The Companion Advisor:
Taxes & Estates
401(k)/IRA to RRSP
Bringing US retirement plans to Canada
401(k)/IRA Transfer Options
Investors who have left jobs in the US may want to transfer benefits from their US retirement arrangement 401(k) or Individual Retirement Arrangement (IRA) to their Canadian Registered Retirement Savings Plan (RRSP) on a tax deferred basis. Under the right conditions, this can simplify retirement planning and reduce or eliminate the need for duplicate tax reporting.
Depending on age, the rules for the US plan and certain other criteria,
a Canadian resident taxpayer is able to transfer lump sum superannuation
or pension benefits such as a 401(k) plan or a foreign pension plan such
as an IRA under subparagraphs 600)(i) and 60(j)(ii) of the Canadian Income
Tax Act and defer Canadian taxation on these amounts. The individual must
have a Canadian social insurance number (SIN), which is the nine digit
number that identifies individual Canadian residents for income tax and
benefit purposes. A SIN is also required to open a Canadian Registered
Tax treatment on cross-border rollovers
Under Canadian and US tax rules, funds withdrawn from a 401(k) plan or an IRA are taxable as income in the year of withdrawal. The amount received from the 401(k) plan assets being rolled over must be included as income in the Canadian year?end tax return, as well as the offsetting Canadian deduction for the amount transferred to the Canadian RRSP.
The US plan holder is required to withhold 20% of the withdrawal amount
where paid to individuals who are subject to US taxation (reducedto 15%
for payments to non?residentaliens) and make one lump sum
Steps to bringing US retirement accounts to Canada
Consider the alternatives of a cross border transfer for individuals planning retirement in Canada. Assisting clients in making the best choice can lead to investment and planning opportunities for you.
Fiscal Agents Financial Services Group are not engaged in rendering tax,
accounting or legal professional services or advice. The comments in this
article are not intended, nor should they be relied upon, to replace specific
professional advice. Before acting on material contained herein. Readers
should seek advice that is appropriate to their personal circumstances
from a professional advisor.
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