Im a canadian permanent resident. i used to be in the US from 2001-2006 on a H1 visa. I have about 13k in the IRA there.
pr
Now i want to withdraw this IRA end of this month.
my bank in the US said that i will have to pay a 10% penalty in 2010 to the IRS. What i would like to know is , will there be taxes on this 13k as well in the US ? and what will be the tax rate for that ? also i make about 80k here in canada. so in 2010 will i be able to apply that penalty towards my cdn taxes because of the treaty ? also what about US taxeS That i may pay on that 13k ? will i be able to apply that as well against my cdn taxes ?
is there a way to avoid the these taxes ? may be by pushing this into RRSP before FEb'2009 ?
Please help ..
IRA to RRSP
Moderator: Mark T Serbinski CA CPA
Re: IRA to RRSP
pleaes note that i dont intend to return to the US. As i will be a canadian citizen next month im settled here... [quote="njdude26"]Im a canadian permanent resident. i used to be in the US from 2001-2006 on a H1 visa. I have about 13k in the IRA there.
pr
Now i want to withdraw this IRA end of this month.
my bank in the US said that i will have to pay a 10% penalty in 2010 to the IRS. What i would like to know is , will there be taxes on this 13k as well in the US ? and what will be the tax rate for that ? also i make about 80k here in canada. so in 2010 will i be able to apply that penalty towards my cdn taxes because of the treaty ? also what about US taxeS That i may pay on that 13k ? will i be able to apply that as well against my cdn taxes ?
is there a way to avoid the these taxes ? may be by pushing this into RRSP before FEb'2009 ?
Please help ..[/quote]
pr
Now i want to withdraw this IRA end of this month.
my bank in the US said that i will have to pay a 10% penalty in 2010 to the IRS. What i would like to know is , will there be taxes on this 13k as well in the US ? and what will be the tax rate for that ? also i make about 80k here in canada. so in 2010 will i be able to apply that penalty towards my cdn taxes because of the treaty ? also what about US taxeS That i may pay on that 13k ? will i be able to apply that as well against my cdn taxes ?
is there a way to avoid the these taxes ? may be by pushing this into RRSP before FEb'2009 ?
Please help ..[/quote]
The taxrate for IRS withhholding would be 15%. Then the 10% penalty would be added to that.
Only the tax paid in US (not the penalty) could be used on your Cdn return.
The penalty is supposed to be part of withholding, since you are non-resident.
The bank in US has no idea what you can or cannot claim in Cnada so do not put any validity on what they say.
The best way to avoid tax on your IRA right now is to leave it as is. The moment you take it out you are taxable in both US and Canada.
If you intend to put this in an RRSP just leave it in US. If you insist that it go into Cdn RRSP, then in the end you will simply be out the 10% penalty.
All this will be on your 2009 tax year. Nothing to do with 2008.
Only the tax paid in US (not the penalty) could be used on your Cdn return.
The penalty is supposed to be part of withholding, since you are non-resident.
The bank in US has no idea what you can or cannot claim in Cnada so do not put any validity on what they say.
The best way to avoid tax on your IRA right now is to leave it as is. The moment you take it out you are taxable in both US and Canada.
If you intend to put this in an RRSP just leave it in US. If you insist that it go into Cdn RRSP, then in the end you will simply be out the 10% penalty.
All this will be on your 2009 tax year. Nothing to do with 2008.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thank you for your response. im sorry i dont understand what you mean be , the penalty is supposed to be part of withholding ?
also when i talked to HR block 3 months ago , they told me that the penalty i pay can be reclaimed on the cdn return... are they wrong ?
i would prefer to keep it in canada. as there are so many rules changing nowadays that im scared that some day US may make a rule for me to take it out permanently :((((
[quote="nelsona"]The taxrate for IRS withhholding would be 15%. Then the 10% penalty would be added to that.
Only the tax paid in US (not the penalty) could be used on your Cdn return.
The penalty is supposed to be part of withholding, since you are non-resident.
The bank in US has no idea what you can or cannot claim in Cnada so do not put any validity on what they say.
