H1B, taxes, RRSP.

[murloc]

We live in Ontario. I got H1B, my wife got H4. We will move to California in one week (23 January 2011). We already sold our house, the closing date is in February.

Few questions:

1. My understanding that it makes sense to max out my RRSP. This way I get some money back after my 2010 tax return and I can take money out of RRSP later with 25% tax. I am 33, so I will not be able to use RRIF effectively to get the money with 15% any time soon. Is that correct?

2. We are going to close all bank accounts (with exception of RRSP), OHIP, driver license. My understanding is that should be enough to be not a resident of Canada for tax purporse. We can not do it immediately since we will need the account to pay last bills, get money for our house... So it will be closed only at the end of February. Are we going to need to pay taxes in Canada from whatever I earn in US in February? Basically when I send my 2011 tax return what will be the date I write it up to? End of January (the date we left the country) or end of February (the date I broken all ties)?

3. In the year of 2011, I have still worked in Canada. My income is quite low since it was only few weeks. Is it possible to get some RRSP money out before I leave? This way I can get it out with lower that 25% tax on it. Is it going to work together with maxing out my RRSP from 1. above? Is there a way count the operation of maxing out for 2010 year and withdrawal for 2011? Or all this is just nonsense. Or if I just forget about 1. and just do 3. instead, will it be more efficient?

4. How do I go about my first US/Canada tax return? How much would it cost and when shall I start it? Can (should) it be done online or I need to find someone who can do it in person (Santa Clara region)?

Thank you.

[nelsona]

You will become non-resident the day you move to US, regardless of what ties you still have in canada, by treaty.

You will only need to wrorru about 2011 taxes in spring 2012.

You get no personal exemption in 2011, so your RRSP withdrawal will be txed at 25% either way.

[murloc]

Thank you for quick reply.

What exactly in my situation makes me non-resident immediately? I am pretty sure I have read about people that needed to break ties to make them non-resident. What about NR-73, do I need to file it?

Anyway in 2012 when I file my last (departure) Canada tax return do I say that I left Canada in January and never mention any US money there? In that case both tax returns seem not that difficult to do myself.

[nelsona]

You don't need NR-73.

Your Cdn taxes will be simple. Your US one will be too, but you have a couple of choices to make, based on it being your first year in US.

Come back in a year.

[murloc]

That sounds great. Thank you!