 |
Paying taxes in two countries- Canada and US?
10-12-2007, 04:35 AM
|
#1
|
Recycles dryer sheets
Join Date: Nov 2004
Posts: 145
|
Paying taxes in two countries- Canada and US?
Hi all-
I might have a chance to become a Permanent Resident of Canada in my retirement. As an American living in Canada and as a Canadian PR, I will be drawing from my own personal retirement plan based in the US. What are my tax obligations? Would I be required to pay both US taxes and Canadian taxes? What taxes would I pay? Before I commit this, I need to know the answers to this question.
In addition, can I be a Permanent Resident in Canda and still live on Social Security from the States without being penalized?
Thanks, guys, in advance for answers to these questions.
Rob
|
|
|
 |
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!
|
10-12-2007, 07:48 AM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Posts: 11,401
|
Rob, I don't know the answers to all your specific questions, but the US and Canada have tax treaties which means you will not be doubly taxed. More information is available here.....
Individuals - International and Non-resident Taxes
but I do suggest you consult with an accountant who specializes in cross border taxation. My understanding from previous threads is that you may have to continue to file a US return no matter where you live, so you might have two tax returns.
Many years ago I moved from the US to Canada. That year I had two tax returns. After concluding that I owed a lot of tax, I sought the help of an informed accountant. I ended up with a refund!
|
|
|
10-12-2007, 08:08 AM
|
#3
|
Full time employment: Posting here.
Join Date: Jun 2004
Location: Calgary
Posts: 805
|
Hi Rob.
Yes, you will have to file TWO income tax returns. We live in Canada but my husband is American with permanent residency in Canada. He doesn't have to pay double tax but he does have to declare his Canadian income and investments on the U.S. return as "worldwide income". We have an accountant that specializes in cross-border taxation.
It really is a pain in the a** dealing with the IRS. The accountant has told us that as long as hubby is an American citizen, they have their hooks in him and he is required to file dual income tax returns. The only way to get out of it is to renounce his U.S. citizenship.
__________________
I can only be nice to one person today! Today is not your day...tomorrow doesn't look good either.
|
|
|
10-12-2007, 11:34 AM
|
#4
|
Recycles dryer sheets
Join Date: Jun 2007
Posts: 372
|
Quote:
Originally Posted by Calgary_Girl
The only way to get out of it is to renounce his U.S. citizenship.
|
From what I've read even that doesn't really work all that well. If you have any money or income in the last few years you're deemed to have renounced your citizenship for financial reasons and you're on the hook for 10 more years even as a noncitizen.
Anybody heard of taxation without representation?
|
|
|
10-12-2007, 11:45 PM
|
#5
|
Full time employment: Posting here.
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 832
|
Can't speak to the Canadian tax laws.
However, as to US tax laws, sadly it is true, US citizens must pay US income tax on their worldwide income, and must file US tax return no matter where they live.
I am a retired CPA. I suggest you find a knowledgable tax advisor "near the border" who deals with many clients who are US citizens residing in Canada. He can help you minimize the total 2-country tax load, and help you avail yourself of any credits or exclusions related to dual taxation.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
|
|
|
10-12-2007, 11:48 PM
|
#6
|
Full time employment: Posting here.
Join Date: Oct 2007
Location: Willamette Valley, Oregon
Posts: 832
|
As to your question on SS benefits and status as a Canadian PR, I suggest you go to the SS website FAQ's. I am sure I have seen questions and answers there on the subject of US citizens residing abroad. If not, you can sub,it a question at the SS site.
__________________
Dreams Worth Dreaming are Dreams Worth Planning For. I Spent a Career Planning for Early Retirement.
|
|
|
10-13-2007, 07:54 PM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,581
|
Hi, Rob,
I am a Yankee working in Calgary. I am considering a PR myself.
I think it works this way (but by all means get professional advice):
If all you have is retirement income (no wages), it should be easy--much easier than my situation.
You will be a Canadian for tax purposes. You must pay Canadian taxes on your world income from your retirement accounts. If they are from the US, you will get your W-2 by the end of January, so you pay your Canadian taxes before most Canucks, as their equivalent comes out later. (I work here so I have to wait for my forms and have to file for an extension from the IRS--automatically granted since I live outside the country.)
Then you must file with the IRS. In general, you pay more taxes in Canada than the US, so you get credit for them from Uncle and probably won't have to pay him anything.
I have been told that Roth IRAs are not recognized by Canada as a tax-protected vehicle. You will be taxed on their annual earnings even if you haven't pulled them out.
If you have a bank account in Canada (good idea, I think; I like TD Canada Trust), you must file a special form with Uncle. It is said that the IRS is very touchy about this, so do not neglect it.
If you work up here or come up here as an investor, it gets a LOT more complicated. Another story.
Canada has not issued retirement visas for a long time, and you did not say you were planning to work first just to get into the country, so I assume you have another way in (spouse?).
Cheers,
Ed in Cowtown, AB
__________________
I have outlived most of the people I don't like and I am working on the rest.
|
|
|
10-14-2007, 07:47 AM
|
#8
|
Recycles dryer sheets
Join Date: Jan 2006
Posts: 330
|
Quote:
Originally Posted by Ed_The_Gypsy
I have been told that Roth IRAs are not recognized by Canada as a tax-protected vehicle. You will be taxed on their annual earnings even if you haven't pulled them out.
|
Sadly, this one is true  I haven't been eligible to contribute to my Roth recently, but when I am, I may just not fund it since I'm planning on retiring to Canada as well.
Also, the exemption for paying taxes in the US since you've already paid them in Canada only works up to 80k, if I recall correctly. So if your 4% withdrawal is over that, be prepared to have fun.
|
|
|
10-14-2007, 08:55 AM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,581
|
NP, that $80k is earned income. I don't think investment income qualifies.
__________________
I have outlived most of the people I don't like and I am working on the rest.
|
|
|
10-14-2007, 08:57 AM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,581
|
and the $80k applies whether or not you pay taxes in another country. Certain overseas assignments have very little tax pain and still we get the $80k exemption.
Some days I would just as soon be back working in the Land of the Rich and the Home of the Slave. I know the rules back home.
__________________
I have outlived most of the people I don't like and I am working on the rest.
|
|
|
 |
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Thread Tools |
Search this Thread |
|
|
Display Modes |
Linear Mode
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|