Getting an RRSP out of Canada

[Jersey Girl 2]

I'm a dual citizen. While living in Canada, I built a self-directed RRSP at E*Trade Canada. I thought I had a plan for getting it out after moving to the States. I read "The Border Guide" and moved everything to cash and money market funds to avoid capital gains tax down the road.

Then, I sold my house in Toronto and moved back to the U.S. I cut ties to Canada: OHIP, driver's license, credit cards, etc. My Canadian boyfriend visited NJ, we married, and he went back to Toronto to wait for his K3.

I thought I was a U.S. resident for tax purposes. But according to Mark Serbinski, the marriage makes me liable for Canadian income tax in 2006, even though I never set foot in Canada and cut ties. News to me. He also said if I take funds from the RRSP, it will be taxed on both sides of the border. Also news to me.

I called Keats Connelly for a second opinion and was told what I originally thought: non-residents of Canada can withdraw at 25% withholding tax. Being married to a Canadian living in Toronto does not change my status.

I tell this because Serbinski is often mentioned on this site and is very good for doing U.S. and Canadian returns. But for RRSPs, you might want to add this contact to your resources:

KEATS, CONNELLY, Phoenix, AZ

www.keatsconnelly.com

Claudia Freeman, CFP® (US) and CFP™ (Canada)

claudiaf@keatsconnelly.com

[Flames9_RN 358]

Thanks for the info. I recently took out my RRSP's!! Feel rich until tax time, lol

[Jersey Girl 2]

Feel rich until tax time

What's THAT supposed to mean? Are you anticipating more tax on top of the withholding?

[Flames9_RN 358]

Shouldn't be!! But to be honest I havent looked much into it!! My RRSP's were making pretty much zilch, so I decided to take them out and reinvest here. Part of it was my fault, BUT TD waterhouse was suppose to gather al lmy RRSP, and put it into 1 type of rrsp, they were just awaiting my Canadian Armed Forces return of contributions. Long story short, they never did and I didnt stay on top of it!! So was my fault as well. Might have been a good thing as a lot of RRSP's took a hit! Oh well, luckily my wife is the $$$ expert, she looks after all the financial stuff. As well I figured it was a good time to take them out as I am a student with no income. But shouldn't the USA try to tax me on the RRSP withdrawal? I wil have to report it come April I assume.

[zyggy 9]

You will have to report the RRSP withdrawl as income. However, you can

1) Claim the 25% witholding as a foreign tax credit with the IRS

2) File a Section 217 return with the CCRA to get a portion of the 25% back.

So you should get a big chunk of what they took back...

Beware, you can only take a portion of the 25% as a foreign tax credit each year, depending on your income and deductions.. so it may be worthwhile if you do take out your RRSP, to figure out the maximum foreign tax credit that you can get and then take out only that amount in yearly increments.

Edited September 6, 2006 by zyggy

[Jersey Girl 2]

When I callled E*Trade Canada and asked to have my RRSP statements sent to the U.S., all hell broke loose. They will not deal with anyone with a permanent U.S. address and recommended I collaspe the account right away.

I tried transferring it to TD Waterhouse Canada, but they also refused since I'm a non-resident of Canada. So leaving everything there and withdrawing in increments wasn't an option, especially since small withdrawals could go on for years.

I'm a dual, but they don't seem to see me as a Canadian living in the States, and someone who maintains an RRSP in Canada. They seem to see me as an American, living in the U.S. and not eligible to have an RRSP.

I sent my de-registration forms today and am withdrawing the entire (hefty) sum. My U.S. tax rate this year should be low, since I will have only worked 4 months. But the amount of the RRSP withdrawal will push me into the stratosphere of tax brackets. It will be considered investment income by Uncle Sam and the foreign tax credit does me no good, since I'll have no foreign-source income to apply it to. Evidently, that's how it works.

I get grey hairs every time I think about this...

[laura428 0]

To clarify with a possibly silly question... what if I just leave it there to grow, never withdrawing until retirement? Any US paperwork I'll have to file?

[Flames9_RN 358]

Yep you can leave it in there. inform your financial institution that your no longer a Cdn resident. They will get you to fill out a W9. As well when you fil lout your USA taxes, you fill out form 8891. lots of info on that on http://forums.serbinski.com/index.php?sid=...9e0066bcbee3f79

Should be a whol etopic with many pages on form 8891