Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Dual citizen unsure of where to invest
Old 10-21-2006, 09:37 AM   #1
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Dual citizen unsure of where to invest

Hi everyone, I'm new to forums. I searched but couldn't find this question, so I thought I'd ask.

I'm a citizen of both the US and Canada. I recently received my B.A. and moved from Ontario to Indiana to take a job. I expect to stay at this job for 3-5 years before returning to school (most likely in the US) for graduate studies.

So, I'm looking at about 7-10 years in the US minimum. After this, I'm not sure whether I'll remain here or go back to Canada. I' wondering where the best place to put my savings is. An IRA? The 401k offered by my employer? Regular old mutual funds?

I'm worried about losing my money if I decided to settle in Canada.

Oh, and when people throw out the percentage of the salary that should be invested, is that a percentage of net income or gross income?

Thanks a lot for any help.
__________________

__________________
pauld82 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Dual citizen unsure of where to invest
Old 10-21-2006, 10:24 AM   #2
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,563
Re: Dual citizen unsure of where to invest

Welcome to the board, Pauld. One of our Canadian experts should be along shortly...

The conventional wisdom on investing your salary is take-home pay (after tax witholding). However creative use of deductions can make that figure however much you want to lend Uncle Sam interest-free. Maybe it's better to try to save based on your gross salary income and see how painful that is.
__________________

__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-21-2006, 10:47 AM   #3
Full time employment: Posting here.
 
Join Date: Feb 2004
Location: Okanagan Valley
Posts: 797
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by pauld82
So, I'm looking at about 7-10 years in the US minimum. After this, I'm not sure whether I'll remain here or go back to Canada. I' wondering where the best place to put my savings is. An IRA? The 401k offered by my employer? Regular old mutual funds?

I'm worried about losing my money if I decided to settle in Canada.
You wil not lose your US based investments if you decide to settle eventually in Canada. Canada and USA have a tax treaty recognizing each other's registered investments. You may want to Google and read up on the appropriate sections of the tax treaty to get comfortable with it.

You will also want to ask a cross-border tax expert from one of the major accounting firms (in Canada) before you leave to determine how to position your IRA or 401(k) for your best advantage. A few hundred dollars spent now could save a lot of grief later. Since you say you are both a US and Canadian citizen, I assume you have been filling out dual tax returns already on the basis of being a Canadian resident so far.

I do not know whether you currently have Canadian based equity and bond investments currently, but you will need to have a 'deemed' sale of these investments (at FMV on date of departure) in your last Canadian tax return, e.g. 2006 filing in Apr 07 if you leave before end of this year. There are certain investments that you cannot hold if you become a non-resident of Canada, e.g. LP's. Your Canadian based brokers and banks will also withhold non-resident tax on your investment income (15% on dividends and 10% on interest) while you are out of country....but that can be used as a FTC (foreign tax credit) when you file US returns.
__________________
AltaRed is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-21-2006, 10:52 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Ed_The_Gypsy's Avatar
 
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,241
Re: Dual citizen unsure of where to invest

There is one little glitsch that might cause someone a problem.

It is my understanding that CCRA does not recognize Roth IRAs as tax-protected accounts. That is, you will be asked to pay Canadian income tax on earnings within a Roth.

If you have a Roth or are considering one, you should verify this true or false.
__________________
my bumpersticker:
"I am not in a hurry.
I am retired.
And I don't care how big your truck is."
Ed_The_Gypsy is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-21-2006, 11:34 AM   #5
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by AltaRed
You wil not lose your US based investments if you decide to settle eventually in Canada. Canada and USA have a tax treaty recognizing each other's registered investments. You may want to Google and read up on the appropriate sections of the tax treaty to get comfortable with it.
This is good news. I will try to get familiar with this treaty.

Quote:
Originally Posted by AltaRed

You will also want to ask a cross-border tax expert from one of the major accounting firms (in Canada) before you leave to determine how to position your IRA or 401(k) for your best advantage. A few hundred dollars spent now could save a lot of grief later. Since you say you are both a US and Canadian citizen, I assume you have been filling out dual tax returns already on the basis of being a Canadian resident so far.
Actually, I have not been filling out dual returns. Prior to my moving to Indiana, I lived only in Canada, and was under the impression that as long as I made under 80 K/year, I was not required to file in the states. But, as you may have gathered, I'm quite ignorant and unprepared about what does and does not apply to me.

