I didn’t know that you can pay the penalty without having to withdraw the excess contribution. My understanding was that you have to withdraw, pay the penalty and then you can contribute again once your contribution room expands in 2022. Let us know if that’s not the case after your meeting with the RRSP advisor.
it’s a waste of time by going ahead with 5% RRSP payroll contributions with 5% employer match. it would trigger 1% penalty per month having excess of $2K, lessen the contribution room for 2022 which triggers the same process again in 2023 and the whole process would eventually settle down by 2024 plus additional paperwork overhead.
The bonus got deposited recently so spoke to Manulife to reverse the transaction to go to checking a/c and is in talks with company plan admin to see if that’s possible.
If bonus gets reversed and payroll contributions stopped immediately then this mess will settle since the balance wouldn’t exceed by $2K despite of employer automatic 1% RRSP contributions.
There is NO WAY to take advantage of employer match in 2021 and it will let go per RRSP advisor.
fingers crossed on bonus reversal as it would levy 1% penalty for Sep if that didn’t happen plus additional paperwork to pay the penalty. I wish it would be something like a bill to pay online, but it seems it’s not the case.
The other option is to pay 1% penalty every month until Feb 2022 and move the funds (cash withdrawal and deposit) to TFSA and it really depends upon the math on how much tax penalty levied vs how much gain thru employer match to go with this option.
There seems to be one more option to request CRA to waive off the penalty, but again the outcome really depends on how much efforts were put in to good faith to avoid over contribution.
Does anyone know any cross border tax accountant preferably in Windsor, ON who can deal with RRSP vs Non resident for tax purpose to see if opens up additional avenues??
any others thoughts are welcome!!!
Gregory Grant, Windsor
Gregory D. Garant CPA, CA
631 Pitt Street West
Windsor, Ontario
N9A 5M5
Tel: 519.252.1133
Fax: 519.252.4811
www.garantcpa.ca
I had contacted him for US-Canada taxes this year but ended up going with Liberty since they were slightly less expensive. But Garant’s office seems like a good place to start based on that conversation.
1 Like
Thanks @avj for sharing contact info. much appreciated!!!
My company has reversed RRSP contributions and did direct deposit my contributions amount back after deducting taxes and the RRSP balance now become $0. RRSP benefit will start from 2022 as I’m not eligible for this year per my company.
Will definitely approach Garant first and then likely go to Liberty if not satisfied with the service/outcome during tax filing.
@avj, I contacted Gregory Grant and explained about my situation. Would you mind sharing how much they quoted in your case and how much liberty quoted?
Lived, worked in US on H1B (US payroll) until from Jan 1st until mid Jul 2021. Moved, lived & worked in Canada on Work Permit (Canada payroll) from mid Jul until 31st Dec.
They are estimating up to $500 CAD for single filing with just W2, T4 and couple 1099-INT’s.
They are saying it’s still complex filing as US filing need to be paper based should include Canada income. Canada filing can be electronic should include US income.
I would become tax resident of US for having lived in US for more than 180 days in 2021 and lived last 3 years in US.
I would still need to disclose US income on Canada filing to get tax credit.
When I contacted H&R Block week ago they said. US filing first with just W2 income followed by Canada filing with both W2 +T4 to get tax credit on US return.
I’m still confused…
Anyone in the same boat filing cross border taxes??? Can you recommend any good affordable CPA’s or Agency?
If you’re still confused then you should just let a professional handle this for you.
$500 for both the US and Canadian tax returns seems very reasonable to me.
Based on what you’ve described it does sound like you were a US resident for Tax purpose and a Canadian non resident. So what H&R block is telling you is wrong. As a US resident you need to report and pay taxes on your worldwide income. You’re not going to get a credit from the CRA as a non resident. It sounds like the CPA that you’re talking to is correct, the US return will need the Canadian income on it too. The Canadian tax return will have the US income on there but for non residents foreign income is tax exempt.
I think you should just go ahead with the CPA that you’re talking to or get another opinion locally (google helps finding these), I would advice against H&R Block and other similar tax prep shops (though I don’t have personal experience with these) due to what I read online elsewhere where people complain about how they’re not equipped to handle complicated cases.
Thanks for quick reply…
I reached out to Liberty tax in Windsor to see what they say. It seems like they don’t have expertise in Windsor to handle US returns, but they recommended one CPA in Tecumseh mall to get both returns done.
Surprisingly, after telling all my details as above and told about H1B status in US and Work Permit in Canada meaning neither citizen/pr of US or Canada. She recommended US filing doesn’t need Canadian income included. Canadian returns must include both US and Canada income. Insisted, there is 100% chance CRA audit on Canadian returns as they don’t have US filing details within their system which they will furnish upon request by CRA.
I’m on same page will ignore H&R Block.
In limbo again after two different opinions from two CPA’s.
Strange that two CPAs are giving you different conflicting information.
Could you ask them why the US return needs Canadian Income and vice versa.
Ideally they should be telling you that you need to file as resident in one of the countries and non resident in the other.
It sounds like one of them is considering you a resident of Canada for tax purposes and the other one is considering you a tax resident of the US.
It might also be asking for clarification around this particular issue (determining residence) on reddit at r/personalfinancecanada some mods and posters are pretty knowledgeable about cross border taxes.
No matter what they say, both CPA’s agree that Canadian returns need to include US filing copy.
I guess they both defer to the point H1B holder need not include Canada income on US filing versus doesn’t hurt to include Canada income on US filing to be on the safer side. It may be due to lack of knowledge or experience in dealing with these kind of situations especially US H1B to Canada Work Permit holders.
Upon my research, it’s obvious that I become resident for tax purposes due to substantial presence (>180days) need to disclose world wide income in US filing per IRS.
I think I should be considered as a Deemed NR per CRA
Thanks for sharing reddit link
So if they’ve both deemed that you are a resident for US tax purposes, then you must declare your worldwide income to the IRS. There is no benefit in excluding your Canadian income from your US tax return, if anything you should get a refund or tax credit for the taxes paid in Canada on your US tax return.
As for the Canadian return, since you’re a non resident for tax purposes; you will only be taxed on your Canadian earnings. You can show your US earnings, that shouldn’t be any problem, however you’re not going to get a tax credit or refund based on any taxes that you’ve paid to the IRS from the CRA. You should get a decent refund from the CRA because you’ve potentially only worked in Canada for less than half a year whereas the taxes from your paycheck would have been deducted assuming that you’d been working for the full year.
I ended up filing w/ CPA in Windsor who’s licensed to do both US & Canada returns. US (paper) + Canada (online) + FBAR (online) filing total costed close to $500. I feel it’s worth and would recommend doing with CPA in 1st year of moving as US filing would be complicated with Dual status returns and Canada returns will have 100% chance of audit due to not having US return info with them.
1 Like
Thanks for the update, I think it’s going to be helpful for folks to have an idea of what this costs as well.
I think $500 is a pretty fair fee to take care of 2 tax returns and the peace of mind in not having to deal with CRA reviews.
1 Like
I eventually went with H&R here in Canada for US+Canadian taxes and it was in the ballpark of CAD 500-600 IIRC (since US taxes can only be filed by tax accountants certified to do so, they charge more). For Canadian taxes only it is roughly around 150-200.