Things to consider before moving to California from Toronto

blacknotebooks · Post by **blacknotebooks** » Sun Apr 22, 2012 10:50 pm

Hi, I work in Toronto right now and I have accepted a job offer to work in California (on a TN-1 to be granted); I currently live in Toronto with my parents and will be visiting home when possible. My plans are to work in the US for 3 years and see where I am. I might stay longer or I might return home.

I don't have to move for another 4-6 weeks but I want to make sure I'm on the ball for items to handle and any obligations to fulfill.

1) I have various RRSP/TFSA/savings/credit card accounts. Since I'm going to be on a expected 3-year TN-1, I don't need to close these accounts correct? I've read that maybe closing the TFSA is better for tax reporting in the US. Should I stop contributing to RRSP and just focus on 401(k) when I start working?

2) For my situation for tax purposes would I be considered a non-resident in Canada and resident in US? Would I need to file a Canadian departure return in 2013 for my 2012 tax returns? Isn't a departure return intended to sever your Canadian ties and not be applicable to my situation? Will be I completing both Canadian/US returns for the 3 or more years I'm working in the US? (i.e. world income/foreign tax credit for US income/income taxes in CDN return).

3) Should I obtain a Canadian credit report now to make it easier to get a credit card later (will a Canadian credit report even help). Or should I try and get an AMEX to use in the US now?

4) I haven't decided whether to ship my car or to just buy a used car with cash when I get down there. I understand there's a process for importing a car (i.e. emissions test, title transfer, letter from manufacturer). Would the effort outweigh the convenience of just buying a cheap car to use for 3 years?

5) Car insurance. From what I've read, it's better to get insured in the States and just get rid of the Canadian car insurance. What companies are good?

6) Will I need a California driver's license? Having a driver's license kind of violates the TN-1 status temporary intent doesn't it?

7) US bank account. I plan to register for my SSN as soon as possible. All I need for a bank account is a SSN correct?

Are there any other personal or tax-related items I should consider before leaving or accomplish upon arrival?

Thank you so much.

Steve

nelsona · Post by **nelsona** » Mon Apr 23, 2012 4:58 am

You will be considered US tax resident and Cdn non-resident, so much of what you state is incorrect..

TFSA reporting will be required and onerous, so close TFSA, you can always re-stock if you come back.

You will no longer be reporting in Canada, so RRSP contribs will be pointless.

You will file adpearture return for 2012 with depature date

You will require a Cal DL within 30 days.

blacknotebooks · Post by **blacknotebooks** » Mon Apr 23, 2012 9:53 am

Thanks Nelson, I was anticipating your help.

Referring to the departure return, this is just that checkbox I tick off in my 2012 return claiming I left at xx-xx-2012 correct?

By filing a departure return does that mean I am severing my ties with Canada and have to close everything but RSPs based on the US-CA treaty? Or can I still maintain all my bank accounts/RSPs (will close TFSA)? In either case, do I still have to complete both Canadian/USD tax returns until I either a) come back or b) go the GC route? I keep hearing about world income and foreign tax credits in my type of situation and don't know whether they apply.

Thanks again, you rock!

nelsona · Post by **nelsona** » Mon Apr 23, 2012 10:09 am

You are becomeing Cdn non-resident simply buy virtue of living and working in US. The only thing you MUST close is any non-RRSP brokerage account. You may have to move/change your RRSP to a brokerage compliant with california SEC (TD waterhouse and RBC direct are 2 such brokerages).

Your TFSA you would close just because of onerous filing requirements. By transfering your non-RRSP to a US broker, that will get rid of any Cdn mutrual funds (also a reporting nightmare).

But everything else you can keep as is. You will want to simplify of course, an dsome things just won't reamin valid: DL, OHIP for example.

nelsona · Post by **nelsona** » Mon Apr 23, 2012 10:11 am

You will file a departure return i ncanad , which should have no US income on it.

For US you will have a choice: fuill year or part-year. I've dicussed this at length so I won't repeat here.

Your US choice has no impact on your Cdn departure return, and is not affected by the future.

nelsona · Post by **nelsona** » Mon Apr 23, 2012 10:14 am

You should be reading over CRA emigrants guide for what to expect.

WomanOnTheMove · Post by **WomanOnTheMove** » Thu Apr 26, 2012 3:37 pm

I am a U.S. citizen who moved from California to Montreal a few years ago and had many of the same questions going the other direction.

1) My husband is a Canadian citizen who kept his RRSP during U.S. residency. He filed Form 8891 each year to maintain its tax deferred status in the U.S. at the federal level, which is available thanks to the Canada-U.S. Income Tax Treaty. However, California (unlike most, if not all, other states) does not recognize this treaty provision, so residents must report and pay tax on RRSP earnings. FTB Pub. 1001, Supplemental Guidelines to California Adjustments, spells out the difference between federal and California law and how to report the earnings in California.

3) I imagine that there may be differences between the U.S. and Canada as far as getting credit goes. When we moved to the U.S. my husband was able to get a credit card with no problem, based on a letter from his employer stating his salary. When we moved to Canada I had a more difficult time getting a credit card. The only way I could do it in Canada was to put a hold on funds in my savings account equal to the credit limit I wanted. We purchased property in Canada shortly after arriving, and (unlike getting a credit card) I was able to use my U.S. credit report in qualifying for a mortgage. It wasn't easy, though. The lender was willing to take my U.S. history into account, but required a ton of addition information, such as a year's worth of bank account balances and paycheck stubs. We ended up faxing a couple hundred pages of documents during the qualification process, including a copy of my U.S. credit report. I imagine that each lender has a different policy, but if you are thinking of trying to qualify for a mortgage it might be worth gathering up some of those documents in advance, or at least make sure that you don't pack them away in a place that will be inaccessible when you need them. In any case, trying to establish some kind of credit history in the U.S. before arrival certainly wouldn't hurt.

