Doing exiting Taxes for Canada, but doing first taxes for USA

[Canerican 242]

Hi there,

I know that I posted something somewhere, but am not able to find it now. I entered the US on a K-1 visa and was wondering how I would do both my Canadian and American taxes this coming tax year?

I worked in Canada from January-March 2013 and will have worked in America end of September to December. Is there any special way that I have to do my tax on either side of the border?

Any help would be greatly appreciated.

[Cyteen 0]

I can't give you advice, but can share my own experiences from last year. The Canadian taxes for your terminal year will have to be calculated and filed manually. I had my terminal taxes to file last year and asked both CRA and Intuit if I could use Turbotax. They both answered yes. The real answer was no. In my case, I was able to prepare most of it via software, but the extra forms had to be done manually and you can't file electronically. I filed on time, spoke with CRA, who tell me it was received on time and is being processed, but have yet to see the notice of assessment. It was an ugly package. Don't forget your deemed dispositions.

[NikLR 13,227]

I was hoping someoe would have some information too.. I have to wait for the T4 from my old company as I understand it right? (Great I won't get it until end of Feb or later... /facepalm)

[Flames9_RN 358]

http://forums.serbinski.com/viewforum.php?f=2 free cdn/usa tax forum!! Back in 2005 (for my 2004 taxes) I did use a online software program to do my exit return from Canada, but can't recall the name of it, wasn't 1 of the big named ones. Just ask//or do a saearch on serbinski

[Canerican 242]

I can't give you advice, but can share my own experiences from last year. The Canadian taxes for your terminal year will have to be calculated and filed manually. I had my terminal taxes to file last year and asked both CRA and Intuit if I could use Turbotax. They both answered yes. The real answer was no. In my case, I was able to prepare most of it via software, but the extra forms had to be done manually and you can't file electronically. I filed on time, spoke with CRA, who tell me it was received on time and is being processed, but have yet to see the notice of assessment. It was an ugly package. Don't forget your deemed dispositions.

What do you mean by deemed dispositions?

[NikLR 13,227]

What do you mean by deemed dispositions?

I was wondering this as well.

I do not have any RESPs or RRSPs. I have closed all but 2 bank accounts in Canada and neither have enough money to make any interest. I also no longer have an active Canadian credit card as it came up for renewal and I didn't activate the new card.

[Cyteen 0]

Deemed disposition means you crystalize the value of your Canadian assets which remain in Canada as of when you left. This means things like real property, RRSPs, mutual funds and so on which remain in Canada. The CRA has some guides on their web site that cover the forms required to report the value of those assets on departure so as to avoid or minimize or defer taxation to the date of actual disposition and report the income [if any] to the correct jurisdiction.

[NikLR 13,227]

Oh if you don't have any then this isn't a problem I bet. Guess I should be glad I never did those things.

[Canerican 242]

Will I need to add my now wife to my exiting taxes for Canada and file as married, or do I file as a single as I entered the US engaged on a K-1.

[NikLR 13,227]

If you were married by the end of the year, you have to file as married.

[Canerican 242]

So if I file as married do I have to add my USC wife to my taxes, put N/A for Social Insurance Number and add her USA income to the taxes as foreign income?

[NikLR 13,227]

I put all zeros on the SIN (actually the tax preparer did that) and figured out his foreign income as converted into CDN $$. At least that's what I did last year when I was still in Canada.

[Lakehouse 293]

I will be seeing a professional for advice, and yes paying a pretty penny for it, but it's wayyyy too complicated for me to understand and consider filing forms on my own.

I'll be retaining my Canadian account with RRSP's, investments and pension incomes, etc through this Can. account. My head swims even after many hours on the prior suggested Serbinski website, and I've taken notes for when I eventually book an appointment to see the experts ( I prefer to have at least an inkling of what the discussion will cover, and questions ready ).

A few basic starters I've found include -and these are mostly copied from threads on the Serbinski forums:

Re: selling House and having that $ in Can acct and moving that money to the US

- US (like Canada) does not tax wealth. It taxes income. Transferring money from one bank to another or one country to another is not income.

Now, selling your home in Canada in the year you moved to US means that you will need to be careful how you do your taxes in US this year, since unlike Canada, your gains are not unlimited tax-free (it's $500K gain per couple tax-free, and only if you lived in the house 3 years). But this has nothing to do with where the proceeds are sitting, or if you transfer them to US.

Re RRSP's: your RRSP account is exempt from Canadian departure tax. What is departure tax? On the departure date, the CRA deems that you sold all of your assets at its market value and any positive difference between the market value and the original cost of the asset will be taxed as capital gain. Some assets, such as your RRSP and TFSA accounts, and principal residence are exempted from the deemed sale.

the US-Canada tax treaty allows non-residents to maintain growth within the RRSP tax free in the United States. This is done by filing a Form 8891 -(US Information Return for Beneficiaries of Certain Canadian Registered Retirement Plans) and attaching it to your US tax return each year. This form will allow you to defer paying tax on your RRSP income until you begin your withdrawal.

8891 is filed with your 1st US return. But you need to keep track of the BOOK value of your RRSP on date you arrived (or, if you elect to file full year 1040, which is likely), Jan 01, 2013.

As a non-resident with a RRSP account, you will only be responsible for 25% withholding tax on all of your withdrawals. If you turn your RRSP into RRIF or other annuity payments, the withholding tax will be reduced to 15%. You may also be able to claim a Foreign Tax Credit in the US for the withholding taxes paid to the CRA.

A company RRSP contribution IS deductible on your US taxes, by the way. It is private RRSP contributions which are not deductible.

For someone who was never a US taxpayer, The cost basis for determining future US taxation of an RRSP is the book value on the date one became a US taxpayer, plus any non-deductible contributions made thereafter.. For RRIFs, there is no cost basis, the RRIF is 100% taxable in US, regardless of when it was formed.

(Canadian RRSP is deductible -When it is part of an employer-sponsored RRSP).

There is no way to transfer RRSP to an IRA in the US.

re FBAR:

There is a box on the bottom of schedule B, which needs to be filed every year with any return, that specifically alerts one of the need to file special forms if one has any foreign accounts. Eg FBAR

-----------

[Flames9_RN 358]

If u keep ur RRSP's--one has to fill out form 8891 to uncle sam every year.........http://www.irs.gov/pub/irs-pdf/f8891.pdf

[Jenn&Matt 3]

Hi everyone, I know this forum has been inactive for some time but it seems to be addressing the questions I have about finances and investments before moving to the US.

@Lakehouse thanks for your thorough review of this. It's really helpful. I too will be moving to MA, and hope to get my finances sorted before my departure, which I expect to be in a few weeks. 

 

I have a moderate amount of RRSPs, TFSAs and savings at a Canadian bank. I may use some of my savings for a downpayment for a house in the US - hopefully when the exchange is more favourable - but I do still hope to keep some money in my Canadian bank account for now especially given the current terrible exchange rate.

Just wondering a few things:

1. For your Exit Taxes, would keeping my investments in RRSPs ONLY be a safe way to avoid being taxed on my assets? Are any other forms of investments possible without taxation as we resettle in the US?

2. When we exit and declare our assets, would we have to continue reporting yearly - ie. if I decide to exchange CAD to USD over time, therefore causing my Canadian assets to decrease, would this be reported? Would there be any benefit or detriment of having more/less Canadian assets to report?

 

Trying to plan the most financially wise way of doing this! Thank you all.

Edited April 30, 2020 by Jenn&Matt