# TFSA while working abroad



## mrcheap (Apr 4, 2009)

Hi all,

I'm working in the US on a J1 visa. I originally read the rules about TFSA (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/lgbl-eng.html) and thought I couldn't contribute / withdraw while I'm out of country. 

Looking at it more closely, it seems I'm not a non-resident (I haven't cut ties with Canada or done anything along those lines). Does that mean my TFSA works exactly as if I was living in Canada?


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## Guban (Jul 5, 2011)

If you are still a resident of Canada for tax purposes, then my understanding is that you still get to accumulate TFSA room. However, one price to pay is that you still have to file a Canadian return and pay taxes on the income from the US. This could be a substantial penalty if you work in a low tax state.

Also you may have further US filing requirements besides a 1040NR depending on how much you make and how long you are physically present in the US. See a cross border tax specialist.


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## mrcheap (Apr 4, 2009)

Ahh, excellent, that was my understanding too. Many thanks Guban!


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## Eclectic12 (Oct 20, 2010)

mrcheap said:


> ... I'm working in the US on a J1 visa.
> I originally read the rules about TFSA (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/lgbl-eng.html) and thought I couldn't contribute / withdraw while I'm out of country ...


I don't recall anything about withdrawals ... any links or articles that mention this?




Guban said:


> If you are still a resident of Canada for tax purposes, then my understanding is that you still get to accumulate TFSA room ....


If one is deemed a resident, I thought that contributions were also allowed. Or have I missed something?


Cheers


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## Guban (Jul 5, 2011)

Eclectic12 said:


> I
> If one is deemed a resident, I thought that contributions were also allowed. Or have I missed something?


Yes, contributions, withdrawls, transactions,... everything like normal.


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## james4beach (Nov 15, 2012)

I'm in a similar situation.

One common misconception out there is that "residency" follows from where you are physically spending your time. That's not entirely true. The residency decision is a combination of many factors -- what you elect, what is your permanent address, your history, your intentions, where your driver's license is, your assets, family, ties and even social circles.

Your TFSA/RRSP continues as normal as long as you're a Canadian resident. Like you, I will be living in the US (and even spending most of my time there) but I will be a US non-resident, and continue to be a Canadian resident.

As Guban wrote, you will have to file 1040NR but that may not be all you have to file -- my accountant indicated that I have to file more to indicate to the US government that I am in fact a Canadian resident and am invoking the tax treaty to free myself from the requirement to file detailed documentation about all my Canadian investments.

So to summarize, if you're a "resident of Canada" and only in the US on a temporary basis, then


 Make sure you maintain what a Canadian resident needs (e.g. home address, cdn bank accounts, cdn driver's license)
 File normal Canadian taxes, as a Canadian resident, and report all your worldwide income to CRA
 With the US, file 1040NR (you're a US non-resident alien)
 Consult an accountant to make sure you properly elect Canadian residency over US residency/US person rules
 Be very mindful that the IRS is extremely aggressive, file required forms on time, look into FBAR obligations
 Keep using your TFSA, RRSP and all bank accounts as normal


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## