Becoming a US citizen and effects on 2 Canadian pensions?

[rnessman]

I am a Canadian citizen who came to the USA on a fiance visa. I now have a 10 year green card and permanent status and qualify to become a US citizen this coming July. I presently have 2 Canadian pensions. One is a Teachers pension with the BC government which is taxed as a non resident each month and so is not taxed when we file our taxes here in the USA. The other is a CPP with the Canadian government which is not taxed due to being a non resident but does get taxed here in the USA. First if I become a US citizen and a dual citizen with Canada do I still qualify to collect these pensions? Second would there be any change to the taxation laws if I decide to become a US citizen or dual citizen with Canada? In other words would I be subject to a double taxation on the teachers pension. I also have about $4000.00 in an RRSP which matures in 2008? Should I cash it in now and pay the taxes or roll it over and end it when I'm 69 which is 6 years from now? PS it doesn't earn that much interest, somewhere around 4 to 5 percent.

Any answers would be appreciated

[nelsona]

First off, your BC pension IS taxable in US, and has been since you were in US. You report it as income on your 1040 and take credit for any Cdn tax you paid. Whomever suggested to you that it was not reportable in US was incorrect. The fact that 15% tax is withheld in Canada simply means that you do not have any further reporting required IN CANADA, not US. I hope when you say it was "not taxable" that you meant no additional tax had to be paid in US, but it is certainly reportable here and in your state if it has income tax. You need to fix this.

Your CPP (and your OAS when you get it -- remember to apply for it) are being taxed correctly, which is only in the US (and only 85% of it is taxable, remember).
Your becoming a US citizen will have no impact on the taxation of any of your income, since you are already taxed like a US citizen ever since you moved here, and particularly since you got your GC.

Your RRSP will be taxable in US when you withdraw it, to the extent that its value (in US$) grew from the day you became a US tax resident (ie. the year you first filed a 1040, either yourself or jointly with your spouse. Again, US citizenship has no bearing on this; the day you arrived in US is what counts) You also have reporting requirements, like form 8891 for RRSPs, failure to file resulting in fines and penalties.

So, immediately, you should be correcting your US returns for the last 3 years to add your BC pension (and claiming the 15% Cdn tax as a credit)and fixing your state return as well. You should also and filing form 8891 for these years (see threads on this issue).

Being a US citizen will mean that you will be taxed by IRS regardless of where you live. However, given that you are married to a US citizen, this would likely be the case anyways. This is also true if you simply maintain your GC. Also, by getting citizenship, it is unliley that your spouse's estate (if she passes before you) would be subject to any estate tax on what she gives to you, which is not necessarily the case if you do not get citizenship.

Your getting US citizenship does nothing to your Cdn one. You will be dual citizen.

[peon]

Isn't that true when you become a U.S. Citizen, you have to give up your prior citizenship meaning you will no longer be a Canadian citizen?? As far as I understand, U.S.A doesn't approve dual citizenship.
If you were a U.S. citizen, and became a Canadian citizen, what would happen?
You have to give up your U.S. citizenship??!??

[nelsona]

No, US does NOT require that you give up any other citizenship, including Cdn.

In any event, as far as this discussion goes, Cdn citizenship is not a requirement to colect OAS and CPP, nor any other Cdn pension, so getting US citizenship (and even, should you so choose, renouncing your Cdn one) has no affect on your pensions.