Moving Year US Return for Canadian TN and RRSP Withdrawals

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

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colinc
Posts: 29
Joined: Sat Jan 04, 2014 5:07 pm

Moving Year US Return for Canadian TN and RRSP Withdrawals

Post by colinc » Sat Jan 04, 2014 7:18 pm

Hi I've been reading this forum and have some follow questions on
1. Canadian departure tax
2. US tax form to use
3. RRSP withdrawal foreign tax credits

I moved to the US in Nov 2013 and prior to moving had:
- Sold all my equities held in my TFSAs and RRSPs
- Closed all TFSAs prior except for one because the broker had to investigate incorrect W8-BEN withholding taxes (now closed)


[u]Canadian departure tax[/u]
No longer a Canadian resident as of Nov 2013 and confirmed by NR73 so I just need put a leaving date on my T1 and go about it as usual and add on the deemed dispositions. Since I owned no property in 2013 and only invested in registered accounts I believe my only obligation is my ESPP held in the US.


[u]US Tax Form[/u]
From what I can tell, I have options
- 1040NR full year, available due to not meeting Substantial Presence Test
- Dual Status, available due to 31+ days in the US
- 1040 full year, available due to treaty

Looked into these posts:
http://forums.serbinski.com/viewtopic.php?t=7390
http://forums.serbinski.com/viewtopic.php?t=7440

- Is 1040NR an option? because that would be saying I'm non resident of both US and Canada in Nov/Dec 2013 or does it mean I should subject the US income to Canadian taxes?
- For 1040 is there any advantage beyond simplification for filing if you are single?

- Since my income is split ~50 Canada / ~30 USA in 2013 would it be more advantageous in terms of marginal tax rate for me to file dual status since I would not have to report Canadian income to the US and US income to Canada?
- For the TFSA I did not close in time do I have to file 3520 & 3520-A?
- Does the FBAR TD F 90-22.1 I fill need to report accounts for the whole year or just the time I was in the US?


[u]RRSP withdrawal foreign tax credits[/u]
I signed an agreement to purchase a house closing in Jan 2014 and put in $16 000 with the intention of using the HBP. Now I can't but from posts below if I just withdrew I'd only get a withholding tax rate is 25% and I can claim a deduction on my US return and not a credit since no tax is payable in the US. From a long term perspective does it make sense to file all those 8891s for such a small amount and wait till retirement (decades away) so I can withdraw at 15%?

I assume section 217 won't help since I'd have to report foreign income and get withholding at the highest graduated rate.
http://forums.serbinski.com/viewtopic.php?t=7396
http://forums.serbinski.com/viewtopic.php?t=7899

Thanks
Colin

nelsona
Posts: 16452
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Sun Jan 05, 2014 9:36 am

Since you arrived in November, I would simply file 1040NR for US this year, the complexities of filing fill year, or even dual status far outweigh any (if eny) tax savings.

Filing 1040NR doesn't mean you are not a US resident, it just means that you haven't met the time yet. But you have moved, and unless there is some major tie in Canada (which is obviously not the case since you gor a NR73 determination of non-resident) there is no worry.

With 1040NR, you do not need 3520 not FBAR.

As a non-resident, you cannot use HBP of course. You should withdraw all your RRSPs (if you have not already done so) at the 25% NR rate (make sure your brokerages know this). If it was done in 2014, you can use the tax as a deduction instead of a credit. You would still need to file 8891 for 2014 anyways, to report the existence of RRSP (and FBAR).

So, you were leaving Canada and were still going to buy a residence in Canada? HBP can only be used on a personal residence. please clarify.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

colinc
Posts: 29
Joined: Sat Jan 04, 2014 5:07 pm

Post by colinc » Sun Jan 05, 2014 7:31 pm

Thanks nelsona, 1040NR looks much nicer in terms of complexity. I believe there are some articles in the US-Canada treaty that might be applicable that I will look into (interest, dividends, gains, double taxation, non-discrimination).

For the house, I signed an agreement to purchase in Sep 2012 and it has been under construction since. At the time I had "intended to inhabit it as my principal residence" but subsequently got a job offer in the US. To make it more complicated my brother who is a resident of Canada is on title and mortgage. Right now I'm considering the tax implications/complexity of choosing either "Joint Tenants" or "Tenants in Common".

colinc
Posts: 29
Joined: Sat Jan 04, 2014 5:07 pm

Post by colinc » Sun Jan 05, 2014 7:40 pm

I'm actually returning to Canada this Wednesday to sign papers and close the house as well as dispose of some Canadian assets, sever ties, file NR6 etc...

Intention is to rent out the house considering I can't live in it. My brother probably will use 2.48 and claim it as his principal residence while living at our parent's. He will probably qualify for first time homebuyer tax credits and land transfer tax refund but I wont.
http://www.cra-arc.gc.ca/tx/tchncl/ncmt ... html#p2.48

revylim
Posts: 1
Joined: Thu Jul 16, 2020 2:50 am

Re: Moving Year US Return for Canadian TN and RRSP Withdrawals

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