The Canadian in America – Canada – U.S. Income Tax Planning and Preparation

Myth - Lump-sum RRSP/RRIF withdrawals have a 10% withholding

Many times, people have told us we were wrong on the withholding of lump-sum RRSPs/RRIFs withdrawals because the financial institution only had 10% withheld instead of the Canada Income Tax Act mandated 25%. In fact, the confusion lies with the financial institution that processed the withdrawal because 10% is the prevailing rate on smaller lump-sum withdrawals for residents of Canada . The reason they withheld 10% is because there is still a Canadian address on the account . . . they haven't been told you moved to the US and are no longer a resident of Canada for tax purposes. According to the Income Tax Act, the correct withholding on lump-sum withdrawals is 25% and you are required to submit the remaining 15% through a Part XIII tax filing.

With proper planning, there are many tax efficient ways of getting some or all of your RRSPs/RRIFs out of Canada as low as 0% depending on the planning opportunities your unique circumstances present. The other question to ask is "When you have withdrawn the funds and moved them to the US , what will you do?" See the Investment Planning section for some tips on how to structure your investment portfolio to potentially "get back" some more of the withholding you left in Canada.

Income Tax Planning
	Tax Filing Requirements - which tax return do you file? In which country? When?
	Severing Ties With Canada - make sure you are not taxed in both Canada and the US!
	The Canada/US Tax Treaty - learn what it is and how it works.
	Taxation of RRSPs/RRIFs/LIRAs - landmines in waiting.
	Taxation of Interest & Dividends - potential for double tax.
	Taxation of Capital Gains - Which country taxes? Canada/US comparison.
	Taxation of Pensions - company pensions, OAS, CPP/QPP.
	Social Security Number - or Individual Taxpayer Identification Number, why you might need one.
	Taxation of Rental Properties - a paperwork nightmare how to apply.
	Foreign Tax Credit Planning - your ticket to avoiding double taxation.
	Key Differences - Canada/US comparison of tax brackets, deductions, and so on.