401(k) options when Moved to Canada

Hi all (new user)!

I recently moved back to Canada from the US and have a 401(k) account still in effect. I'm under 40 and don't need the funds until I'm over 59. It would appear that transferring this account to a RRSP would trigger penalties/taxes/etc, thus is my best option to simply leave the account as is in the US? Am I allowed to do this? If so, any forms required on my end with the IRS &/or Rev Cda?

Any help would be appreciated.

Thanks

You are best to leave it until retirement. There is no forms to fill for CRA or IRS.

There is an eleborate process thta could get your 401(k) into an RRSP, and not pay any taxes, but it requires that you have at least the equivalent amount of Cdn income to match the 401(K) withdrawal (this would allow you to take credit for the US tax you would pay on the withdrawal), and it would still cost you the penalty money (no credit for that). So only 60+ should even think of this.

And since the tax and penalty would be withheld from the withdrawal, you would have to also come up with that extra cash to fund your RRSP for this to work out.

leave it be.

Tip to others however: For anyone moving back to Canada after Jan 01, 2009, you should almost always do anything you can to transfer your 401(K)/IRA etc in its entirety to a Roth BEFORE becoming Cdn Resident. This requires that you report the rollover as income in US of course, but then makes the Roth completely tax-free in both US and Canada forever after.


Too late after you move, though....

-- Mon Dec 14, 2009 2:43 pm --

One thing to watch for however is that some fund companies do not want to accept foreign account holders and try to pressure Cdns to close their account.

If it is a sizeable account (6 figures +), there are a couple of fee-based firms (Blackmont, Pacifica) that will manage cross-border.

Hi There, I read about your situation and I was wondering if you've went back to Canada yet? The reason being is that I am planning on returning to Canada in 2010 and I am looking for information as well. Your situation is very helpful. At present, I am working in the US, on a L1A Visa, I have been deemed a non-resident in Canada. The project I am on is coming to a close and I will probably move back to Canada. I'm not a fan of the US. Anyway I may end up working for this company until Sept 2010.
My question is: What are the tax implications that I'm facing for the year 2010 once I'm back in Canada? Would it be better if I not work in Canada until 2011? I'm really not sure about the whole worldwide income thing once I get back to Canada. Thanks. Syd

You've asked this elsewher, and the answer is still teh same. Collect all US income before returning, consider moving your pensions into Roths. It doesn;t matter when you start working again in Canada, as the Cdn income will only be taxed in Canada as you willexclude the cdn wages on your final IRS return.

The Pacifica Partners Capital Management website has information on the options for expats moving across the border - I had similar questions and the site really helped me out.