Canadian PR & Implications on US Social Security & 401K PLAN funds

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texancanadian

Registered Users (C)
Canadian PR & Implications on US Social Security & 401K PLAN funds
I am wondering if some of our experienced friends would reflect on the above topic relative to permanently moving from the USA to Canada.
1) Social Security:
What happens to the social security contributions one made to the US system. If someone has paid in to the US system for more than 10 years they are eligible for social security. Now what if you move to Canada ? Are those funds moved to Canada SIN account ? I know there is some treaty between the US & Canada on this but dont know any of the specifics. Will u get 2 separate checks in retirement one from US & the other from Canada ?

2) 401K money
What happens to your 401K money once you move to Canada. Since these are tax defered investments ie if you cash out prior to a certain age (Age 55 I believe) you are taxed as well as have to pay a steep and severe penalty. Can you transfer or "roll over" these funds to a similar Canadian Retirement Plan? or can you keep the money by keeping it in the 401K plan, rolling it to an IRA and just cashing out after you turn 55?

Would appreciate any help/insight with these topics.
Thanks in advance.
 
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I assume you are inquiring about moving from US to Canada and not from Canada to the US as your first paragraph states.

You are correct on the SS. As long as you have had qualified employment (as defined by the SS administration) for a total period of 10 years, you can collect SS at the appropriate age. Note that the 10 years does not have to be consecutive. In other words, if you had a break of 2 years after 5 years and then continue for another 5, you will be seen as completing 10 years of qualified employment.

I doubt that there will be any transfer of funds into "SIN" account. You probably would end up getting the money to your address at that time from the SS administration.

Your 401K funds cannot be transferred (rolled over) into any Canadian funds due to the laws of the individual countries. You can just leave the funds in its current form and pull it out when you are eligible to do so. You can also roll it over to another qualifying US fund account. Cashing out before eligible age will result in taxes and penalties.

Heres another info - If you move to Canada and continue to work in the US, you may have to think twice before continuing to contribute to the 401K. While you do not pay US taxes on the 401K contributed amount (until you cash out at 55), your Canadian taxes are based on the total amount of your earnings for that year. Example, if your earnings were $50000 and 401K contribution was $10000, you pay US taxes on $40000 and Canadian taxes on $50000 (multiplied by the excahnge rate)!!

Because of that, it becomes more favorable to invest in a RRSP (Canadian "Registered Retirement Savings Plan") since they are tax deductible at the time of filing your Cdn taxes.
 
Thanks Dimple

Yes, I menat from the US to Canada , and have made the change to the original note.
Dimple, your answers have been most helpful. Thank you so much.
However I have one question:
Can someone who is working in the US invest in the RRSP to take advantage of Canadian tax rules ?
Secondly if one continues working in the US will the SIN account have any funds? ie when u retire your US SSN will pay you but will u receive anything from Canadian SIN since you have not contributed anything? are there any major long term consequences of that ?
Thanks.
 
<<<<<<Dimple, your answers have been most helpful. Thank you so much.>>>>>>

You're welcome:)


<<<<<<<Can someone who is working in the US invest in the RRSP to take advantage of Canadian tax rules ?>>>>>>>>>

It is not the issue of working in the US. The issue lies in whether you are filing or have filed Cdn taxes. If you are a PR who lives and works in the US, you do not have to file Cdn taxes and therefore will not become eligible for RRSP contribution.

If you are a PR living in Canada, working in the US, you will have to file Cdn taxes and you are eligible to contribute to the RRSP.

Here is how you determine your eligibility.....

You can contribute in the ***current year***, a maximum of $14,000 (double ck this) or 18% of your ***previous year's*** qualified earned income (whichever is lower). US wages is considered as qualified income.

The eligible contribution amount will be provided to you by Revenue Canada in the Notice of Assessment that you will receive after you file the Cdn taxes.

Your max contribution limit will be reduced by the amount of 401K contributions. For ex, if you contributed $5000 worth of 401K in the previous year, and your RRSP eligible amount is $14000, then your RRSP max contribution limit for the current year is now 14000-5000 = 9000.

The following year, when you file taxes for the current year, you can deduct $9000 as a tax deduction (if you contributed all the $9000 in the current year).

So you see that it just takes a while before you can enjoy the RRSP tax deduction benefits.



<<<<<<<<Secondly if one continues working in the US will the SIN account have any funds? ie when u retire your US SSN will pay you but will u receive anything from Canadian SIN since you have not contributed anything? are there any major long term consequences of that ?>>>>>>>>

Assuming SIN contributions are made similar to the SS contribution from your paycheck, no, you will not have any money contributed to the SIN. However, I honestly do not know how the SIN works.

Unless you are betting your retirement life wholly on the SIN funds, I don't see any consequences in the long term.
 
taxes

Originally posted by dimple2001

Your max contribution limit will be reduced by the amount of 401K contributions. For ex, if you contributed $5000 worth of 401K in the previous year, and your RRSP eligible amount is $14000, then your RRSP max contribution limit for the current year is now 14000-5000 = 9000.

