I meant a US AMT calculation, rh.
There will be no Cdn AMT since she has no deductions whatsoever, never mind any AMT-qualifying ones.
However a 29K foreign tax deduction on her 1040 will almost certainly kick in AMT.
As to use of a pro, I certainly would use one for my US tax in year one (again, she's going to US on an INVESTOR VISA, so if she is not using a CPA at ths point....).
For her Cdn tax however, it is so straight forward as to be done in one's sleep, and if she withdraws the RRSP after departure, then the return can be done while in a coma.
<i>nelsona non grata</i>
RRSP Taxability
Moderator: Mark T Serbinski CA CPA
Rh, you seem to be getting confused with the foreign tax credit and the foreign tax <b>deduction</b>.
As I already explained, the FTC will be of no use to kelli, since the foreign included income she will report on 1040 will be minimal, and the cahnces of her having gen limit income in canada which is low-taxed adding up to ~$70K in the next 5 years is infinitessimal
She should be including the Cdn tax as a foreign tax deduction on Sched. A, since thsi does not require any foreign income, and is not limited except for AMT purposes.
It would be this large deduction, coupled with all her other normal deductions that would likely trigger AMT. This happens regularly to people who live in high tax states, or have large property tax deductions (her foreign tax would be exactly like a property tax deduction).
We are not talking about AMT with respect to FTC.
Let's here from kelli before delving back into your closed issue.
<i>nelsona non grata</i>
As I already explained, the FTC will be of no use to kelli, since the foreign included income she will report on 1040 will be minimal, and the cahnces of her having gen limit income in canada which is low-taxed adding up to ~$70K in the next 5 years is infinitessimal
She should be including the Cdn tax as a foreign tax deduction on Sched. A, since thsi does not require any foreign income, and is not limited except for AMT purposes.
It would be this large deduction, coupled with all her other normal deductions that would likely trigger AMT. This happens regularly to people who live in high tax states, or have large property tax deductions (her foreign tax would be exactly like a property tax deduction).
We are not talking about AMT with respect to FTC.
Let's here from kelli before delving back into your closed issue.
<i>nelsona non grata</i>
Rh, thanks for confirming what I said about 15 posts ago, in response to Kelli.
Unless one has yearly gen limit income, the deduction is always better than the gcredit, especially for newly arrived Cdn, whose taxable portion of RRSP is negligeable.
By the way, I wanted to explore a strange thing you cited your acct as saying in a previous post:
"<i>even though Canadian EI is eligible as a foreign tax for the FTC, it is best to not claim it -- to an IRS novice, it doesn't look like an income tax and can trigger an audit</i>"
<b>
What Malarky</b>!! Sounds more like he is the novice. First off if you are going to use treaty arguments, your return is unlikely to be reviewd -- if at all -- by a novice.
Secondly, if one is going to stand on very acrobatic usages of the treaty (or several treaties) and then be 'afraid' to use one that is in black and white, then I would begin preparing for my audit right now.
Thirdly, <u>and most importantly</u>, since when does one itemize what constituted their foreign tax, let alone provide proof of it with their return?!
One simply states the amount. Period. There is no disctinction between fed tax, prov tax, EI or whatever.
<i>nelsona non grata</i>
Unless one has yearly gen limit income, the deduction is always better than the gcredit, especially for newly arrived Cdn, whose taxable portion of RRSP is negligeable.
By the way, I wanted to explore a strange thing you cited your acct as saying in a previous post:
"<i>even though Canadian EI is eligible as a foreign tax for the FTC, it is best to not claim it -- to an IRS novice, it doesn't look like an income tax and can trigger an audit</i>"
<b>
What Malarky</b>!! Sounds more like he is the novice. First off if you are going to use treaty arguments, your return is unlikely to be reviewd -- if at all -- by a novice.
Secondly, if one is going to stand on very acrobatic usages of the treaty (or several treaties) and then be 'afraid' to use one that is in black and white, then I would begin preparing for my audit right now.
Thirdly, <u>and most importantly</u>, since when does one itemize what constituted their foreign tax, let alone provide proof of it with their return?!
One simply states the amount. Period. There is no disctinction between fed tax, prov tax, EI or whatever.
<i>nelsona non grata</i>
<i>The foreign taxes are backed up with documentation because the foreign income is declared. If the foreign taxes were less than the U.S. tax, the FTC would be limited to that amount. So, the credit has to be justified.</i>
This is false. In no case is proof of foreign income provided, much less foreign tax paid, unlees an <b>actual </b> W-2 or an 1099 is issued, not the foreign equivalents. Any other documentation would simply be kept on file by you.
Are you sure you are dealing with a good <u>cross-border </u> tax pro?
Only 3 or 4 countries have treaty provisions for dependants not resident in US, so this is not as big a loop-hole as you may think.
Oh, and by the way, EI eligibility as a tax credit/deduction is NOT atreaty issue. Its right there in the 1116 instructions. The fact that there is a <i>possibility </i> of direct benefit is of no concern, adn is explained in those instructions.
CPP is the 'tax' that is not creditable, because of the totalization agreement in place between US/Canada.
