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Canadians living in the US: what did you do with your RRSP and TFSA?

961 views 2 replies 3 participants last post by  Eclectic21 
#1 ·
I've been living in the US on a green card for some time now. I've been to figure out what to do with my registered accounts; I didn't settle this prior to moving (which I regret) and now I'm trying to figure out what to do. I tried applying for Canadian investments but since I'm no longer a tax resident in Canada I'm inadmissible. I'm trying to keep US and Canada finances separate but I'm not sure if it's possible. Should I drop my RSP and TFSA and switch to 401k and IRA? What have people in a similar situation done?
 
#2 ·
I've been there, and yeah, it's complicated. It sounds like you already have an RRSP and TFSA, right? That's what it sounds like from your question.

OK the real answer is that you need to see an expert. This really is complicated. But here's my latest knowledge of the situation.

TFSA. Experts have differing opinions. Some say that you shouldn't keep a TFSA because it requires Form 3520 and 3520A disclosures. That's the advice I got, and I withdrew my entire TFSA. But some other sources like this one claim that this is not the case, and someone won't get in trouble for keeping a TFSA.

RRSP. Luckily these are recognized by the IRS so you can keep your existing RRSP intact. What do you mean when you say you've "inadmissable"? Do you already hold securities in your RRSP? I'm guessing that if you have one, it can just stay untouched, right?

I can see the problem where you can't add more to your RRSP. Yeah, that's expected. But I think you're best off leaving the existing RRSP alone, and contributing new money to a 401(k), IRA, or Roth IRA as the case may be.
 
#3 ·
... I tried applying for Canadian investments but since I'm no longer a tax resident in Canada I'm inadmissible.
Not sure what you meant.

If you already have an RRSP and TFSA with a Canadian FI, you are allowed to keep it. If you don't, since you don't seem to be a Canadian tax resident, most FI's likely won't let you open registered accounts.


... I'm trying to keep US and Canada finances separate but I'm not sure if it's possible ...
Can you explain what you mean by this?

As a Canadian non-resident, the TFSA has no Canadian tax implications but on the US side, my understanding is the US taxes the TFSA income.

For the RRSP, withdrawals are what have Canadian tax implications, with a set rate (the default non-resident rate is 25% but IIRC, the US-Canada tax treaty reduces this to 15%). The US Federal gov't taxes the RRSP on growth each year but the tax treaty defers this tax until a withdrawal is made, allowing the foreign tax credit to reduce/eliminate double taxation.

Some states ignore the tax treaty provisions so the RRSP is taxed each year.

... Should I drop my RSP and TFSA and switch to 401k and IRA?
What have people in a similar situation done?
Most posts I have seen have had the US person (whether living in the US or Canada) avoiding a TFSA. The RRSP has typically been left alone to keep growing with the last RRSP contribution made in the year before or the year of the move to the US (i.e. when a Canadian tax return was being filed).

The US residents that have the US retirements accounts made available to them have made contributions only to the US accounts.

Income earned in the US won't grant RRSP contribution room. IIRC, one article said where one has RRSP contribution room from Canadian income still available - one can contribute to the RRSP. I doubt anyone does this because there is no Canadian tax to use the RRSP contribution against and the US won't allow the contribution to reduce US income, which makes the contribution useless.


When I worked in the US, I kept my Canadian tax residency where my work provided access to cross-border tax experts for filing the US and Canadian tax returns. The only income reported to the US was income earned in the US. Your situation is different as being a US person through residing there and/or having an active green card means your world wide income is reported to the US.


Cheers
 
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