Page 1 of 2 12 LastLast
Results 1 to 15 of 21

Thread: Question For The Tax Planning and Investment Experts

  1. #1
    Veteran of Misadventures
    Join Date
    Jul 2003
    Location
    U.S.A.
    Posts
    13,128

    Question For The Tax Planning and Investment Experts

    I just got through doing my American federal and state income tax returns on Turbo Tax, and one of the questions that came up was whether I had a Canadian registered retirment savings plan (RRSP) or Canadian registered retirement income fund (RRIF).

    What are these plans, and what advantages are there to putting my money in one of these plans? I guess since Turbo Tax is asking me about it, other Americans must be doing it, and I am wondering what advantage there is, if any, to these retirement plans. I assume these are like IRAs but what advantages do they provide?
    Last edited by EagerBeaver; 02-04-2007 at 06:58 PM.

  2. #2
    RRSP contributions let us reduce our effective income in a given working year (hence less income taxes) and also the contributions are sheltered from any taxes on the gains, dividends, etc. until the money is withdrawn from the shelter.

    Here's an article that might be of interest from a Canadian turned American:

    http://www.canadatotwincities.com/rrsp-old.html

  3. #3
    I am me, too!
    Join Date
    Mar 2004
    Location
    If only I knew...
    Posts
    2,214
    My knowledge of US taxes is no tuch but I think you guys call it 401K plan. It's money you put aside for when you retire. When you put money on this plan, it's taken out of your net income so you don't pay taxes on it. It then grows without being taxed until you retire or cash it out. Some plans are paid jointly by employees and employers, some are only by employee or, more rarely, only by employer.

  4. #4

    Rrsp

    Quote Originally Posted by EagerBeaver
    What are these plans, and what advantages are there to putting my money in one of these plans?
    In order to contribute to a RRSP, you have to earn income and pay taxes in Canada. You are allowed to contribute a percentage of your Canadian income to a RRSP. I forget the percentage, but the max is around $18k per year and changes every year.

    You don't pay taxes on this amount and the money invested in the RRSP grows tax free, until it is pulled out of the RRSP.

    For people who haven't contributed, you can back contribute for previous years. This is an interesting option for people that stumble onto a chunk of change for whatever reason.

    I don't know how a 401k works, but people often compare RRSPs to 401ks

    There is an age by which you have to switch your RRSP to a RRIF and start pulling the money out.

    Hope this helps

  5. #5

    Rrsp

    Hello,

    The RRSP (Canada) is similar to 401K. The IRS put this section because their is US citizens or US resident that worked previously in Canada and invested in them. Without being 100% sure, these people have to declare any capital gains realized within their RRSP for the previous year (my taxes courses are far away). If you do not have any RRSP in Canada, do not pay attention to this section. Do not forget to make your contribution in your 401K though.
    Last edited by Franz; 02-05-2007 at 02:53 PM.

  6. #6
    EB,

    RSP (or RRSP) = IRA....

    On an IRS form, this probably only applies to US residents who have lived and worked in Canada during the tax period in question (ie: 2006). If you have not lived in Canada, or earned income in Canada, then there is probably no way that you could contribute to an RRSP...

    IRA and 401K contributions are also deductable in Canada for Canadians who lived/worked in the US but who are filing in Canada...

    good luck!!

    BD

  7. #7
    Registered User
    Join Date
    Jan 2004
    Location
    Anywhere and everywhere
    Posts
    1,911
    First, only taxpayers earning an income in Canada can contribute to an RRSP. This can be a U.S. citizen working in Canada as well. If a U.S. citizen has an RRSP in Canada, if they are here or if they have returned to the U.S. and have opted to keep the plan they MUST report all the income earned by the plan on their tax returns, even if it is tax sheltered in Canada.

    Second, forget the RRIF. This is an RRSP plan which has now been converted for the purpose of removing funds in the form of an income. There is no provision enabling anyone Canadian or American to make a contribution into a RRIF. This then is ONLY a plan to remove money from.

    Any questions, feel free, this is what I do for a living.....LOL
    " You actually get to choose your friends, family.........well..."

  8. #8
    Quote Originally Posted by Jou
    Guys I've a tax specialist in my team but his rate is around 250$ an hour!
    But he's jewish which is a enormous advantage when comes the time to talk about tax....
    What bearing does him being Jewish have in terms of an advantage when it comes time to talk about tax?