<i>nelsona non grata</i>
This is false. In no case is proof of foreign income provided, much less foreign tax paid, unlees an <b>actual </b> W-2 or an 1099 is issued, not the foreign equivalents. Any other documentation would simply be kept on file by you.
Are you sure you are dealing with a good <u>cross-border </u> tax pro?
Only 3 or 4 countries have treaty provisions for dependants not resident in US, so this is not as big a loop-hole as you may think.
Oh, and by the way, EI eligibility as a tax credit/deduction is NOT atreaty issue. Its right there in the 1116 instructions. The fact that there is a <i>possibility </i> of direct benefit is of no concern, adn is explained in those instructions.
CPP is the 'tax' that is not creditable, because of the totalization agreement in place between US/Canada.
<i>nelsona non grata</i>
<i>I prefer a more accurate position, and like taking every credit I can get, even if it is only in the interest of accuracy. Still, the simpler the return, the better, espescially if it is complex already.</i>
I agree, especially considering that you have nowe relocated 3 times in lessd than 2 years. who is to say that you will not at some point need that extra foreign credit from 2003 or 2004, when, say, you work for a month in canada (free of Cdn tax, by the way), or if spouse withdraws some RRSPs at low Cdn tax rate, like mine is doing, using FTC carried forward from our move year. It would be nice to have banked the creditable tax for future use.
And we've never submitted anything which relates to Cdn income in 5 years of Cdn income after leaving US.
<i>What I did not know what that Canada has an EI agreement with the U.S. Canadians legally working in the U.S. on a valid work visa, who lose their jobs, and can legally work in Canada, can apply for unemployment insurance benefits in the state they worked...</i>
Yeah, you are pretty new at all this, which is 101 stuff for those of us who have been discussing this for years. Look at the grasmick.com tax forum for old discussions on this.
<i>nelsona non grata</i>
I agree, especially considering that you have nowe relocated 3 times in lessd than 2 years. who is to say that you will not at some point need that extra foreign credit from 2003 or 2004, when, say, you work for a month in canada (free of Cdn tax, by the way), or if spouse withdraws some RRSPs at low Cdn tax rate, like mine is doing, using FTC carried forward from our move year. It would be nice to have banked the creditable tax for future use.
And we've never submitted anything which relates to Cdn income in 5 years of Cdn income after leaving US.
<i>What I did not know what that Canada has an EI agreement with the U.S. Canadians legally working in the U.S. on a valid work visa, who lose their jobs, and can legally work in Canada, can apply for unemployment insurance benefits in the state they worked...</i>
Yeah, you are pretty new at all this, which is 101 stuff for those of us who have been discussing this for years. Look at the grasmick.com tax forum for old discussions on this.
<i>nelsona non grata</i>
Thank you for your replies. I am still here (leaving on Monday). FYI, I am a BC resident.
It doesn't look like I can even claim 1/6 of the basic personal exemption... I found the following info:
---------
Non-residents - You can claim the following non-refundable tax credits if they apply to you:
[only 'charitable donations' applies to me]
In addition, you can claim the other applicable non-refundable tax credits if you have included at least 90% of your 2003 net world income on line 236 of your return.
---------
Since most of my income will be US for the year, I won't be able to claim any personal exemption.
QuickTax shows a non-refundable tax credit of $55 (related to the charitable donations, I suppose).
There is also an additional 'surtax for non-residents', which is 48% of the tax owing on the $5200 (Canada's parting 'gift' to emigrants). So the total tax owed on the $5200 is $1147. My refund would come to $412.
Then I added in a $10,000 RSP withdrawal, with $1000 tax paid on withdrawal. This bumped the taxes owing to $956 which, when added to the $1000 paid on withdrawal and the $412 refund I would no longer be receiving, comes to $2368, which is close to 25%.
Similar situation when adding in a $20,000 RSP withdrawal... total additional taxes are $4700.
Given that this is just a rough estimate anyway, and it seems to complicate things and the amount saved is not very much, I have decided to withdraw the entire amount after I am a US resident.
Thanks again to rhollan and nelsona for taking the time to reply!
It doesn't look like I can even claim 1/6 of the basic personal exemption... I found the following info:
---------
Non-residents - You can claim the following non-refundable tax credits if they apply to you:
[only 'charitable donations' applies to me]
In addition, you can claim the other applicable non-refundable tax credits if you have included at least 90% of your 2003 net world income on line 236 of your return.
---------
Since most of my income will be US for the year, I won't be able to claim any personal exemption.
QuickTax shows a non-refundable tax credit of $55 (related to the charitable donations, I suppose).
There is also an additional 'surtax for non-residents', which is 48% of the tax owing on the $5200 (Canada's parting 'gift' to emigrants). So the total tax owed on the $5200 is $1147. My refund would come to $412.
Then I added in a $10,000 RSP withdrawal, with $1000 tax paid on withdrawal. This bumped the taxes owing to $956 which, when added to the $1000 paid on withdrawal and the $412 refund I would no longer be receiving, comes to $2368, which is close to 25%.
Similar situation when adding in a $20,000 RSP withdrawal... total additional taxes are $4700.
