transfering a pension

[hockeygal 0]

We're trying to sort out what to do with my pension. I have one with work, and when I leave, they give it to me in a lump sum, but it has to be transferred into a locked account. I am guessing that would be an IRA in the US?

Also, I have money that is in excess of the tax sheltered amount. They will also give that to me in a lump sum, but I will have to pay taxes on it unless I put it in an RRSP. Is a Canadian RRSP a useful thing when I am living in the USA? Would it be better to put it in something in the US? But then I'll pay tax.

Anyone transfer a pension before?

Edited May 1, 2006 by hockeygal

[Flames9_RN 358]

http://forums.serbinski.com/index.php?sid=...69e26b292b2d1cc

great site for that info

[Jersey Girl 2]

Agree, get thee to Serbinski and be sure you have a cross-border plan for taxes. I'm not an expert, but can tell you that I left my RRSP in Canada, for now. The U.S. views it as a fully taxable investment account so you'll want advice on the best way to handle it, especially in conjunction with your other assets. There is no mechanism for rolling it over into a Roth. Not sure about the pension. But I am sure there are plenty of cross-border wrinkles for U.S.-Canadian couples, so it's best to get personalized advice.

[Flames9_RN 358]

RRSP's rules also vary from State to state!! One can file a form 8891 that more or less notifies the IRS that you have RRSP's and for the time being you do not get taxed on them. But once you take them out I assume you would be! I left mine in Canada for the time being but may be taking them out and transferring to an account here. I'm a student so no income in USA (or canada) so probably the best time to do it. Just have to find out if Virginia will tax me on it. Possibly moving to texas in a few yrs, so that may be another option, who knows!! Plus as a non resident of Canada when you take the RRSP's out, they should automatically deduct 25%!! There are rules and tricks to it all to decrease the amt of taxes, one just has to know where to find them.

[Jersey Girl 2]

I'm a student so no income

As soon as you withdraw funds from your RRSP, it's considered pension income in the U.S. and taxable. That's after RevCan takes its 25% and you've paid the exchange rate. If you built a decent pile of assets, it could catapult you into a higher tax bracket. Not a hard thing to do in Canada. And if you're filing in both countries (including a state), it gets more complex, since some states (like Jersey) don't recognize foreign tax credits. And now, since I'm not an expert and you've taxed my brain, I'm wishing for a Brick Premium Lager, or Upper Canada Rebellion, or any other medicinal microbrew.

[Flames9_RN 358]

Thats what I have to find out if Virginia will tax me, or if texas does (if we move there) but by Texas i should be done school and working, thus more $$$ to claim!! lol Or just leave the RRSP's alone as there is a chance in yrs to come, we may move to Canada. Choices choices. I dont need the $$$ now, so probably better to just leave it, otherwise may find myself visitng the new car or motor cycle show rooms, lol

[Jersey Girl 2]

We all need to start viewing ourselves as couples when it comes to taxes, and get advice on the best way to handle everything. I sleep better when I have a plan and know why I'm doing what I'm doing. Personally, I'd like to take my RRSP assets out of Canada for this simple reason: as long as it sits there, I have "financial ties" to Canada and will be considered taxable by RevCan.

Frankly, I hate the idea of having a decent American salary taxed into nothingness because Canada wants a huge piece. Remember Michael Corleone in Godfather III? "Just when I thought I was out, they pull me back in!"

We are not snowbirds who let their RRSPs sit for half a year. We're U.S. residents who can't trade our accounts. (Unless we live in certain states where TD Waterhouse is licensed to open an account for us.)

I figure I have two choices: collapse the RRSP and take my knocks, then re-invest the pathetic sum that's left. Or, leave it in Canada and continue to be taxed at userer rates on my worldwide income. My head hurts, because I can't remember whether the foreign tax credit means nothing in NJ for the first or second option or both.

Did you read The Border Guide by Robert Keats?

