Returning to US with RRSP

Mesozoic · Post by **Mesozoic** » Mon Aug 09, 2010 2:16 pm

Hello,

I'm a dual US/Canadian citizen returning to the US for work after living in Vancouver for over 8 years. I have a self directed RRSP that I've liquidated and the final cheque has a 30% Federal Tax withholding. Since I've not been employed for the last 9 months I'm hoping that I can reduce my tax exposure based on my annual income for the year the RRSP was liquidated (2010). Is there any way to reduce my tax exposure in this scenario or do I have to suck it up?

Thanks.

nelsona · Post by **nelsona** » Mon Aug 09, 2010 2:29 pm

A crucial point that you have not mentionned is whether you were still in canada when you collapsed your RRSP or if you were in US.

Also, what amount are we talking here?

Mesozoic · Post by **Mesozoic** » Mon Aug 09, 2010 2:37 pm

[quote="nelsona"]A crucial point that you have not mentionned is whether you were still in canada when you collapsed your RRSP or if you were in US.

Also, what amount are we talking here?[/quote]

Sorry, the amount was originally $65K. The check I'm seeing is for $46K. I had the cheque written out while I was still in Canada.

nelsona · Post by **nelsona** » Mon Aug 09, 2010 3:26 pm

Ouch. You probably cost yourself some money.

Since you did this before leving canada, it will be part of your income for the year on your departure return. You will report the income and the tax, and see whther you owe more or less.

If you had waited until after leaving, you would have simply paid 25% flat non-residents tax.

Either way, you need to report the income on your US return, I assume you have beemn making the proper filings on your 1040 to defer tax on your RRSP (Fomr 8891 etc).

The taxable portion of your withdrawal would be the proceeds in current USD minus your contributions made over the years in USD at the time of contributions. You should have been tracking those carefully whan making your annual filing.

nelsona · Post by **nelsona** » Mon Aug 09, 2010 3:30 pm

Even if the tax you owe i ncanada would be less than 25%, the same would have been true if you collapsed it after leaving Canada (CRA would adjust the tax down).

In other words, when plnning to leave canada mid-year, one should NEVER collapse their RRSP before leaving, but rather wait until after.

Mesozoic · Post by **Mesozoic** » Mon Aug 09, 2010 3:39 pm

So I've basically screwed myself? What if I call BMO Investorline (my RRSP holder) to cancel the cheque? I've only just received it... and it is in my new home in Arizona. So technically speaking, I was already in the US when collapsing the RRSP.

nelsona · Post by **nelsona** » Mon Aug 09, 2010 7:07 pm

You would have had to notify BMO that you were non-resident, and they would have deducted 25% for non-residents.

You moved on a specific date. You called BMO to collapse your account on a specific date, presumably before your move, no?