The best way to avoid tax on your IRA right now is to leave it as is. The moment you take it out you are taxable in both US and Canada.
If you intend to put this in an RRSP just leave it in US. If you insist that it go into Cdn RRSP, then in the end you will simply be out the 10% penalty.
All this will be on your 2009 tax year. Nothing to do with 2008.[/quote]
also when i talked to HR block 3 months ago , they told me that the penalty i pay can be reclaimed on the cdn return... are they wrong ?
i would prefer to keep it in canada. as there are so many rules changing nowadays that im scared that some day US may make a rule for me to take it out permanently :((((
[quote="nelsona"]The taxrate for IRS withhholding would be 15%. Then the 10% penalty would be added to that.
Only the tax paid in US (not the penalty) could be used on your Cdn return.
The penalty is supposed to be part of withholding, since you are non-resident.
The bank in US has no idea what you can or cannot claim in Cnada so do not put any validity on what they say.
The best way to avoid tax on your IRA right now is to leave it as is. The moment you take it out you are taxable in both US and Canada.
If you intend to put this in an RRSP just leave it in US. If you insist that it go into Cdn RRSP, then in the end you will simply be out the 10% penalty.
All this will be on your 2009 tax year. Nothing to do with 2008.[/quote]
HR block has no knowlegde of Cdn returns, so don't pay any attention.
They can barely do US returns correctly.
You have three taxes to pay on your IRA withdrawal:
1. IRS withrdrawal tax of 15%
2. IRS penalty tax of 10%
these are both withheld at time of withdrawl (or should be).
3. Cdn tax on the entire amount, based on it being added to your 2009 income.
Tax #1 above can be used on your 2009 Cdn return. #2 cannot.
They can barely do US returns correctly.
You have three taxes to pay on your IRA withdrawal:
1. IRS withrdrawal tax of 15%
2. IRS penalty tax of 10%
these are both withheld at time of withdrawl (or should be).
3. Cdn tax on the entire amount, based on it being added to your 2009 income.
Tax #1 above can be used on your 2009 Cdn return. #2 cannot.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
hmm my bank in the US says it will not withhold anything !! they will give me the entire money :)
Also the hrblock i was talking about is in canada. why would they say that the 10% penalty can be deducted from my cdn return :((( [quote="nelsona"]HR block has no knowlegde of Cdn returns, so don't pay any attention.
They can barely do US returns correctly.
You have three taxes to pay on your IRA withdrawal:
1. IRS withrdrawal tax of 15%
2. IRS penalty tax of 10%
these are both withheld at time of withdrawl (or should be).
3. Cdn tax on the entire amount, based on it being added to your 2009 income.
Tax #1 above can be used on your 2009 Cdn return. #2 cannot.[/quote]
Also the hrblock i was talking about is in canada. why would they say that the 10% penalty can be deducted from my cdn return :((( [quote="nelsona"]HR block has no knowlegde of Cdn returns, so don't pay any attention.
They can barely do US returns correctly.
You have three taxes to pay on your IRA withdrawal:
1. IRS withrdrawal tax of 15%
2. IRS penalty tax of 10%
these are both withheld at time of withdrawl (or should be).
3. Cdn tax on the entire amount, based on it being added to your 2009 income.
Tax #1 above can be used on your 2009 Cdn return. #2 cannot.[/quote]
Folks who work at HRB will be doing something else in May, and they know absolutely nothing about cross-border tax matters.
Have you told the bank that you are not resident of US anymore? Even residents are subject to withholding, non-residents even more so.
In any event, if you have nothing withheld, you will need to file a 1040NR at year-end reporting the income (it will be considered non-connected income) subject to 15% flat tax.
You will add the 10% tax on that form as well.
Have you told the bank that you are not resident of US anymore? Even residents are subject to withholding, non-residents even more so.
In any event, if you have nothing withheld, you will need to file a 1040NR at year-end reporting the income (it will be considered non-connected income) subject to 15% flat tax.
You will add the 10% tax on that form as well.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best