[Flames9_RN 358]

I have the book. havent read it much!! You can leave your RRSP's in canada. I do not believe you have to do a cdn tax return each yr, if you have no incoem from Canada. Im studying for Finals, so on eof these days will look closer into it, I'm not overly concerned,lol

[Jersey Girl 2]

I do not believe you have to do a cdn tax return each yr, if you have no incoem from Canada.

Even if you make almost nothing, you may want to file and get a GST refund. But that's not the point. Now that we're involved in an immigration process, we need to look at things from that perspective. So here's the deal as I, a complete twit, understand it:

Canada's taxes are based on residency. If you live in Canada, you need to file. If you're a non-resident of Canada, you do not have to file. However, RevCan may consider you to be a resident even if you're not there! They base this decision on your financial ties, and an RRSP could be one of them.

Here's a twist on residency: I'm a dual citizen who left Canada at the end of 2005. But I'll still be on the hook for Canadian taxes in 2006. Why? Because I married a Canadian who went back to Toronto to wait for the K3 Visa. The matrimonial home (for tax purposes) is wherever the husband lives, according to our friends in Ottawa. They don't care whether I'm actually present in Toronto or not; I'll still be liable for tax! This fun fact wasn't covered in The Border Guide, but something I learned from Mark Serbinski, who did my taxes this year, thank heavens.

One upshot is that I won't be withdrawing my RRSPs in 2006 as a non-resident, as originally planned. I can't claim a departure date from Canada until my husband gets his K3 visa and leaves! That's when I officially become a non-resident and can start getting my RRSPs out. Only then will Ottawa finally consider me a non-resident and not obliged to file a return. This fact alone was worth the price of admission at Serbinski.

I know you want to keep your options open and possibly return to Canada to retire. But you need to know exactly what this will mean for your taxes, as a couple, whether you're making money or not. If your RRSP is small, it may be worth considering getting it out of Canada so you become a true non-resident and not taxable. Take your pennies and re-invest them in the States. But what do I know? Only that it pays to talk to the real experts, who are worth their weight in gold when it comes to cross-border tax planning.

Edited May 2, 2006 by Jersey Girl

[hockeygal 0]

Thanks for all the info! I knew this was the right place to ask!

I will check out the site. Gotta tell you - my head is already spinning!

[Flames9_RN 358]

When I filed my taxes in Dec 2004, I stated the date I left canada, plus I received a statement stating I was now a non resident of Canada. So now not able to get a GST rebate, actually have never got one, lol I have a good amount in RRSP's now. Plus taking them out as a non resident can actually be better than taking them when your still a Cdn resident, many factors to consider. Guess I should pay more attention to it, but more important things like hockey and school! lol

[Jersey Girl 2]

taking them out as a non resident can actually be better

That's what I thought when I realized RevCan would only take 25%. It's a much better rate than 46%, which you could easily reach if you continued to build assets and retired in Canada. What I didn't realize (and here I'm completely out of my depth) is that when you cash in your RRSPs, you receive a form saying you had income from Canada. Ah ha, says Uncle Sam, who considers it taxable pension income. So if you're a non-resident, poverty-stricken student, you could be in the best position to cash out now, provided your RRSP balance isn't so big it sends you into a much higher tax bracket. In that case, you may need a plan for systematic, tax-conscious withdrawals. But I'm not qualified to advise you...

[hockeygal 0]

Flames... what did you do with your military pension? (you were in the military I think?) Were you able to transfer it to an IRA in the USA or somethign similar, or will you just draw it from Canada when the time comes?

Mineis a Government pension, and they want me to take it somewhere with me... I just haven't figured out where!

Edited May 2, 2006 by hockeygal

[Flames9_RN 358]

I had nearly 15 yrs of service in the military. I broke my contract to get out, so I get a retrun of contributions and other stuff. I transferred it all into my RRSP acct. That way They did not take any taxes off!!. With the Cdn $$$ high, now may be a great time to transfer the $$$. Have to play with the #'s to ensure as a family we dont jump into a higher tax bracket here in the US of A!! I wrote my last Final exam today, have a bit of a break, before summer semester, so maybe I should at least investigate it!!