The following year, when you file taxes for the current year, you can deduct $9000 as a tax deduction (if you contributed all the $9000 in the current year).

So you see that it just takes a while before you can enjoy the RRSP tax deduction benefits.

[/B]
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I dont think this is correct. The 401k and the RRSP have nothing to do with each other. When you compute Canadian taxes you add back the 401k contribution as taxableincome. So you still have what would otherwise have been entire tax shield. In other words contributing to 401k does squat to reduce your taxable income as far as Revenue Canada is concerned. Thats the whole problem with Canadian commuters. You get taxed on your 401 k when you put it in and you get taxed when you take it out!!!

Welcome to life as a commuter.
 
I don't want to think about paying TAX for another 8 months!! I have stopped 401k's, and it's going into RRSP. In regards to getting money from the government when one retires (SIN). The answer is no!! One will be eligible only if he/she has contibuted to CPP. Thats what my CGA said.

Yes, Commuter life sucks!! but its better than nothing. I struggled for a year in Canada without a proper job, and when I got an opportunity in the US, I didn't think twice, about the time I would be spending commuting. Struggle for 3 years, once you have your Canadian passport, then you decide where you want to pay your taxes.

This year, I might not pay any US taxes, since my say in the US will be < 150 days. I still have to clarify this with IRS.

Texan, when you retire and if you decide to settle in Canada, and assuming the SSA dosen't go belley up you can file your papers with SSA to transfer money to your bank account. Just make sure you save those lovely annual statements you get from SSA every year a month or two before your b-day. :p
 
Who is a commuter ?

Hi,
What do you mean when you say commuter life ?
Do all of you live in Windsor & commute to Detroit ? or are you guys in other Canadian border towns commuting to US towns?

Can someone who maintains a Canadian adress, pay taxes in Canada, holding Canadian Drivers license, count the 3 yrs spent in USA for Canadian citizenship.
I know Im off topic but this is getting to be quite interesting.
Thanks.
 
Re: Who is a commuter ?

What do you mean when you say commuter life ?
Do all of you live in Windsor & commute to Detroit ? or are you guys in other Canadian border towns commuting to US towns?

Can someone who maintains a Canadian adress, pay taxes in Canada, holding Canadian Drivers license, count the 3 yrs spent in USA for Canadian citizenship.
I know Im off topic but this is getting to be quite interesting.
Thanks.
============================
Commuter life....

Enter the US in the morning and head back home after work. I don't live in Windsor. I live in Mississauga, and I commute to work 2 or 3 days in a week to Buffalo. Happy 3 hour drive if there is no traffic, each way.

Now the Citizenship issue.....

What do you mean by maintain a canadian address? The answer depends on this!! If youare saying that I will use my friends/relatives address, but I will not stay in Canada, but I will pay Taxes, and get a Canadian DL, the answer is no. Your physical presence is required in canada (1095 days).

If you ask me how are others who have never spent a day/week/month in canada are getting Citizenship? Well I don;t have to answer that, you know what they have stated on thier application for Citizenship.
 
Re: Re: Who is a commuter ?

Originally posted by vault
If you ask me how are others who have never spent a day/week/month in canada are getting Citizenship? Well I don;t have to answer that, you know what they have stated on thier application for Citizenship.
Click to expand...

Also remember that if CIC ever EVER in the rest of yur life finds out you lied in your application they can strip you of your citizenship. All it takes is a disgruntled ex spouse, jealous co-worker , spiteful friend and you are hosed....

Immigration fraud is a VERY bad idea.
 
I agree

Wasnt talking of lying. I would never do that. I just wanted to know if that is something that could be legally done ?

So bottom line is that you need to spend 3 yrs in Canada. Whatever you do - even if u r unemployed . even if u dont earn a single penny but just survive on your saving and since you dont earn you dont pay a cent in income tax you can still apply for citizenship based on the fact that you have "lived" in Canada for 3 yrs.
Am I correct ???
 
So bottom line is that you need to spend 3 yrs in Canada. Whatever you do - even if u r unemployed . even if u dont earn a single penny but just survive on your saving and since you dont earn you dont pay a cent in income tax you can still apply for citizenship based on the fact that you have "lived" in Canada for 3 yrs.
Am I correct ???
==========================================

Yes, that is correct. You must live in Canada at least 3 years
of the past five years on the day you apply for citizenship.

I don't know how long the entire process it takes these days,
but it took me about four months, 10 years ago.
 
vault...?

Originally posted by vault
I don't want to think about paying TAX for another 8 months!! I have stopped 401k's, and it's going into RRSP. In regards to getting money from the government when one retires (SIN). The answer is no!! One will be eligible only if he/she has contibuted to CPP. Thats what my CGA said.
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I was working in Canada for a while and have quite a sum (for me!!! :) ) put into the CPP. I will probably not work in Canada again. Any idea how I can know either how much money I will get back out of it all whenever or if I can get that money back?!

