Opening and contributing to Roth IRA while living in Canada

[dry.00]

Hello everyone.
I'm curious if it's ok to open up a Roth IRA and start contributing into it.
I won't be taking any money out of it while living in Canada, but I'm curious if there's anything illegal about investing using Roth IRA while living outside the US.
Also, do I have to pay taxes even if I don't take any money out of the account?

 

[harirajmohan]

Hello everyone.
I'm curious if it's ok to open up a Roth IRA and start contributing into it.
I won't be taking any money out of it while living in Canada, but I'm curious if there's anything illegal about investing using Roth IRA while living outside the US.
Also, do I have to pay taxes even if I don't take any money out of the account?

You pay only for taxable income from other country.
You can invest anywhere.

 

[dry.00]

You pay only for taxable income from other country. Rot
You can invest anywhere.

I see. I guess it won't be a problem if I don't take out the earnings from the investments
Thank you

I'm curious if others on this forum are still investing into US retirement funds as a back up?

 

[harirajmohan]

I see. I guess it won't be a problem if I don't take out the earnings from the investments
Thank you

I'm curious if others on this forum are still investing into US retirement funds as a back up?

Simple: If its taxable in that country then you would file returns and pay taxes. And then you would show that income in Canada(and pay additional tax if any).
Its nothing to do with whether you buy or sell. its all about what was the income for the last year and file it in US and in Canada.

 

[DEEPCUR]

Simple: If its taxable in that country then you would file returns and pay taxes. And then you would show that income in Canada(and pay additional tax if any).
Its nothing to do with whether you buy or sell. its all about what was the income for the last year and file it in US and in Canada.

It's not as simple as that. Retirement and brokerage accounts are treated differently than income taxes. Non US residents cannot open or transact through brokerage accounts. Accounts like IRA, HSA are tax advantaged brokerage accounts. People do that giving US address, but that's not the right way to deal with it. It's not an tax issue, it's a regulatory issue and can put people in deep trouble if discovered. Like it's okay to leave an open account as it is, but operating it as if living in US is a different story.

OP, as far as I know you cannot open IRA or any tax advantaged or non tax advantaged brokerage accounts once you give up US residence. You can continue leave the account you opened, but opening freshly may not be possible.

 

[dry.00]

It's not as simple as that. Retirement and brokerage accounts are treated differently than income taxes. Non US residents cannot open or transact through brokerage accounts. Accounts like IRA, HSA are tax advantaged brokerage accounts. People do that giving US address, but that's not the right way to deal with it. It's not an tax issue, it's a regulatory issue and can put people in deep trouble if discovered. Like it's okay to leave an open account as it is, but operating it as if living in US is a different story.

OP, as far as I know you cannot open IRA or any tax advantaged or non tax advantaged brokerage accounts once you give up US residence. You can continue leave the account you opened, but opening freshly may not be possible.

Darn, it's complicated.
I should have opened it before moving to Windsor...

Would it be a problem if I invested in stocks without any connection to IRA?

 

[DEEPCUR]

Darn, it's complicated.
I should have opened it before moving to Windsor...

Would it be a problem if I invested in stocks without any connection to IRA?

Yes , you cannot keep US brokerage account too.. right way would be to find a Canadian broker and buy US stocks. But people do keep US brokerage accounts giving their friends address. If you try login to some US brokerage websites like Fidelity, Vanguard from Canada, they give you a warning saying that it's meant for US persons only and that you agree for them to track your location based activity.

Opening might not have helped big because you could have invested maximum for one year limit with that. Once you move to Canada, you won't be able to operate it anyways.

 

[dry.00]

Yes , you cannot keep US brokerage account too.. right way would be to find a Canadian broker and buy US stocks. But people do keep US brokerage accounts giving their friends address. If you try login to some US brokerage websites like Fidelity, Vanguard from Canada, they give you a warning saying that it's meant for US persons only and that you agree for them to track your location based activity.

I see.
That'll definitely become a problem later down the road.

I'm planning on moving back to the US in several years and settling down permanently.
Do you have any recommendation on saving up for retirement while living in Windsor?

