US Roth IRA Filing Requirements While Canadian Resident

michaelthef · Post by **michaelthef** » Wed Apr 30, 2014 5:45 pm

Hi - I lived in the US several years ago and do so now as well. For a period of a few years in between, I moved back to Canada and became a Canadian tax resident. During this time, I did not report my Roth IRA to Canada (nor did I report any other financial assets held in the US). I never saw that there was a requirement to do or a mechanism to do so. Question for this forum is - did I do something wrong here? Was I supposed to report this to Canada? I now see there is a form T1135... my roth IRA + US funds in bank accounts were less than $100k. I think this results in not requiring disclosure to Canada. Sounds like for the 2013 tax year this has changed, but I no longer live in Canada (moved in 2013 to US). Also, is it correct that the T1135 is not required to be filed with the CRA in the year you move to the US (and subsequently accumulate assets greater than $100k?)

Thank you!

nelsona · Post by **nelsona** » Wed Apr 30, 2014 7:03 pm

T1135 is one issue. But Roths require a special election for 2010 and forward.
http://garygauvin.com/WebDocs/CCRA/CRA% ... idance.pdf

Alex · Post by **Alex** » Mon May 05, 2014 2:18 pm

When you file your Roth-IRA election you may receive a letter from CRA indicating that you do not need to include it on T1135. Until getting such a letter i guess it may be safer to include it.

nelsona · Post by **nelsona** » Mon May 05, 2014 5:02 pm

Yes there is no exception to US pensions of any sort being reported this year. They all are reportable on T1135.

michaelthef · Post by **michaelthef** » Thu Jun 19, 2014 9:41 am

Thanks - so to confirm. While I lived in Canada for 3 years prior to returning to the US, I never filed the Roth special election. I actively traded my Roth account while a resident of Canada. Now I live in the US and just filed by 2013 emigrant return in Canada. I understand that during the year of departure, a T1135 filing in Canada is not required. However, seems to me that I may have made an error by not filing for the special Roth election that nelsona you described in your earlier post:

http://garygauvin.com/WebDocs/CCRA/CRA% ... idance.pdf

I did not make any further contributions to the Roth while living in Canada. Only managed it.

Do you have any recommendations on how to correct this, if in fact I have made a mistake? I have significant gains in the Roth while I was a resident of Canada (it near doubled) and I worry that there may be some tax owing to Canada now? Is there precedent for CRA making an exception - of course this error was made due to a misunderstanding as I thought that as long as no Canadian Contriubtions made to the Roth, then there would nothing to report.

Thank you, as always, for your help.

nelsona · Post by **nelsona** » Thu Jun 19, 2014 10:40 am

You should comply with the election procedure, claiming this for the first year you were back in canada.

As you said, you have not made what the procedure defines as a "Canadian Contribution".

In all likelihood CRA will accept this late election, with a claim of ignorance, due to the low visibility this procedure has. It is not mentioned, for example, in the General tax guide.

You are INCORRECT that T1135 is not required in the year of departure from, or return to, canada.

michaelthef · Post by **michaelthef** » Thu Jun 19, 2014 11:12 am

Got it thank you, will do. I will go ahead and submit a letter as per the guidelines in the technical tax document in the link with the information about my Roth IRA and will also mentioned that I have now left.

OK got it my accountant mentioned that T1135 is not required in the year of departure so sounds like he is incorrect. Have already filed my Canadian return. Will ask him to look into it and prepare the form. Looks like a $25 a day penalty... Hope that isn't enforced. I specifically asked about the form T1135 requirement and received a response stating that this was not necessary in the year of departure. But some further research online suggests that it is required in the year of departure, but not the year of arrival (sounds like this might be different than what you mentioned as well since you mentioned both years of arrival and departure require the form).

http://www.deloitte.com/view/en_CA/ca/s ... 0aRCRD.htm

michaelthef · Post by **michaelthef** » Thu Jun 19, 2014 11:59 am

Just to close the loop and for the benefit of others on the forum, looks like we did file this form.

Furthermore, Roth IRA is not considered specified property and therefore doesn't need to be included on Form T1135 (neither does 401k).

nelsona · Post by **nelsona** » Thu Jun 19, 2014 12:10 pm

Roth IRA need not be reported IF A VALID ELECTION HAS BEEN SUBMITTED.

Even more reason that the election should be made.

And while the link you included reported that T1135 is needed in year of deparure, it is silent on year of arrival, so it should be filed in that year as well.

patti · Post by **patti** » Mon Jun 23, 2014 3:22 pm

Nelsona said, "...there is no exception to US pensions of any sort being reported this year. They all are reportable on T1135."

I would think that US pensions (including all IRAs) would be considered "an interest in a trust described in paragraph (a) or (b) of the definition of
"exempt trust" in subsection 233.2(1)" The instructions for T1135 say that such trusts are not "Specified Foreign Property".

nelsona · Post by **nelsona** » Mon Jun 23, 2014 6:43 pm

I would not make that conclusion. You may be right, however when CRA means US IRA's they typically say so.

patti · Post by **patti** » Tue Jun 24, 2014 9:05 am

"I would not make that conclusion. You may be right, however when CRA means US IRA's they typically say so."

Sorry to push back a little bit on this one, but when I go paragraph (a) in subsection 233.2(1), the definition of "exempt trust" is as follows:

"exempt trust means (a) a trust that is governed by a foreign retirement arrangement; ..."
source: http://laws-lois.justice.gc.ca/eng/acts ... ml#docCont

How could that definition not include an IRA??? It was always my understanding that a traditional IRA was considered a "foreign retirement arrangement". I don't know why that would have changed even though CRA no longer specifically references IRAs in the instructions.

nelsona · Post by **nelsona** » Tue Jun 24, 2014 9:20 am

As I said, you may be -- and probably are -- right. I don't believe however that the rank and file taxpayer should need to go to the tax code to determine if their pension plan is a trust defines by a particular atricle of the code.

But, thanks for clearing that up.

here's a non-patti, non-nelsona source:

http://www.grantthornton.ca/resources/i ... 135_NC.pdf

nelsona · Post by **nelsona** » Tue Jun 24, 2014 9:22 am

Looks like we already had this discussion patti, and I gave you the right answer there.
No ned to quote tax code when we already have a thread that explains it.

This is going to become the stump nelson forum, is it?

http://forums.serbinski.com/viewtopic.p ... a2964f6fa2

nelsona · Post by **nelsona** » Tue Jun 24, 2014 9:26 am

Since CRA has said that a non-elected or improperly elected Roth must be reported on T1135, then not all "foreign retirement arrangents" (as defined by the foreign country) are exempt.