Given that this is just a rough estimate anyway, and it seems to complicate things and the amount saved is not very much, I have decided to withdraw the entire amount after I am a US resident.
Thanks again to rhollan and nelsona for taking the time to reply!
Don't overthink this kelli.
You are not a non-resident until you leave. Your 2005 tax retuurn will be the same one everyone else in BC will submit, except that it will have your personal ammount reduced by about one-sixth. It will only include your income up 'til now, plus any other Cdn income from later this yearthat is not subject to NR tax (that does not include RRSP, interest.
The 90% rule, the surtax, that is all for PURE, full-year non-residents.
You are looking at the rules for NEXT years's <b>2006 </b> tax return (it's unlikely you will even need one by then -- it would be submitted in april 2007!).
You will not be reporting your RRSP withdrawl on a tax return, if you wait 'til after you leave to collapse it.
Don't scratch your head over this one, just worry about setting up your new home, and then in a few months, take your RRSP. I guarantee that the most that you will pay more tahn if you took out some now and some later is about $200.
<i>nelsona non grata</i>
You are not a non-resident until you leave. Your 2005 tax retuurn will be the same one everyone else in BC will submit, except that it will have your personal ammount reduced by about one-sixth. It will only include your income up 'til now, plus any other Cdn income from later this yearthat is not subject to NR tax (that does not include RRSP, interest.
The 90% rule, the surtax, that is all for PURE, full-year non-residents.
You are looking at the rules for NEXT years's <b>2006 </b> tax return (it's unlikely you will even need one by then -- it would be submitted in april 2007!).
You will not be reporting your RRSP withdrawl on a tax return, if you wait 'til after you leave to collapse it.
Don't scratch your head over this one, just worry about setting up your new home, and then in a few months, take your RRSP. I guarantee that the most that you will pay more tahn if you took out some now and some later is about $200.
<i>nelsona non grata</i>
Hey there.
Higher up in this thread I explained my situation as follows:
1. Canadian citizen
2. US resident for a long time
3. Never disclosed the RRSP before
4. Due to my skillful investing (Nokia, etc.) I've turned my $22K CDN RRSP into something like $1,200! - so I've lost a bit!
And I got good information from all on what to do.
But since then I've checked over my records going back to about 1996 (when I became a US resident). In 2000 I purchased 2 stocks - JDS Uniphase and PMC Sierra for just over $22K.
Since then, they've gone down to about $700. In all that time, there was not a dividend, no action, nothing.
Also, I have never filled out a 3520, 8891 ... nothing.
Now there's never been a loss in the account as the stocks have not been sold. But as of yesterday, I told the CDN broker to sell them.
So, I'll have a 20K CDN capital loss as of 2005.
It was mentioned that I must have bought the investment with money in the RRSP (which is correct), but when I went over each year of triggered amount of profit, it was quite minimal. I know, it's still a profit, but it was in the $30.00CDN - $300CDN range in a year.
My accountant advised that as this took place before 3 years ago, and it wasn't a lot of money, and who wants to alter many years before that of tax returns, so ... if I just move forward from 2001, what's the best thing to do now to be able to claim a 3K US loss for 2005 and 3K US loss for 2006?
Do I really have to amend my return for 2002 and 2003 with a form 3520? Do I need to file a form 8891 this year (for 2004 taxes which have already been sent in) advising that I am not seeking the treaty-exempt status?
Or can I just treat the account like any investment account where I've lost the $20K CDN since the investment was bought in 2000?
Thanks in advance ...
Higher up in this thread I explained my situation as follows:
1. Canadian citizen
2. US resident for a long time
3. Never disclosed the RRSP before
4. Due to my skillful investing (Nokia, etc.) I've turned my $22K CDN RRSP into something like $1,200! - so I've lost a bit!
And I got good information from all on what to do.
But since then I've checked over my records going back to about 1996 (when I became a US resident). In 2000 I purchased 2 stocks - JDS Uniphase and PMC Sierra for just over $22K.
Since then, they've gone down to about $700. In all that time, there was not a dividend, no action, nothing.
Also, I have never filled out a 3520, 8891 ... nothing.
Now there's never been a loss in the account as the stocks have not been sold. But as of yesterday, I told the CDN broker to sell them.
So, I'll have a 20K CDN capital loss as of 2005.
It was mentioned that I must have bought the investment with money in the RRSP (which is correct), but when I went over each year of triggered amount of profit, it was quite minimal. I know, it's still a profit, but it was in the $30.00CDN - $300CDN range in a year.
My accountant advised that as this took place before 3 years ago, and it wasn't a lot of money, and who wants to alter many years before that of tax returns, so ... if I just move forward from 2001, what's the best thing to do now to be able to claim a 3K US loss for 2005 and 3K US loss for 2006?
Do I really have to amend my return for 2002 and 2003 with a form 3520? Do I need to file a form 8891 this year (for 2004 taxes which have already been sent in) advising that I am not seeking the treaty-exempt status?
Or can I just treat the account like any investment account where I've lost the $20K CDN since the investment was bought in 2000?
Thanks in advance ...