# IRA-Roth IRA



## rvnls55

Does anyone know if a US non-resident living in Canada and earning Canadian$ salary can contribute to existing IRA or Roth IRA in the States?


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## Bevdeforges

Moved your query over here because it's largely a tax issue.

The main thing seems to be that, in order to contribute to a traditional IRA (not sure about the Roth variety), you must have taxable US income that is considered "earned" income (i.e. salary and the like). Means that you can't take the FEIE to exclude your salary income. (Just be careful if you have been doing this that you don't "revoke" your election to take the FEIE. It can be tricky to re-invoke the choice in later years.)
Cheers,
Bev


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## maz57

It can be tricky with the US institution holding the account if you are not physically resident in the US. Some will not allow non-resident account holders at all. Some will allow the account to sit dormant but won't allow any transactions.

Check with your US institution, but proceed carefully if they don't already know you live in Canada; you could find yourself with a closed account and a big problem. They really don't like it if you fail to disclose residence information because it can put them in violation of their securities license.

An IRA contribution will help with your US taxes but not Canadian and an RRSP helps with your Canadian taxes but not US.. This has been a known problem with the US system for many years.


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## BBCWatcher

The direct answer to your question, though, is yes.

You have to do a bit of research, though. The rules are a bit complicated, and the U.S.-Canada tax treaty governs. Also, Canadian residents are subject to foreign asset reporting -- what a surprise  -- that may apply if you hold U.S. assets such as IRAs and 401(k)s. But there are scenarios where U.S. IRAs/401(k)s can work well.

To elaborate slightly on what Bev mentioned, you must have U.S. tax_able_ (not necessarily U.S. taxed!) earned income (from work -- wages, salary, tips, etc.) to qualify to make a Traditional or Roth IRA contribution. If you take the Foreign Earned Income Exclusion, and if your earned income is fully shielded by the FEIE, then you cannot make an IRA contribution. To solve that problem you can either skip the FEIE (and take only the Foreign Tax Credit), or (if possible) earn above the FEIE/FHE. If you earn above the FEIE/FHE you may earn too much to make a direct IRA contribution (due to income limits), but then a "backdoor Roth IRA" may be an option.


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## Nononymous

BBCWatcher said:


> Canadian residents are subject to foreign asset reporting -- what a surprise  --


No complaints there. Luckily Canadian *non*-residents are not subject to any reporting at all.


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## maz57

BBCWatcher said:


> Also, Canadian residents are subject to foreign asset reporting -- what a surprise  -- that may apply if you hold U.S. assets such as IRAs and 401(k)s. But there are scenarios where U.S. IRAs/401(k)s can work well.
> .


OK, BBC, let's not be too smug here, OK? Yes, Canadian residents are subject to foreign asset reporting, but only if over a reasonable $100,000 threshold (vs. the minuscule US $10,000 threshold for FBAR). Canada taxes the worldwide income of Canadian RESIDENTS, distinctly different from the US which taxes the worldwide income of US citizens (or persons!) regardless of where they live. Canadians who do not live in Canada don't have to report anything to the Canadian tax authority. Canada is consistent with international taxation standards; the US is in it's own separate universe and is an outlier.

The US continues to insist on taxing income not earned in the US by people who do not live in the US, mostly based upon their birthplace.


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## BBCWatcher

At least FinCEN Form 114 is e-filed. You cannot e-file Form T1135 -- it has to go on paper in postal mail.

How....quaint. 

More seriously, I think context and accuracy are important. This is important context. Not saying you did it, but I have read comments that foreign financial account reporting in and of itself is somehow uniquely evil and American. No, it really isn't. Some countries even have (gasp, horror) wealth taxes flowing from these reports.

I have yet to find a country with a tax and financial reporting system I couldn't quibble with.


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## Bevdeforges

BBCWatcher said:


> At least FinCEN Form 114 is e-filed. You cannot e-file Form T1135 -- it has to go on paper in postal mail.
> 
> How....quaint.


OK, if we're comparing systems, let's just add that your FinCEN form MUST be filed online. There is no paper alternative (except for those who file on paper in protest). 

This is fine for those of us equipped with electronic gadgetry, but it causes a certain amount of problems for people without access to a computer or without computer knowledge.
Cheers,
Bev


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## maz57

BBCWatcher said:


> At least FinCEN Form 114 is e-filed. You cannot e-file Form T1135 -- it has to go on paper in postal mail. How....quaint.


T1135 at least is filed with your tax return if it must be filed at all. There is no separate "Financial Crimes Enforcement System", no different due date, and, most of all, $100,000 is a reasonable threshold. The CRA doesn't operate on the default assumption that you must be a tax evading criminal simply because you have foreign assets.