Quote:
Originally Posted by AltaRed

I do not know whether you currently have Canadian based equity and bond investments currently, but you will need to have a 'deemed' sale of these investments (at FMV on date of departure) in your last Canadian tax return, e.g. 2006 filing in Apr 07 if you leave before end of this year. There are certain investments that you cannot hold if you become a non-resident of Canada, e.g. LP's. Your Canadian based brokers and banks will also withhold non-resident tax on your investment income (15% on dividends and 10% on interest) while you are out of country....but that can be used as a FTC (foreign tax credit) when you file US returns.
I left several things in Canada: 1500 in savings bonds, a 17000 student loan, and 500 in my chequing account. Is it too late to sell the bonds? I think I really need to talk to an international tax specialist...I've just been having trouble finding one.
__________________
pauld82 is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-21-2006, 01:41 PM   #6
Full time employment: Posting here.
 
Join Date: Feb 2004
Location: Okanagan Valley
Posts: 797
Re: Dual citizen unsure of where to invest

I don't think you need to sell the CSBs if you don't want too. Check the residency rules for those bonds on the CSB website to be sure. Those bonds never have a FMV more or less than face value because they are cashable at any time... so you won't have a capital gain/loss issue on them.

I don't know if you have an issue with not having filed US returns up to now or not. You need to check with a cross-border tax expert. And as per Ed's post, check out the Roth IRA question.

If you PM me, I can give you a name and phone number of a tax expert from PriceWaterhouse in Calgary you could talk too. She will charge a fee of course, but is very fair and will give you the straight goods.
__________________
AltaRed is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-21-2006, 03:31 PM   #7
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Re: Dual citizen unsure of where to invest

Will do. Thanks for you help, and thanks to Ed and Nords as well.
__________________
pauld82 is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 06:03 AM   #8
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Re: Dual citizen unsure of where to invest

For some reason, I am not able to send PM's. Perhaps AltaRed could email me the phone number at paul.davis AT uottawa dot ca

__________________
pauld82 is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 08:21 AM   #9
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,563
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by pauld82
For some reason, I am not able to send PM's. Perhaps AltaRed could email me the phone number at paul.davis AT uottawa dot ca
Uhm, nothing personal, it's a spammer countermeasure. Your account won't be able to send PMs until you reach 10 posts. I'll tell AltaRed.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 08:39 AM   #10
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Re: Dual citizen unsure of where to invest

Ahhh. I figured it might be something like that. Thanks.
__________________
pauld82 is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 08:40 AM   #11
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 784
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by Nords
Uhm, nothing personal, it's a spammer countermeasure. Your account won't be able to send PMs until you reach 10 posts. I'll tell AltaRed.
Quick! Post a lot of boobies jokes!

On a serious note, what's this about under/over $80k? I'd never heard of that before. Come to think of it, learning the important rules governing US-Canada taxation is something I've been meaning to do for a while, although every time I try to learn about it I get a pain in my head and my vision blurs.

Hm, maybe there's a Cole's notes version somewhere on the web. Anyone have any good (on- or off-line) resources? I'm also a U.S.-Canadian dual citizen, currently living in Canada, and thinking of moving to the U.S. or a third country. I wish all countries just operated a simple (low) flat tax only, or just a sales tax, or anything other than the God-forsaken mess we've got now.
__________________
Cool Dood is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 08:44 AM   #12
Full time employment: Posting here.
 
Join Date: Feb 2006
Posts: 784
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by pauld82
I'm worried about losing my money if I decided to settle in Canada.
Oh, and Paul, the easy way to avoid this is to avoid settling in Canada. Seems like a country worth giving up on, anyway. Oops, I mean -- Canada's wonderful, come visit the Falls! You'd never want to go to Texas when you can spend time in peaceful Canada!
__________________
Cool Dood is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 08:53 AM   #13
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 699
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by pauld82
Prior to my moving to Indiana, I lived only in Canada, and was under the impression that as long as I made under 80 K/year, I was not required to file in the states.
Nope, gotta file, even if your total earned income is below the Foreign Earned Income Exclusion (~$80k, depending on the year). If you don't file, and the IRS notices that you haven't been filing, they can make you file back returns and disallow the FEIE as a penalty. Your safest course of action is to file back returns now, before the IRS asks questions (like why you apparently didn't exist until now). Check Pub. 54 at irs.gov for details.

__________________
bpp is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 11:10 AM   #14
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by bpp
Nope, gotta file, even if your total earned income is below the Foreign Earned Income Exclusion (~$80k, depending on the year). If you don't file, and the IRS notices that you haven't been filing, they can make you file back returns and disallow the FEIE as a penalty. Your safest course of action is to file back returns now, before the IRS asks questions (like why you apparently didn't exist until now). Check Pub. 54 at irs.gov for details.

Okay. Well, that's good to know. I've gone from being concern about early retirement to concerned about jail time . Should I get in contact with the IRS first, or talk to a knowledgable expert?

