Canadian RSP accounts and US taxes
Jul 16th 2002, 5:20 pm
#1
Guest
Posts: n/a
Canadian RSP accounts and US taxes
I'm hoping some of the Can/Am'ers out there can help me with this one. My fiance is
liquidating his non-retirement plan (RSP) stocks for the move. We had planned to
leave his RSP funds alone - just let them continue at their current level in Canada,
while he starts a new retirement fund here (401K). He bought a book yesterday
designed to help emigrating Canadians move to the US and answer some common
questions, etc., and there was a section on RSPs and US taxes that makes us wonder
what's the best thing to do. I don't have the book, and I'm not sure I totally
understand the issues, but I thought someone else on the NG may have addressed this
issue. I searched google but didn't find anything on this issue specifically. I did
find some info on the IRS site validating this, so I guess what I'm asking is this:
1. Apparently US tax law doesn't recognize RSPs as retirement plans and annually
taxes any gains in them as CURRENT income, even though you're not actually
collecting that income. They call this "phantom" income. Has anyone paid taxes on
their RSP earnings while living in the US?
2. The guide recommends you collapse/cash out your RSPs if you are planning to move
to the US permanently. How are others handling their RSPs when they move?
I hope this isn't too off-topic, but I thought someone in here might be able to give
us some guidance or their experience. Thanks! Kristin
IRS: http://www.irs.gov/faqs/display/0,,i...D15807,00.html
liquidating his non-retirement plan (RSP) stocks for the move. We had planned to
leave his RSP funds alone - just let them continue at their current level in Canada,
while he starts a new retirement fund here (401K). He bought a book yesterday
designed to help emigrating Canadians move to the US and answer some common
questions, etc., and there was a section on RSPs and US taxes that makes us wonder
what's the best thing to do. I don't have the book, and I'm not sure I totally
understand the issues, but I thought someone else on the NG may have addressed this
issue. I searched google but didn't find anything on this issue specifically. I did
find some info on the IRS site validating this, so I guess what I'm asking is this:
1. Apparently US tax law doesn't recognize RSPs as retirement plans and annually
taxes any gains in them as CURRENT income, even though you're not actually
collecting that income. They call this "phantom" income. Has anyone paid taxes on
their RSP earnings while living in the US?
2. The guide recommends you collapse/cash out your RSPs if you are planning to move
to the US permanently. How are others handling their RSPs when they move?
I hope this isn't too off-topic, but I thought someone in here might be able to give
us some guidance or their experience. Thanks! Kristin
IRS: http://www.irs.gov/faqs/display/0,,i...D15807,00.html
Jul 16th 2002, 5:30 pm
#2
Concierge
Joined: Apr 2001
Posts: 46,392
Re: Canadian RSP accounts and US taxes
My Canadian has left his RRSP in Canada and has no intention of liquidating them or moving them to the US. His thoughts are that one day he might return to Canada and in any case he will be receiving retirement income from Canada and will be using his RRSP at that time.
No, he does not have to pay income tax on whatever interest his account makes annually to the US government. It is not even mentioned on our tax returns.
May I suggest that your husband to be subscribe to an excellent source of information provided by the quarterly magazine,
www.canadiansresidentabroad.com/
They have answers in their issues to all non-resident problems.
Rete
No, he does not have to pay income tax on whatever interest his account makes annually to the US government. It is not even mentioned on our tax returns.
May I suggest that your husband to be subscribe to an excellent source of information provided by the quarterly magazine,
www.canadiansresidentabroad.com/
They have answers in their issues to all non-resident problems.
Rete
Jul 16th 2002, 10:20 pm
#3
Guest
Posts: n/a
Re: Canadian RSP accounts and US taxes
Rete - Thanks for advice and the URL, we'll both look at the site. We were also
planning on leaving his RRSPs in Canada in case we move back or just as supplemental
savings and it never occured to us that we might have to pay taxes on the RRSP
earnings until he actually started receiving payouts.
If you're interested, this is the IRS site I referred to before:
http://www.irs.gov/faqs/display/0,,i...D15807,00.html
Scroll down to the second question from the bottom. The question is actually about a
US citizen who has an RRSP but I think permanent residents are treated the same as US
citizens for tax purposes, so it's still relevant. If anyone else has any experience
with this, I'd be interested in hearing what you think. Kristin
planning on leaving his RRSPs in Canada in case we move back or just as supplemental
savings and it never occured to us that we might have to pay taxes on the RRSP
earnings until he actually started receiving payouts.
If you're interested, this is the IRS site I referred to before:
http://www.irs.gov/faqs/display/0,,i...D15807,00.html
Scroll down to the second question from the bottom. The question is actually about a
US citizen who has an RRSP but I think permanent residents are treated the same as US
citizens for tax purposes, so it's still relevant. If anyone else has any experience
with this, I'd be interested in hearing what you think. Kristin