 

[DEEPCUR]

I see.
That'll definitely become a problem later down the road.

I'm planning on moving back to the US in several years and settling down permanently.
Do you have any recommendation on saving up for retirement while living in Windsor?

You can look for Canadian brokers who let you trade US stocks. Even Canadian ETFs/mutual funds are equally good option. For retirement account.. I'm not sure, there's something called RRSP similar to 401k that let you grow your money tax free.

 

[dry.00]

You can look for Canadian brokers who let you trade US stocks. Even Canadian ETFs/mutual funds are equally good option. For retirement account.. I'm not sure, there's something called RRSP similar to 401k that let you grow your money tax free.

I see. I'll have to look into them.
I'm assuming that once I move back to the US, I can't contribute to RRSP either?

 

[harirajmohan]

It's not as simple as that. Retirement and brokerage accounts are treated differently than income taxes. Non US residents cannot open or transact through brokerage accounts. Accounts like IRA, HSA are tax advantaged brokerage accounts. People do that giving US address, but that's not the right way to deal with it. It's not an tax issue, it's a regulatory issue and can put people in deep trouble if discovered. Like it's okay to leave an open account as it is, but operating it as if living in US is a different story.

OP, as far as I know you cannot open IRA or any tax advantaged or non tax advantaged brokerage accounts once you give up US residence. You can continue leave the account you opened, but opening freshly may not be possible.

OP is moving to Canada and asking on investment accounts and taxes in US.

Yes without being a resident one cannot/shouldnt open the accounts. But with respect to taxes, there is no difference in earning in W2 or on an investment account. Canada doesnt care the income source or investment in other countries as CRA just cares about the taxes.

Most here whoever worked/working have investment accounts and we show additional income from these accounts along with w2(this total income mentioned at IRS is being shown as income from US at CRA).

I dont see any confusion/problem in using the investment accounts while being in Canada.

 

[DEEPCUR]

OP is moving to Canada and asking on investment accounts and taxes in US.

Yes without being a resident one cannot/shouldnt open the accounts. But with respect to taxes, there is no difference in earning in W2 or on an investment account. Canada doesnt care the income source or investment in other countries as CRA just cares about the taxes.

Most here whoever worked/working have investment accounts and we show additional income from these accounts along with w2(this total income mentioned at IRS is being shown as income from US at CRA).

I dont see any confusion/problem in using the investment accounts while being in Canada.

You seem to be missing my point.
I am not saying from a CRA or IRS taxation or income perspective. From stock market/US regulatory compliance perspective, it is not legal to operate/transact US brokerage accounts while not residing in US. If you tell your US broker that you moved to Canada, they'll immediately close your account. Some brokers support, but it's not very straightforward. Someone enquired with robinhood if they can continue to hold the account after moving to Canada, the answer was big no. Many do manage to keep the accounts by giving US address, but just because someone is able to keep, it doesn't mean it's legal.

I suggest going through this thread..

https://forums.redflagdeals.com/us-brokerage-canadians-2101566/

 

[DEEPCUR]

I see. I'll have to look into them.
I'm assuming that once I move back to the US, I can't contribute to RRSP either?

I am not sure.. I don't believe so.

 

[harirajmohan]

You seem to be missing my point.
I am not saying from a CRA or IRS taxation or income perspective. From stock market/US regulatory compliance perspective, it is not legal to operate/transact US brokerage accounts while not residing in US. If you tell your US broker that you moved to Canada, they'll immediately close your account. Some brokers support, but it's not very straightforward. Someone enquired with robinhood if they can continue to hold the account after moving to Canada, the answer was big no. Many do manage to keep the accounts by giving US address, but just because someone is able to keep, it doesn't mean it's legal.

I suggest going through this thread..

https://forums.redflagdeals.com/us-brokerage-canadians-2101566/

I was talking only on the taxes. Rest its up to the OP.

 

[dry.00]

I am not sure.. I don't believe so.

It seems like it's not very well advised to keep them open anyways. It appears there's a 1% tax per month while keeping the account alive while being a non-resident of Canada. Money from these accounts are also taxed in the US, so it appears accountants advise their clients to close it out before moving to the US.