  9. #9
    GUYS I just decided to delete my post. Many people here have no sense of humour. Even if my post was a little bit sarcastic, I can't believe I received a ¸PM mentionning:

    - Jewish have been persecuted for 1000 years
    - accusing me for beeing a racist

    HEY RELAX, TAKE A BREATH, TAKE A STEP BACK!!!

  10. #10
    I am me, too!
    Join Date
    Mar 2004
    Location
    If only I knew...
    Posts
    2,214
    Come on Jou, you should reasonably accomodate your accountant!

    Ok, sarcastic too...

    Everybody on this board got to be politically correct.

    But it does seems Jews have a thing for business. Nothing bad about this! They're good at it!

  11. #11
    thank god! I was about to kill my self for being such a NAZI...but the last 2 posts makes me change my mind!!!!

    Believe me my tax specialist is well accomodated...He costs me a fortune every year!!!!!!! He's not working during the SHABBAT even if I'm working on Shabbat days.

    But at the end of the year is really helping me much saving paying taxes.
    Promess, to punish my self for posting sarcastic...I'll send money to Israel supporting found this year.

  12. #12
    Veteran of Misadventures
    Join Date
    Jul 2003
    Location
    U.S.A.
    Posts
    13,128
    Hey guys,

    Thanks for the responses. What prompted my question is that I have been using Turbo Tax for a few years now and I don't remember getting the question about RRSPs and RRIFs until this year. I do have my own IRA to which both my employer and I make contributions, and I assumed that these plans are similar. I was just curious as to why Turbo Tax is asking me about them. I thought perhaps Americans were investing in them and maybe I was missing out on something here. It's good to know that I wasn't.

    With the IRAs that we have in the USA, there is a steep penalty assessed if you withdraw any monies from the plan prior to age 59.5. Do the RRSPs and RRIFs have similar rules to discourage withdrawals?
    Last edited by EagerBeaver; 02-06-2007 at 08:42 AM.

  13. #13
    I am me, too!
    Join Date
    Mar 2004
    Location
    If only I knew...
    Posts
    2,214
    It must have sniffed some of your SPing experiences in Canada while you were writing reviews...

    Seriously, any way you would have entered something about working or simply visiting Canada? Canadian tax refund stuff you may have to declare in USA maybe?

  14. #14
    Registered User
    Join Date
    Jan 2004
    Location
    Anywhere and everywhere
    Posts
    1,911
    Tax software in both Canada and the U.S. allow for the fact that you may have contributed to an RRSP or are taking income from an RRIF in Canada. For Canadians the same rule applies if they had an IRA or a 401k, the income must be reported to the Canadian gov't.
    " You actually get to choose your friends, family.........well..."

  15. #15
    Veteran of Misadventures
    Join Date
    Jul 2003
    Location
    U.S.A.
    Posts
    13,128
    Quote Originally Posted by metoo4
    Seriously, any way you would have entered something about working or simply visiting Canada? Canadian tax refund stuff you may have to declare in USA maybe?
    metoo4,

    I did not get any Canadian tax refunds in 2006. I am not sure if a foreign tax refund is reportable if I had gotten one. I know that I got an income tax refund from the State of Connecticut in 2006 and I am prompted to and did report that (a form is even sent out on this), but there is no prompt in Turbo Tax requiring me to report any refunds from foreign governments (at least I don't recall this question, but last year it would not have applied to me). From the perspective of Turbo Tax, they are gifts and not income. I am not sure whether the law looks at it the same way, as I have not studied the Internal Revenue Code on this point.

    I did get Canadian tax refunds in past years on hotel stays, but never reported them as income and never believed I was required to. Currently, all of my hotel bookings are done on Priceline and Hotwire and there is no Canadian taxes to refund as these are American companies.

    When I did in the past do direct hotel bookings, and was eligible for refunds of the Canadian taxes, I found the process so onerous and cumbersome and the refunded monies were so minimal that it was a waste of my time. Eventually I started using Priceline, Hotwire and other online services to book hotels and it became a moot issue.

    The net result of my tax returns this year was a refund from the federal government but I owe money to the State of Connecticut. I come out ahead when the refund and the payment are washed against each other.
    Last edited by EagerBeaver; 02-06-2007 at 02:09 PM.

Page 1 of 2 12 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •