What would it happen to my RRSP, RESP if I am no longer a Canadian resident?

[Tincan 0]

What would it happen to my RRSP/RESP if I am no longer a Canadian resident? Will I be forced to close out the account?

[Flames9_RN 358]

NO, u can keep ur RRSP open. But u have to notify the institution that is holding them. They wil sebnd you some paperwork to fill out! As well each yr, u have to inform the IRS and that is done by form 8891. very easy form to fill out!

[Kathryn41 3,205]

You are also required to pay tax on the interest earned on the RRSPs - they are not considered tax deferred income in the US. You have a choice - you can keep them in Canada and do the necessary paperwork; you can cash them out before you leave Canada and then include them in your return as income and pay the going tax rate on them (good if you leave the country early in the tax year and you don't have a large amount of RRSP investments), or you can cash them after you move to the US and pay a mandatory 25% non-resident tax on the amount.

[Flames9_RN 358]

U dont pay any Federal "tax" on RRSP's if u leave them alone, only if u take them out. Form 8891 covers that! But I have been told it differs from State to State

[Kathryn41 3,205]

You do on the interest - not the principle - and you're right, it does vary State to State as well.

Edited November 15, 2008 by Kathryn41

[Flames9_RN 358]

Not what i was told (could be wrong) by filling out form 8891 ur informing the US govt that u have the RRSP's. When (if) u cash them out, then you could get taxed on the interest

[La Souris 19]

Hi,

Is there a chart of which state taxes RRSPs? (I'm moving to Mass.)

Thanks!

[Flames9_RN 358]

Not that I have seen. VA didnt care about my RRSP's

[jedinite 0]

You are taxed on the entire amount of your RRSPs when you pull them out. The institution that holds your RRSP will automatically withhold a percentage (around 30%) for tax purposes I believe. Since RRSPs are a way of lowering your tax rate, you will pay on the interest you have earned on them plus the principle.

You will have to file this as current year income to the IRS but the amount that you paid for taxes already in Canada will be used towards your current year IRS tax filing. So if you paid 30% on your RRSP when you pulled it out to the CRA, and you owed 33% to the IRS the they would take your 30% you already paid to the CRA and give you a tax credit for it, and therefore you would owe an additional 3%. If you ended up paying 35% to the CRA and you owed the IRS 33%, then you wouldn't owe the IRS any additional money since the tax credit you would receive exceeds the taxes you owe. I do not believe that you can use the additional 2% tax credit against your US earned income, but you should check with your accountant.

[Darryl 0]

You are taxed on the entire amount of your RRSPs when you pull them out. The institution that holds your RRSP will automatically withhold a percentage (around 30%) for tax purposes I believe. Since RRSPs are a way of lowering your tax rate, you will pay on the interest you have earned on them plus the principle.

You will have to file this as current year income to the IRS but the amount that you paid for taxes already in Canada will be used towards your current year IRS tax filing. So if you paid 30% on your RRSP when you pulled it out to the CRA, and you owed 33% to the IRS the they would take your 30% you already paid to the CRA and give you a tax credit for it, and therefore you would owe an additional 3%. If you ended up paying 35% to the CRA and you owed the IRS 33%, then you wouldn't owe the IRS any additional money since the tax credit you would receive exceeds the taxes you owe. I do not believe that you can use the additional 2% tax credit against your US earned income, but you should check with your accountant.

Great info - we're actually doing this right now and would love some more details. My wife and I are living/working in the US and sold our remaining Canadian RRSP this year (2008). Right off the top we paid 25% non-resident tax. So that said do we have to report this sale on our US tax return? if so, can you tell us how and/or what forms we need to fill out?

Also - do you know if we have to do a Canadian tax return (we have no other canadian income, just this one RRSP sale)? If so, do you have any tips or advice on what we need to file or extra forms etc?

Thanks very much for your help

Darryl

[Reba 2]

Check with a financial advisor before you do anything with them. Before I left Canada I spoke with an advisor who did some research for me and found out the the state of North Carolina does not allow an NC resident to have foreign investment managers, which is basically what the administrators of your RRSP is. I cashed it out after I moved here, on Jan 1 for the next year's income so I wouldn't get dinged too bad for income tax in the US. But we did anyway

[jhunjhun 7]

You are taxed on the entire amount of your RRSPs when you pull them out. The institution that holds your RRSP will automatically withhold a percentage (around 30%) for tax purposes I believe. Since RRSPs are a way of lowering your tax rate, you will pay on the interest you have earned on them plus the principle.

You will have to file this as current year income to the IRS but the amount that you paid for taxes already in Canada will be used towards your current year IRS tax filing. So if you paid 30% on your RRSP when you pulled it out to the CRA, and you owed 33% to the IRS the they would take your 30% you already paid to the CRA and give you a tax credit for it, and therefore you would owe an additional 3%. If you ended up paying 35% to the CRA and you owed the IRS 33%, then you wouldn't owe the IRS any additional money since the tax credit you would receive exceeds the taxes you owe. I do not believe that you can use the additional 2% tax credit against your US earned income, but you should check with your accountant.

Great info - we're actually doing this right now and would love some more details. My wife and I are living/working in the US and sold our remaining Canadian RRSP this year (2008). Right off the top we paid 25% non-resident tax. So that said do we have to report this sale on our US tax return? if so, can you tell us how and/or what forms we need to fill out?

Also - do you know if we have to do a Canadian tax return (we have no other canadian income, just this one RRSP sale)? If so, do you have any tips or advice on what we need to file or extra forms etc?

Thanks very much for your help

Darryl

Hey good thing happened to me was I cashed out my RRSP while I'm here in USA and I told a guy from CIBC that I want to stop contributing for my RRSP and I was tax for 10% since i'm a resident during that time....but one month later I checked my CIBC online account and the bad thing happened was CIBC deducted a certain amount from my checking account and I phoned them again to inquire...the lady apologized for what happened and I told her that if possible transfer that money back to my cheking account and it was tax for 25% ( non-resident)...sucks! it wasn't my fault!