4) We imported our car and used a car shipping service to transport the vehicle. It was a long process, but the website of the Registrar of Imported Vehicles (RIV) was very helpful and gives a more or less complete description of the process. It could be worth checking it out if you think that you might to try import a vehicle back to Canada at some point. You might already be aware that the cost of purchasing a new vehicle in Canada is higher than in the U.S. Have you thought about selling your car in Canada, purchasing one in the U.S., and later importing it to Canada if you decide to move back?

After having dealt with cross-border tax issues for the past few years, my general advice would be to cash out and close down as much as possible in Canada before moving, particularly if you file a departure return with the CRA since they will treat your taxable assets as if that is what you have done anyway. Plus, the cleaner a break you have, the easier it will be to handle any tax issues that arise.

Between immigration issues, moving logistics, and taxes, so many questions came up for me that I started a blog about the whole process. It's not easy to accomplish a move like you are going to do, but it's not impossible either. Best of luck!

blacknotebooks · Post by **blacknotebooks** » Thu May 10, 2012 9:30 am

Thanks guys for all your help. I will be starting work in the US on Monday.

From Nelson's assistance I understand now that I will be a Canadian Non-resident and a US resident onwards for my situation.

Also from Nelson's advice I have closed my TFSA. If I am transferring my DPSP/GRRSP from my old job to my personal RRSP, would I need to fill out the NRTA1 form? I'm on the fence because at the time of transfer (in the next 2 weeks) I will be in the US already but still under 183 days.

So in 2013 (for Canadian 2012 return) I will be filing 2012 departure and only including income from January - May 11. Would I need to fill out the T1161 form as well? I don't have property but I do have financial accounts exceeding $25,000 that will remain open when I am in the US. For the 2013 US return I have options like Nelson suggested.

For 2014 onwards I will only have the US return to fill.

blacknotebooks · Post by **blacknotebooks** » Thu May 10, 2012 9:52 am

Couple more questions:

- Should I sell all my stocks? I don't have much (~$15,000 worth) but if I don't plan on returning to Canada for a while it's not much use sitting there right? If I just leave them I don't have any tax obligations correct?

- My personal RRSP is with ING Direct; do I need to move it to TD Waterhouse?

nelsona · Post by **nelsona** » Thu May 10, 2012 9:56 am

NRT1A - I would, or at least the resident equivalent. The key is to not have anything withheld, as you are doing a transfer. Do both your former employer and RRSP manager consider you non-resdient at this point?

T-1161 is for property and investments, not cash. So the fact that you have "accounts" exceeding $25,000 means nothing. It is if you have reportable holdings in those accounts (ie stocks, bonds and mutual funds).

And as important as this list, if it does include investments, is Form T1243 to determine your deemed disposition cap gains/losses.

And non-RRSP accounts (which is all we are talking about here) should be closed when you leave canada.

blacknotebooks · Post by **blacknotebooks** » Fri May 11, 2012 11:13 am

So Nelson, should I be moving my ING RRSP to TD Waterhouse? I told ING I was leaving for 3 years and they just put a note in my file and were okay with it.

With California I've read something you wrote about "earnings" within RRSPs being taxable unless you go for election. What does that mean?

nelsona · Post by **nelsona** » Fri May 11, 2012 11:22 am

ING may be "OK" with it, but will they let you trade in your account? If you have ING mutual fund account, you are not allowed to buy those as a US resident, unless you have a self-directed RRSP, not one limited to only a certain brand of MFs.

To clarify cali tax on RRSPs: you MUST pay Cali tax on any triggered income and distributions in cali, REGARDLESS of what you elect for IRS on 8891. Any election you make does not apply to california (it does to all other states). This will be another reason to collapse your RRSP assoon as you are non-resident.

If you do decide to hold on to your RRSP, don't forget to switch your winning funds around before leaving canada, even if you do stay with ING (which I'm sure you won't).

blacknotebooks · Post by **blacknotebooks** » Fri May 11, 2012 11:57 am

Thanks for the clarification on RRSP vs. Cali tax.

My ING RSP is just a RSP savings account (not mutual funds) that I plan to use for the HBP when I come back to Canada. I will not do any trading or make any contributions to it when I'm gone. The account makes less than 1.5%/year so the taxes paid to Cali won't be much. If the situation arises that I do not come back then I will collapse the RRSP then. Is that feasible?

What did you mean about switching winning funds around?

nelsona · Post by **nelsona** » Fri May 11, 2012 12:11 pm

Since you do not have mutual funds or stock, this does not apply.

You are probably still better off taking the money out after you leave. Better to have cash to put towards your down payment rather than HBP, which you are stuck repaying with no tax deduction.

You will never get a better taxrate on your RRSP until you reture, than right after you leave canada.

nelsona · Post by **nelsona** » Fri May 11, 2012 12:13 pm

My advice: take the RRSP as soon as you are non-resident, paying the 25% flat tax. While in US put as much of this money and other funds into Roth and Roth401(k), and then this will all be tax-free for you within 5 years. Then use some if not all of this as downpayment for your Cdn house.