And on another note whether you pay US taxes or not hardly helps! Revenue Canada or Uncle Sam whats the difference?!! :mad: The net outflow remains the same!!!
 
Re: vault...?

Originally posted by rzz1gv
I was working in Canada for a while and have quite a sum (for me!!! :) ) put into the CPP. I will probably not work in Canada again. Any idea how I can know either how much money I will get back out of it all whenever or if I can get that money back?!
==========================================
This link should answer your questions about CPP:

http://hrdc.gc.ca/isp/cpp/genera_e.shtml
==========================================
And on another note whether you pay US taxes or not hardly helps! Revenue Canada or Uncle Sam whats the difference?!! :mad: The net outflow remains the same!!!
Click to expand...
==========================================
Yes, no difference!! :mad:
 
Hey guys, please post. I definitely need help with some information on this.

Parents Sponsorship while in US:

Are sponsoring conditions met once you are PR and have paid one year in taxes on US Income?? Anyone who knows about the process, please post your opinions/experiences/views and ideas.

Thanks
Tanvi
 
Wow, this is indeed a flurry of posts between yesterday and today !!!

To rzz1gv:

>>>>>>>>>>
I dont think this is correct. The 401k and the RRSP have nothing to do with each other. When you compute Canadian taxes you add back the 401k contribution as taxableincome. So you still have what would otherwise have been entire tax shield. In other words contributing to 401k does squat to reduce your taxable income as far as Revenue Canada is concerned. Thats the whole problem with Canadian commuters. You get taxed on your 401 k when you put it in and you get taxed when you take it out!!!>>>>>>>>>>>>>>

You are absolutely right on your above comments. Your taxable cdn wages does not protect 401K.

However, I was only referring to the amount of money you can contribute to the RRSP for the current year. Revenue Canada will look at your previous year's 401K contribution you made (if any) and will indicate that your RRSP out of pocket contribution limit will be reduced by that 401K contribution amount. I am not referring to tax deduction/shelter.

For example, in my case, my allowed RRSP contribution limit has been reduced to about $6600 for year year 2003 instead of the allowed maximum because I contributed to 401K.
 
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Originally posted by Tanvis
Hey guys, please post. I definitely need help with some information on this.

Parents Sponsorship while in US:

Are sponsoring conditions met once you are PR and have paid one year in taxes on US Income?? Anyone who knows about the process, please post your opinions/experiences/views and ideas.

Thanks
Tanvi
Click to expand...

You have to meet the following conditions:

Must have filed Canadian Taxes, since you will be asked to enclose your assessment

Must be living in Canada to sponsor

Must have a job (Once you put your US Employer's name and phone number you will receive a call from CPC, and they will cross question you. This is what happened with a friend of mine)
 
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Originally posted by dimple2001


However, I was only referring to the amount of money you can contribute to the RRSP for the current year. Revenue Canada will look at your previous year's 401K contribution you made (if any) and will indicate that your RRSP out of pocket contribution limit will be reduced by that 401K contribution amount. I am not referring to tax deduction/shelter.

For example, in my case, my allowed RRSP contribution limit has been reduced to about $6600 for year year 2003 instead of the allowed maximum because I contributed to 401K.
Click to expand...

Hmm strange .. dont know abt this . I put in the 10% 401k contribution in the US for several years and calculated US tax claiming that as a deduction. Then I added back the 401k contrib as far as calculating income for Revenue Canada and put in the full 13500 as RRSP contrib and claimed that as a deduction from the Canadian tax. I got audited one year too and Revenue Canada was ok with my return..
 
rzz1gv:

It is strange....

I had my returns done through HR block in Windsor. I can only think of one reason. I was dual status (resident of US part year and Canada part year) when this reduction in contribution occured.

I have to review my tax return and see if anything makes sense. Unfortunately, my recent tax return is as thick as a thesis as I had business income and deductions along with regular wages and the whole thing puts me to sleep trying to understand:)

Thanks for the insight. It certainly has got me wondering.
 
Thanks Vault. Appreciate it very much.

Regarding the job: if one works near US border and lives in Canada, is there a problem?

I cannot think of any other way to meet all requirements:
income requirements, live and pay taxes in Canada for a year.

If you could ask your friend to post his experience and comments, now that would be great.

Thanks very much.
-Tanvi
 
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job...

Originally posted by Tanvis
Thanks Vault. Appreciate it very much.

Regarding the job: if one works near US border and lives in Canada, is there a problem?

I cannot think of any other way to meet all requirements:
income requirements, live and pay taxes in Canada for a year.

If you could ask your friend to post his experience and comments, now that would be great.

Thanks very much.
-Tanvi
Click to expand...
No no problem if you commute from Canada to the US.

Also you could work in Canada!!

good luck. its a simple process. though longer now than it used to be. Follow rules, be careful that you answer all questions in the formsand you will be fine.
 
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