If anyone has any recommendations for good US-Canada tax experts (especially those in Ontario or Indiana), I'm all ears. You can either PM them to me, or email them at the above address.
__________________
pauld82 is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 05:23 PM   #15
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 699
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by pauld82
Okay. Well, that's good to know. I've gone from being concern about early retirement to concerned about jail time . Should I get in contact with the IRS first, or talk to a knowledgable expert?
The IRS should be pretty helpful. They can tell you how many years back you need to file; usually around 6, I think. You might try calling one of their taxpayer help lines, so that you can be anonymous. (But keep a log of the conversation, in case they have a different story in future dealings -- been known to happen.)


__________________
bpp is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 06:37 PM   #16
Recycles dryer sheets
 
Join Date: Jun 2005
Posts: 213
Re: Dual citizen unsure of where to invest

I came in from the cold a couple of years ago. I live overseas and hadn't filed for 15 years. The accountant suggested filing one year and if the IRS wanted more, they would come back to me. It worked out OK. Being a small fish they didn't seem to care. I am not giving advice on what to do, just saying what happened to me.

Mike
__________________
mikew is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 07:00 PM   #17
Moderator Emeritus
Martha's Avatar
 
Join Date: Feb 2004
Location: minnesota
Posts: 13,211
Re: Dual citizen unsure of where to invest

I would work with a tax professional rather than going straight to the IRS.

FYI, the statute of limitations on collecting taxes doesn't start running until returns are filed. But I don't believe there is a failure to file penalty if you don't owe anything.


http://www.irs.gov/businesses/small/...122901,00.html
__________________
.


No more lawyer stuff, no more political stuff, so no more CYA

Martha is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 09:14 PM   #18
Full time employment: Posting here.
 
Join Date: Feb 2004
Location: Okanagan Valley
Posts: 797
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by pauld82
For some reason, I am not able to send PM's.
I trust you got my message?

Also, there was a thread on Financial Webring Forum not that long ago on this issue of dual citizenship and not having ever filed US returns. You may wish to pose that question there, or peruse the threads with the Search function.

http://financialwebring.com/forum/index.php
__________________
AltaRed is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-24-2006, 09:51 PM   #19
Full time employment: Posting here.
 
Join Date: Mar 2005
Posts: 699
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by Martha
I would work with a tax professional rather than going straight to the IRS.
Why is that?

Quote:
FYI, the statute of limitations on collecting taxes doesn't start running until returns are filed. But I don't believe there is a failure to file penalty if you don't owe anything.
I'll confess that I, like mikew, also spent some time out in the cold at one point, and have also helped another person who was in a similar situation get back in good with the IRS. There may be no failure-to-file penalty if you owe nothing, but if you don't turn yourself in before they catch you, they can disallow the FEIE on those back returns, which will likely end up costing you a lot of money (the money you now owe due to loss of FEIE, plus the failure-to-file penalty on that money). Plus, with the new stacking rules, the days of typically owing nothing to the IRS are over for many people, so one cannot count on the lack of a failure-to-file penalty even if the FEIE is not disallowed.

I didn't know/couldn't afford any tax advisors, so just called the IRS directly (the IRS still maintained an office in Tokyo then), and found them very helpful; I think they see this a lot. They told me that they require 6 years of back returns, though I don't know if the rule has changed since then.
__________________
bpp is offline   Reply With Quote
Re: Dual citizen unsure of where to invest
Old 10-25-2006, 08:51 AM   #20
Confused about dryer sheets
 
Join Date: Oct 2006
Posts: 7
Re: Dual citizen unsure of where to invest

Quote:
Originally Posted by AltaRed
I trust you got my message?

Also, there was a thread on Financial Webring Forum not that long ago on this issue of dual citizenship and not having ever filed US returns. You may wish to pose that question there, or peruse the threads with the Search function.

http://financialwebring.com/forum/index.php
Got it. Thank you. I will look into the other forum as well.

The reason I am thinking of going to an expert before the IRS is because I would like someone to explain to me what is required of me and what is the best course of action to take (not simply in regards to what I've failed to file, but for what I should do in the future to keep both countries happy). And I'll need it to be explained in dumbed down language...
__________________

__________________
pauld82 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
pay off the rental mortgage or refinance and invest the difference? WM FIRE and Money 19 02-12-2007 05:32 PM
Really need your advice- $20K to invest, Munis, ETFs,REITS, or Index Funds Foodeefish FIRE and Money 5 01-06-2007 02:34 PM
How to invest trust funds???? RE2Boys FIRE and Money 10 11-23-2006 11:50 AM
ER is 2 Years Away, Where Should I Invest $300K? Hydroman FIRE and Money 12 05-06-2006 05:10 PM
How to invest in commodities? Spanky FIRE and Money 16 03-06-2005 09:13 AM

 

 
All times are GMT -6. The time now is 04:11 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2016, vBulletin Solutions, Inc.