Cashing out RRSP in Canada and bringing Monies to the States

djamesgraham
New Member



Joined: 19 Aug 2008
Posts: 3
Location: New Hampshire

Posted: Tue Aug 19, 2008 7:25 pm

 

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Because of a series of situations, including dollar valuations, I have been thinking about cashing out my RRSP's at this point in my life (mid-30's) and taking the proceeds into a savings account I have in the States. Has anyone done this? I know that I will need to pay $$$ for taxes and other fees, but was there anything that could be a problem other then that?

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Reba
Moderator


Canuck in NC

Joined: 16 Jul 2004
Posts: 1451
Location: North Carolina

Posted: Wed Aug 20, 2008 3:18 am

 

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You'll pay a flat 25% tax on it in Canada, and then depending on the final dollar amount when you receive it and your current tax bracket (this will likely bump you up to a higher tax bracket) you may or may not end up paying more taxes on it in the US. Be very very careful. You may want to speak with a tax accountant before you do it.
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Steven
CanuckAbroad VIP



Joined: 28 Sep 2007
Posts: 1587
Location: Calgary

Posted: Wed Aug 20, 2008 9:56 am

 

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I think you can convert it into USD inside the investment, depending on what it is, my local bank does that.

Depends on where your tax home is as well, if it's still Canada it's treated the same as if you're in Canada (so just look on the CRA website for what will happen, pretty much), if it's the US it gets more complicated. Currently RRSPs are now treated as IRAs but that doesn't apply to previous tax years, although in your case I don't think that matters if you're cashing it out in the current tax year. In theory the IRS website explaining what happens if you cash out your IRA early is what to go and look at.

However, given that the Form 8891 requirement is fairly obscure and the new tax treaty has only just come into force I think your only really option here is to sit all week on the phone with the IRS to get a definitive answer or talk to a really good cross-border accountant, if you are currently a US tax resident.
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