Roth IRA -- reporting for 2009 and 2010

readtheform · Post by **readtheform** » Wed Jan 19, 2011 3:04 pm

I am USC, Cdn resident. I am getting mixed information on Roths from different sources.

Questions for 2009 taxes:
(1) Is income for Roth (dividends/interest) reported same as for any other investment account?
(2) How do I determine if Roth is custodial account or trust?
(3) Are unrealized cap gains for Roth taxable too? I thought unrealized cap gains only taxed when/if I leave Canada but investment specialist told me that unrealized cap gains for Roth alone also need to be reported/taxed
(4) Is it worth trying to correct returns for 2009 for ~$200 in dividends on Roth and $2k in unrealized cap gains? I did not report these in original filing. How painful is such a correction? Or does filing the new declaration (link below) make this all moot?

Questions for 2010 taxes:
From this forum, my attention is called to this document about new declaration form: http://www.cra-arc.gc.ca/E/pub/tp/itnew ... s-43-e.pdf, which seems to make everything easier and maybe makes all above questions moot. Except re-reading it carefully, it seems at the time of writing, the legislation maybe wasn't passed? (That's the paragraph in italics in second column of second page). Is this ruling in place?

Many thanks!

nelsona · Post by **nelsona** » Wed Jan 19, 2011 3:21 pm

Yes, except that with recent treat developments, you can file to have tax defewrred (pre-2010) or not be taxed at all.

You should fix your previous return, and then comply with the new direstive.

As long as you do not make any contributions to a Roth while resident of canada, and you file the paperwork correctly as outlined in the IT, and your withdrawls from Roth follow the US rules, you should not pay any tax on your Roth in canada or US.

This is a treaty issue, so regardless of legislation passing or not, the treaty overrules.

nelsona · Post by **nelsona** » Wed Jan 19, 2011 3:24 pm

Your roth is a custodial account. You would know if it had been placed in a trust.

readtheform · Post by **readtheform** » Wed Jan 19, 2011 3:59 pm

Still unclear:
(1) I should fix 2009 return then file paperwork to not be taxed on it? Then do I get tax back, since that declaration seems to cover tax year 2009.

(2) Do I pay tax on unrealized capital gains of Roth?

(3) Is correcting 2009 something that is so complicated that i need to invoke a professional?

Thank you!

nelsona · Post by **nelsona** » Wed Jan 19, 2011 7:04 pm

1) You will get the tax back, obviously.
2) No. roths are tax-free.
3) nah.

readtheform · Post by **readtheform** » Wed Jan 19, 2011 7:31 pm

Thank you.
I understand Roths are tax-free. But I am correcting 2009 return to pay taxes on Roth (which I will then request to have returned). Right?

In my correction to 2009 return, I pay taxes on realized cap gains/dividends/interest. Do I also pay taxes on unrealized capital gains?

I understand in the future I won't be taxed on any of these things as long as I file the declaration and file the directive.

nelsona · Post by **nelsona** » Wed Jan 19, 2011 8:29 pm

You are missing the point.
Roths have been determined to ALWAYS been tax-free. Up until 2009 people in your situation were filing a protective claim in anticipation of the final measure.

So, you should only be amending 2009 to offcially tell them you aren't paying any Roth tax. Circular, but that's the way it is. You re merely going tio send them the protective claim.

If you were going to pay tax for 2009 (why?), then it would only be on actual income (interest, dividends and realized gains) from that year (or the portion of the year you were in canada).

Read what I said in the first line of my first response to you:

"Yes, except that with recent treat developments, you can file to have tax defewrred (pre-2010) or not be taxed at all. "

readtheform · Post by **readtheform** » Wed Jan 19, 2011 8:30 pm

Got it. Thanks!