Question for Canadians about RRSP!

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I have about $2800 CAN in my RRSP that I think I'm going to cash out right now so that we can have the money down here. If I cash the entire thing out will I have to pay any penalty? I will have zero Canadian income this year. I believe that the $2800 will count as Canadian income, but since it's so little I won't have to even bother filing taxes next year since I don't live in Canada, right? Anybody know for sure...?

 

[Hanpan]

I believe you should still file, but if $2800 is all you withdraw you should not have to pay taxes on it.

 

[StageLeft]

I thought that you don't have to file taxes if you're not even going to have to pay any. I mean I'll be under the income point for where people have to pay taxes...

 

[Mucho]

When you cash your $2,800 the bank will keep 10% so you will only get $2,520. You will have to then file an incom tax to retrieve the $280. However, you must dislose your foreign income.

 

[CraigRT]

You'll get dinged for pulling it out early, i'd think no matter what the situation was...

 

[StageLeft]

Yeah I just did it and they kept the 10%. I'm a US tax resident so I guess I'll be disclosing foreign income but hopefully it won't present a problem come next tax year. Hmm I'm guessing this is how it will work next year:

Do US taxes and provide proof to Revenue Canada about the US income made and the US taxes paid. Then since I'm a US resident for tax purposes Canada will want to tax that $2800 at the US rate. So I will probably not get that 10% back and in fact have to pay another 10% or so on top of it. Oh well, just as long as they don't think they're gonna tax all my US income at a canadian rate! I believe they can do that if you're a CAN resident for tax purposes but I most definitely am not.

 

[flamingelephant]

There was a big court case about someone pulling out of a tax sheltered trust in Canada and bringing the money into the US. They were supposed to pay like 30% tax but in the dying days of the Mulruny government they said they dont have to (it was something like a 2 billion dollar trust). Im honestly not sure how it would work, because you have to be a resident of Canada for something like 180 days in order to have to pay federal and provincial tax, but, when you put the money in the RRSP the tax you would of paid on that income gets deferred to when you withdraw it (retirement), so technically you never paid income tax on that RRSP money because you were going to down the road. If you came back to Canada and became a resident again, they would probably try and nail you on getting the tax on that RRSP. But, if you stay in the US, the 2800 probably just counts as foreign income under the US tax laws, and its really like a foreign investment, which Im sure the US laws allow at some tax level, probably not all that much id imagine.

 

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Originally posted by: flamingelephant
There was a big court case about someone pulling out of a tax sheltered trust in Canada and bringing the money into the US. They were supposed to pay like 30% tax but in the dying days of the Mulruny government they said they dont have to (it was something like a 2 billion dollar trust). Im honestly not sure how it would work, because you have to be a resident of Canada for something like 180 days in order to have to pay federal and provincial tax, but, when you put the money in the RRSP the tax you would of paid on that income gets deferred to when you withdraw it (retirement), so technically you never paid income tax on that RRSP money because you were going to down the road. If you came back to Canada and became a resident again, they would probably try and nail you on getting the tax on that RRSP. But, if you stay in the US, the 2800 probably just counts as foreign income under the US tax laws, and its really like a foreign investment, which Im sure the US laws allow at some tax level, probably not all that much id imagine.

Yeah I do think that based on how things worked out for my 2001 tax year when I moved here and some other stuff I've read I'll probably end up not paying taxes to the US on this money but paying to canada based on my US tax bracket, since I'm a US tax resident, but since the money was made in canada they will want the taxes from it...