WSJ: Deadline Looms For Roth Holders

WSJ: Deadline Looms For Roth Holders

April 8th Wall Street Journal:-

Wall Street Journal & Pacifica Perspectives

TORONTO (Dow Jones)–Canadians who have worked in the U.S. and Americans who have permanently crossed the border may have a crucial decision to make before the month is out.

Residents of Canada who hold a Roth Individual Retirement Account – the U.S. version of the Tax-Free Savings Account – must file an election with the Canada Revenue Agency by April 30 in order to give the Roth IRA the same tax-free status it has in the U.S.

If they don’t, the Roth IRA could be subject to Canadian taxes as a non-registered investment account, says Jennifer Horner, a senior manager, tax, at consultancy BDO. Moreover, she notes, as the Roth IRA is held in the U.S., those who don’t file the election may then need to fill out special Canadian reporting forms depending on how the Roth plan is constituted. The “kicker” there, she adds, is that if holder is required to fill out one of the reporting forms and doesn’t, the financial penalty is fairly hefty: C$25 a day to a maximum of C$2,500.

But there may also be disadvantages to making the election, argues Paul Bains, managing director of Pacifica Partners Capital Management, a British Columbia-based boutique investment firm specializing in cross-border wealth management. Roth holders who have no plans to return to the U.S. to live might be better off liquidating the proceeds and investing the funds in a Canadian vehicle such as a TFSA, he says.

Americans resident in Canada who plans to stay in the country less than five years – athletes, academics and corporate executives come to mind – should hold on to the Roth and make the election. However, if the individual stays more than five years and then moves back, Bains warns the CRA may invoke the “look-back rule” which could trigger capital-gains taxes on any earnings within the Roth IRA while that person lived in Canada.. To continue reading please visit the Wall Street Journal

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This report is for information purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. The information contained in this report has been compiled from sources we believe to be reliable, however, we make no guarantee, representation or warranty, expressed or implied, as to such information’s accuracy or completeness. All opinions and estimates contained in this report, whether or not our own, are based on assumptions we believe to be reasonable as of the date of the report and are subject to change without notice. Past performance is not indicative of future performance. Please note that, as at the date of this report, our firm may hold positions in some of the companies mentioned.

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