The $10,000 FBAR threshold dates from the early 1970's. So big deal, you must now efile it....if you have the right browser on you computer (a browser known to be a security nightmare). Now, that's what I call "quaint".


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## maz57

BBCWatcher said:


> Not saying you did it, but I have read comments that foreign financial account reporting in and of itself is somehow uniquely evil and American.


Foreign asset reporting is the international norm. What is uniquely evil and American is Citizenship Based Taxation.


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## ForeignBody

maz57 said:


> Foreign asset reporting is the international norm. What is uniquely evil and American is Citizenship Based Taxation.


Evil? Seriously? What we saw in Paris last week was evil.


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## Nononymous

Obviously, there are degrees of evil. CBT is a relatively minor evil.


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## maz57

ForeignBody said:


> Evil? Seriously? What we saw in Paris last week was evil.


Agreed, what happened in Paris is evil on a far more profound scale than CBT. Doesn't excuse the US, though, for the everyday evil it's inflicting on it's expats for no good reason. 

In fact, one of my greatest concerns is what will happen when all this personal and financial information collected by the US government under FATCA eventually falls into the wrong hands as it inevitably will.


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## Bevdeforges

Not sure I'd categorize CBT as "evil" - but an article in today's NY Times does offer a bit of perspective on the whole compliance issue (especially from overseas):
http://www.nytimes.com/2015/01/15/b...column-region&region=top-news&WT.nav=top-news
Cheers,
Bev


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## BBCWatcher

maz57 said:


> In fact, one of my greatest concerns is what will happen when all this personal and financial information collected by the US government under FATCA eventually falls into the wrong hands....


One of your greatest concerns _in life_? That'd be atypical. If I were asked, I'd rank that one somewhere below my concerns about my most distant acquaintance's minor toe fungus problem, as an example.

If you are losing sleep over this issue there are some easy solutions. Cash under your mattress isn't IRS Form 8938/FinCEN Form 114 reportable, for example. (Nor are canned goods, in any amount.) Or you can just wire me enough money to get below US$10,000. If you do that before December 31 you won't have any reporting to worry about from tax year 2015.

Yes, I'm joking. Again. Except for the wiring me your money part.

More seriously, my understanding of IRS Form 8938/FinCEN Form 114 is that you are only required to report the "master" account number for your holdings at each applicable financial institution. If you know how financial institutions work you shouldn't be concerned about account numbers per se, but leaving that aside, one approach that seems perfectly compliant is to keep the bulk of your funds in, say, certificates of deposit (called fixed deposits here in Singapore) while your master account number (usually your checking/current account) is the one that gets reported. As long as you're reporting the high balance across all those funds, that's OK -- that's what the instructions seem to indicate to do.

What your bank reports isn't something you can do anything about unless (a) you know exactly what they do; (b) you don't like it; (c) you find another financial institution with different practices that you prefer. But all banks in developed (and most developing) economies have governmental reporting requirements and have for decades, so nothing new there. Don't like that? See above about the mattress.


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## maz57

BBCWatcher said:


> One of your greatest concerns _in life_? That'd be atypical. If I were asked, I'd rank that one somewhere below my concerns about my most distant acquaintance's minor toe fungus problem, as an example.


Never said that. I said concerns about what will happen when the data is breached, etc, etc. It will happen eventually because governments aren't very good at keeping things secure. Snowden proved that.

Truthfully, I'm far more concerned about what's for dinner tonight or getting t-boned at an intersection. Pretty typical, I'm afraid.


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## maz57

BBCWatcher said:


> More seriously, my understanding of IRS Form 8938/FinCEN Form 114 is that you are only required to report the "master" account number for your holdings at each applicable financial institution. If you know how financial institutions work you shouldn't be concerned about account numbers per se, but leaving that aside, one approach that seems perfectly compliant is to keep the bulk of your funds in, say, certificates of deposit (called fixed deposits here in Singapore) while your master account number (usually your checking/current account) is the one that gets reported. As long as you're reporting the high balance across all those funds, that's OK -- that's what the instructions seem to indicate to do.


You forgot gold coin in a safety deposit box or a mason jar buried in the backyard; also not reportable. And from time to time not a bad investment either.


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## maz57

Bevdeforges said:


> Not sure I'd categorize CBT as "evil" - but an article in today's NY Times does offer a bit of perspective on the whole compliance issue (especially from overseas):
> http://www.nytimes.com/2015/01/15/b...column-region&region=top-news&WT.nav=top-news
> Cheers,
> Bev


 Interesting article. Let's hope the IRS deploys it's limited resources on getting refunds out to the taxpayers who are expecting them rather than chasing expats who likely owe nothing.


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