# CRA requirement for Roth IRA reporting



## Stargazer

Here's another thing I learned from expat message boards. The CRA last year asked for all people in Canada who hold Roth IRAs in the states to make an election which keeps them from being taxed by Canada. But if a contribution is made to the Roth IRA while resident in Canada, the CRA will consider it taxable. 

http://www.cra-arc.gc.ca/E/pub/tp/itnews-43/it-news-43-e.pdf

_E. What if a Canadian Contribution is made?
An Election in respect of a Roth IRA will be valid only
up to the time of the first Canadian Contribution made
(see the definition of “Canadian Contribution” in section
2 above). If you made a Canadian Contribution to a Roth
IRA, the Election is no longer valid and all subsequent
income earned or accrued in the Roth IRA after that time
should be reported in your Canadian income tax return
as required by the Act (see discussion in section 1
above)._

Even moving a 401K to a Roth while resident in Canada counts as a contribution. This is another thing I suspect few have heard about.


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## Cafreeb12

Stargazer said:


> Here's another thing I learned from expat message boards. The CRA last year asked for all people in Canada who hold Roth IRAs in the states to make an election which keeps them from being taxed by Canada. But if a contribution is made to the Roth IRA while resident in Canada, the CRA will consider it taxable.
> 
> http://www.cra-arc.gc.ca/E/pub/tp/itnews-43/it-news-43-e.pdf
> 
> This is another thing I suspect few have heard about.



I have been reading a lot about IRA's in general lately too. My mother had one and we her children inherited it. I will have to cash out my portion and take a HUGE hit. There's no other way as I can't see any benefit to keeping there. There are few vehicles to move it into and you cannot move it across the border without a hit anyway. *sigh* There's just no good way for duals to do these sorts of investments really. I'll just cash it out and it wasn't a Roth.:tongue1:


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## Stargazer

Cafreeb12 said:


> I have been reading a lot about IRA's in general lately too. My mother had one and we her children inherited it. I will have to cash out my portion and take a HUGE hit. There's no other way as I can't see any benefit to keeping there. There are few vehicles to move it into and you cannot move it across the border without a hit anyway. *sigh* There's just no good way for duals to do these sorts of investments really. I'll just cash it out and it wasn't a Roth.:tongue1:


I know--I wish there were special allowances for expats in situations like this. If you waited until retirement age and started withdrawing from the IRA then, would the tax hit be lower? I know that if someone with an RRSP wants to move it to the US, you take a 25% hit to take it all out at once, or can pay 15% to take it out gradually at retirement age.


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## Cafreeb12

Stargazer said:


> I know--I wish there were special allowances for expats in situations like this. If you waited until retirement age and started withdrawing from the IRA then, would the tax hit be lower? I know that if someone with an RRSP wants to move it to the US, you take a 25% hit to take it all out at once, or can pay 15% to take it out gradually at retirement age.


There isn't really any way to take less of a hit as I'm likely renouncing and the hit would be even bigger if I waited. I know my mother did not intend for us to have to pay so much to cash this out. It just wasn't explained to her that well. My brother and sister will roll theirs over to what is known as an "inheritance IRA" and then decide what to do thus saving them some of the hit. In my case though...I think it's going to be ten percent penalty AND taxes up to thirty percent on top of that. 

I called an accountant here to see if there was some way to roll it over within the company to Canada using a similar vehicle and they've said "no" The tax implications on RRSP's and IRA's are really difficult for ex pats.


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## Stargazer

Cafreeb12 said:


> There isn't really any way to take less of a hit as I'm likely renouncing and the hit would be even bigger if I waited. I know my mother did not intend for us to have to pay so much to cash this out. It just wasn't explained to her that well. My brother and sister will roll theirs over to what is known as an "inheritance IRA" and then decide what to do thus saving them some of the hit. In my case though...I think it's going to be ten percent penalty AND taxes up to thirty percent on top of that.
> 
> I called an accountant here to see if there was some way to roll it over within the company to Canada using a similar vehicle and they've said "no" The tax implications on RRSP's and IRA's are really difficult for ex pats.


Yes, I wish they would make it easier. For example, if we ever move our RRSP to the US, I understand that the CRA needs to take the tax owed, and perhaps the IRS depending. However, once it's cashed out, I couldn't just put the whole amount into an IRA or Roth IRA, because there are limitations. I believe my husband and I could only put $5000 each in our Roth IRAs per year. So I guess we'd have to move it into some sort of taxable investment? That sort of thing...


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## Cafreeb12

Stargazer said:


> Yes, I wish they would make it easier. For example, if we ever move our RRSP to the US, I understand that the CRA needs to take the tax owed, and perhaps the IRS depending. However, once it's cashed out, I couldn't just put the whole amount into an IRA or Roth IRA, because there are limitations. I believe my husband and I could only put $5000 each in our Roth IRAs per year. So I guess we'd have to move it into some sort of taxable investment? That sort of thing...



I have had two firms looking into the best way to do this and neither one knows what to do except cash it out and take the hit. My question is IF I am hit upfront then do I file later? :S I cannot believe how punitive the amounts are to cash out. Taxed on it, I have no problem with that but, the amounts are so high! Since there are one million of us in Canada alone it might be a good idea investment wise if some company would step forward and come up with some solution to this IRA/RRSP thing.


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## Vangrrl

Are Roth IRAs relatively new? I wonder if the Canada-US tax treaty just hasn't yet gotten around to including Roth IRAs and TFSAs and RESPs yet?

I'm hoping this is something that will still be coming. Any idea how often the tax treaty is revamped?


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## Stargazer

Vangrrl said:


> Are Roth IRAs relatively new? I wonder if the Canada-US tax treaty just hasn't yet gotten around to including Roth IRAs and TFSAs and RESPs yet?
> 
> I'm hoping this is something that will still be coming. Any idea how often the tax treaty is revamped?


My understanding is that Roth IRAs used to be taxable in Canada, but that changed, maybe in 2007-2008? That would be helpful if TFSAs and RESPs would get the same treatment RRSPs do.


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## maraba

Cafreeb12 said:


> I have been reading a lot about IRA's in general lately too. My mother had one and we her children inherited it. I will have to cash out my portion and take a HUGE hit. There's no other way as I can't see any benefit to keeping there. There are few vehicles to move it into and you cannot move it across the border without a hit anyway. *sigh* There's just no good way for duals to do these sorts of investments really. I'll just cash it out and it wasn't a Roth.:tongue1:


Cash out when your tax rate is low to minimize the hit.


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