Canadian Resident and US 401k holder

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danmacd1
Posts: 3
Joined: Tue Nov 12, 2019 1:47 pm

Canadian Resident and US 401k holder

Post by danmacd1 »

Hi, I have used your income tax service in the past when living in the US. I returned to Canada back in 2009

Question regarding a US 401K and the amount I can withdraw (in periodic payments each year, without having to filing a US Tax return)
- Canadian citizen and resident
- NOT a US green card holder any more
- Only income from the US would be periodic payments from the 401K
- Turning 59-1/2 in March 2020, so waiting till then to remove any funds
- Have completed the W-8BEN to have on file with financial institution (so should be the 15% tax withholding amount)

I am aware of the option to transfer to a Canadian RRSP, however not looking to have any additional registered funds in Canada.

The question is:
In order to NOT file a US tax return each year, what is the maximum I can withdraw from the 401K each year? Is it the $12,000 USD amount to not file a return, or can it be more since it’s the only source of income and sourced from a 401K? Or is there another rule for non US residents?

Also, I assume I can just file a Canadian return with the 401k foreign income amount , and credit for the foreign taxes already paid each year ?

Thank-you Dan.
danmacd1
Posts: 3
Joined: Tue Nov 12, 2019 1:47 pm

Re: Canadian Resident and US 401k holder

Post by danmacd1 »

Opps.. Also forgot to ask, can I pension income split these 401K funds with my spouse on our Canadian Income Tax returns? I'm 59-1/2 and she is 62
nelsona
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Location: Nowhere, man

Re: Canadian Resident and US 401k holder

Post by nelsona »

There is no limit on how much you can withdraw, the withdrawals are treated as pension income. There will be withholding. It is always good to file to reduce the US tax, evn if the withholding is 15%.

As long as it is a 401(K), you can split the income (and, now you can split the tax too(, with your spouse. If you convert to an IRA however, you cannot split. In Quebec you cannot split until you are 65.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
danmacd1
Posts: 3
Joined: Tue Nov 12, 2019 1:47 pm

Re: Canadian Resident and US 401k holder

Post by danmacd1 »

Thank-you for the swift response to the questions

Regards, Dan
steadgarwin
Posts: 8
Joined: Mon Apr 27, 2015 10:52 pm

Re: Canadian Resident and US 401k holder

Post by steadgarwin »

Is there an age requirement to split income from 401k withdrawals? or any other special requirements (besides being married and CAN residents)? I'm 45, my wife is 44. I'm a US citizen, she's a dual citizen. Our sole income is my 401k withdrawal.
nelsona
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Re: Canadian Resident and US 401k holder

Post by nelsona »

For 401(k), no restrictions on age federally and provincially, except for QC, where the pensioner must be 65.
It must be a 401(k) however, not a rollover IRA.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
formerpatriot
Posts: 62
Joined: Mon Feb 23, 2015 4:13 pm
Location: Montreal

Re: Canadian Resident and US 401k holder

Post by formerpatriot »

nelsona wrote:
>
> There will be withholding. It is always good to file to
> reduce the US tax, even if the withholding is 15%.
>

I don't see what would be the point of filing with the IRS if the withholding is only 15%.
If I pay less than 15% to the IRS, I will pay more to the CRA. The only way it would be advantageous
to pay less than 15% to the IRS would be if my marginal tax rate in Canada was less than 15%.
What am I missing?
FormerPatriot in Montreal
nelsona
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Re: Canadian Resident and US 401k holder

Post by nelsona »

As you say, there may be situations where you may have a lower tax rate in Canada (effective rate is the key, not marginal) in some years. Getting onto the habit of not filing might make you miss these opportunities.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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