU the funds, not put them in some other RRSP.
If this is the case, then the LIRA is immediately fully taxable in canada (25% withheld at source - no Cdn tax return is accepted for this, and tax cannot be reduced unless you have no ther world income), and also fully taxable in US. There would be no point to then put the remaining $16K this into an RRSP (assuming you could), since you would get no deduction. Your final 8891 for that account ould show $21K gross, $21K net taxable, and 0 balance.
Note of caution. Your broker is not a tax expert, and certainly not a cross-border tax expert. He *might* simply be interested in getting his hands on your funds, regardless of the initial cost to you.
If however it is allowed to transfer the funds , then (a) the entire $21K would go into your RRSP with no Cdn or US tax incurred. Your final 8891 for the LIRA would simply indicate 0 balance, and I would note that the funds were transferred to other account. No Cdn tax return would be filed. The transfer would be done between the 2 firms (you would never touch the funds), so no tax would be withheld.
Your RRSP 8891 would simply indicate a higher year-end balance.
Note however that the LIRA deposit into your RRSP would add no "investment" into your RRSP for future US tax purposes. If, say, $50K of your RRSP was not taxable in US (becuaee of your past non-deductible contributions) then after the deposit of your LIRA, the non-ytaxable portion remains $50K.
So, you first need to take a look at the forms that govern your LIRA unlock.
And, I'll assume that you will take care of any "Aisin" taxation issues.
If this is the case, then the LIRA is immediately fully taxable in canada (25% withheld at source - no Cdn tax return is accepted for this, and tax cannot be reduced unless you have no ther world income), and also fully taxable in US. There would be no point to then put the remaining $16K this into an RRSP (assuming you could), since you would get no deduction. Your final 8891 for that account ould show $21K gross, $21K net taxable, and 0 balance.
Note of caution. Your broker is not a tax expert, and certainly not a cross-border tax expert. He *might* simply be interested in getting his hands on your funds, regardless of the initial cost to you.
If however it is allowed to transfer the funds , then (a) the entire $21K would go into your RRSP with no Cdn or US tax incurred. Your final 8891 for the LIRA would simply indicate 0 balance, and I would note that the funds were transferred to other account. No Cdn tax return would be filed. The transfer would be done between the 2 firms (you would never touch the funds), so no tax would be withheld.
Your RRSP 8891 would simply indicate a higher year-end balance.
Note however that the LIRA deposit into your RRSP would add no "investment" into your RRSP for future US tax purposes. If, say, $50K of your RRSP was not taxable in US (becuaee of your past non-deductible contributions) then after the deposit of your LIRA, the non-ytaxable portion remains $50K.
So, you first need to take a look at the forms that govern your LIRA unlock.
And, I'll assume that you will take care of any "Aisin" taxation issues.
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
There are other ways to unlock pension, not involving non-residency, where "small" LIRA's might quelify for transfer. The cut-off is in the $21K range, co-incidentally.
But for non-residents, I'm pretty sure that it is take the money, after ta, back to your new country.
Your RRSP contribution room, as you saw from this discussion, doesn't matter.
But for non-residents, I'm pretty sure that it is take the money, after ta, back to your new country.
Your RRSP contribution room, as you saw from this discussion, doesn't matter.
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
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peakinmotion
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peakinmotion
Actually I have one additional question if I am correct on LRSP under Federal rules (transfer allowed, no withdrawal with tax). My broker send me the following note to confirm before proceeding:
"...my back office wanted you to confirm via email response that you do in fact have enough room in your RRSP for ~$20K (LRSP MKT value) to be moved into the RRSP and that you are prepared for this transaction from an accounting perspective"
Your last note stated that RRSP headroom was not relevant. Would there be another reason my financial adviser would ask about "enough room in RRSP".
Also to confirm, from your view, there would be no forms/returns for me to personally file with Canada? I've got the US and Asia covered.
Thanks again.
"...my back office wanted you to confirm via email response that you do in fact have enough room in your RRSP for ~$20K (LRSP MKT value) to be moved into the RRSP and that you are prepared for this transaction from an accounting perspective"
Your last note stated that RRSP headroom was not relevant. Would there be another reason my financial adviser would ask about "enough room in RRSP".
Also to confirm, from your view, there would be no forms/returns for me to personally file with Canada? I've got the US and Asia covered.
Thanks again.
For there to be no tax withheld, this MUST be a transfer. If it is a transfer there is no need for contribution room. And nothing for you to "prepare for". If it is NOT a transfer, only then would there be a question of contribution room, but then then there will ALSO be withholding, and there will be US tax consequence, and absolutely no reason to put these reduced funds into an RRSP.
You advisor is clearly unfamiliar with what is admittedly a rare procedure, so I would insist that he be very sure about what he is doing, and that YOU should be the one contacting your current LIRA administration to see if what he proposes is legit.
You advisor is clearly unfamiliar with what is admittedly a rare procedure, so I would insist that he be very sure about what he is doing, and that YOU should be the one contacting your current LIRA administration to see if what he proposes is legit.
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