RSPs - withdraw or keep in Canada?

[Allie Wabbit 1]

Hello,

We were approved - hooray!!! So, I am wrapping up my life and moving to the States!

A burning question - what to do with my 15K in RSPs?

Shall I leave them in my RBC account and keep a chequing account open so I can transfer and withdraw?

Or do I just cash out now, pay the penalty (10% per 5K withdrawal x 3?) and then what?

File a 2014 tax return in Canada? Declare them as income on my 2014 tax return in the USA?

Am confused - help please!

Thanks!

[Flames9_RN 358]

Right now the cdn $$$ sort of sucks, so it may be best to just leave it alone if u do not need the $$$. I had to inform my Cdn financial institution when I left Canada--they sent me a short form to fill out. All I had to do Canada wise (dont have to file Canadian taxes each yr because of those RRSP's)

USA wise all one has to do is fill out form 8891 each yr! Uncle Sam is not going to tax them (if ur leaving them alone) Someone stated some States may tax you, but I can't confirm that. I know Virginia didn't tax me!!

Always ask at http://forums.serbinski.com/viewforum.php?f=2

[Allie Wabbit 1]

Right now the cdn $$$ sort of sucks, so it may be best to just leave it alone if u do not need the $$$. I had to inform my Cdn financial institution when I left Canada--they sent me a short form to fill out. All I had to do Canada wise (dont have to file Canadian taxes each yr because of those RRSP's)

USA wise all one has to do is fill out form 8891 each yr! Uncle Sam is not going to tax them (if ur leaving them alone) Someone stated some States may tax you, but I can't confirm that. I know Virginia didn't tax me!!

Always ask at http://forums.serbinski.com/viewforum.php?f=2

Thank you so much Flames! I have never been great at saving money, hence why I only have 15K in RSPs but what intimidates me more is the tax consequences.... and now the double trouble of both countries viewing it differently and am brain dead

[Flames9_RN 358]

U leave it alone---no tax consequences.

[Lakehouse 293]

After much tax advice for myself, and much reading on the Serbinski site, here are some thoughts to consider.

Leaving it = filling the 8891 yearly to defer the US tax until you start to withdraw - which will include eventually a withholding tax in Canada plus some taxes on the income to the US. You also have forms to fill out indicating your foreign account.

Taking it out = paying some taxes now and having that money fully available to you now to use or reinvest in the US (which means paying tax on the withdrawal here in Canada and the 15K being added to your total income for this year - potential to bump one up into the next tax bracket).

There are so many more points that weigh in favor of either side, that I personally have narrowed it down to the above 2 factors carrying the most weight as to what I choose to do. So do some reading on these issues And I believe you'll have 25% withheld even in you do small amounts, as it's the tally for the year that the bank statements will indicate on forms you'll receive for taxation in 2015. ie even if you lose 10% on each small withdrawal - but I'm not absolutely certain.

You'll do taxes in both countries for 2014, as exit taxes are required from Canada, so contact CRA (855 284 5942) to fill in an NR73 determination of residency form when you get to the US. And ensure your bank here is aware you've moved for proper taxation information for next year, esp if you leave the RRSP here.

You'll be using a form 2555 in the US to exclude your Canadian income from the joint US filing. There will be a box on the bottom of the US schedule B of the 1040 notifying you to file forms on any foreign accounts.

Good luck with your decisions and I hope this has been a little bit helpful:) Links of value below!

http://www.serbinski.com/

http://blog.taxresource.ca/

[Udella&Wiz 325]

Of interest - I called the IRS recently to ask about the 8891 because I had forgotten to do it for a couple years - like since i filed one when i first moved and did my US taxes for the first time. They told me that I only had to file one 8891 for the time being to defer the taxes until I retire since I am not receiving an income from it (everything is rolled back in...I'm not anywhere near retirement)

I don't think its necessary for everyone to file an 8891 every single year - it appears to depend on your current situation. Phoning the IRS was very helpful - esp in Nov when they weren't very busy.

[Allie Wabbit 1]

After much tax advice for myself, and much reading on the Serbinski site, here are some thoughts to consider.

Leaving it = filling the 8891 yearly to defer the US tax until you start to withdraw - which will include eventually a withholding tax in Canada plus some taxes on the income to the US. You also have forms to fill out indicating your foreign account.

Taking it out = paying some taxes now and having that money fully available to you now to use or reinvest in the US (which means paying tax on the withdrawal here in Canada and the 15K being added to your total income for this year - potential to bump one up into the next tax bracket).

There are so many more points that weigh in favor of either side, that I personally have narrowed it down to the above 2 factors carrying the most weight as to what I choose to do. So do some reading on these issues And I believe you'll have 25% withheld even in you do small amounts, as it's the tally for the year that the bank statements will indicate on forms you'll receive for taxation in 2015. ie even if you lose 10% on each small withdrawal - but I'm not absolutely certain.

You'll do taxes in both countries for 2014, as exit taxes are required from Canada, so contact CRA (855 284 5942) to fill in an NR73 determination of residency form when you get to the US. And ensure your bank here is aware you've moved for proper taxation information for next year, esp if you leave the RRSP here.

You'll be using a form 2555 in the US to exclude your Canadian income from the joint US filing. There will be a box on the bottom of the US schedule B of the 1040 notifying you to file forms on any foreign accounts.

Good luck with your decisions and I hope this has been a little bit helpful:) Links of value below!

http://www.serbinski.com/

http://blog.taxresource.ca/

Thank you so much for the prompt and very informative response! Great advice and very useful too. So I settled on the taking the RSPs out option, but then realized that I would have to declare it over the border at the POE and maybe pay something for coming in with that much money and also would lose money converting to US dollars, as our Canadian dollar is not worth so much nowadays. Since I will be losing $1500 just for withdrawing the measly $15K I really dont want to pay any more taxes/penalties than I absolutely have to....

So, I figured I will take out the RSP, put it in a savings account, wait for the exchange rate to get better (I hope it does and soon!) and as soon as that happens will transfer the entire amount into a RBC US $ account. From there on out I can open a RBC account in the USA and transfer the US dollars equivalent of my RSP to that account and withdraw in the US. I hope am doing the right thing but I honestly dont see us coming back to Canada at any point so having the RSP out and available makes sense at this point.

*head explosion*

Of interest - I called the IRS recently to ask about the 8891 because I had forgotten to do it for a couple years - like since i filed one when i first moved and did my US taxes for the first time. They told me that I only had to file one 8891 for the time being to defer the taxes until I retire since I am not receiving an income from it (everything is rolled back in...I'm not anywhere near retirement)

I don't think its necessary for everyone to file an 8891 every single year - it appears to depend on your current situation. Phoning the IRS was very helpful - esp in Nov when they weren't very busy.

Thanks! That's good to know.