403b: Cashout vs Rollover?

[WaterDad]

So please correct if wrong or point me in the right direction.

Cashout:

Pay the 10% penalty and 20% tax then take money to Canada. Pay income tax to US, and bring it in to Canada via immigration.

Rollover:

Pay the 10% penalty, roll it over to IRA, then roll over to RRSP. File lots of paperwork, pay income tax to US, pay income tax to Canada, recoup 15% via Foreign Tax Credit.



Currently Cashout is in the lead. :/

 

[computergeek]

So please correct if wrong or point me in the right direction.

Cashout:

Pay the 10% penalty and 20% tax then take money to Canada. Pay income tax to US, and bring it in to Canada via immigration.

Rollover:

Pay the 10% penalty, roll it over to IRA, then roll over to RRSP. File lots of paperwork, pay income tax to US, pay income tax to Canada, recoup 15% via Foreign Tax Credit.

Currently Cashout is in the lead. :/

Are you in the US or Canada now?

There is no 10% penalty for rolling over a 403(b) to an IRA. Further, note that if you ARE assessed a 10% penalty by the US, it is a foreign tax credit against your Canadian taxes (see "CRA Internal Interpretation no. 2011-0398741I7 (E) 'Foreign Tax Credit on 10% additional US tax'.") I did this last year and indeed, CRA did credit the 10% as a foreign tax credit.

There are a wealth of articles on how this is accomplished. Yes, there's paperwork, and there is a 15% US tax (if you are a Canadian tax resident) as reduced by the tax treaty - but it CAN be done.

http://www.castanet.net/news/Your-Money/76297/Transferring-US-retirement-plans

 

[WaterDad]

Are you in the US or Canada now?

There is no 10% penalty for rolling over a 403(b) to an IRA. Further, note that if you ARE assessed a 10% penalty by the US, it is a foreign tax credit against your Canadian taxes (see "CRA Internal Interpretation no. 2011-0398741I7 (E) 'Foreign Tax Credit on 10% additional US tax'.") I did this last year and indeed, CRA did credit the 10% as a foreign tax credit.

There are a wealth of articles on how this is accomplished. Yes, there's paperwork, and there is a 15% US tax (if you are a Canadian tax resident) as reduced by the tax treaty - but it CAN be done.

http://www.castanet.net/news/Your-Money/76297/Transferring-US-retirement-plans

Still in the US. I swear...you are just dropping knowledge and hope around here. Thanks.

 

[computergeek]

Still in the US. I swear...you are just dropping knowledge and hope around here. Thanks.

Note that you may wish to wait until you get to Canada to do the actual transfer then (so you can take advantage of the treaty benefits, for example.)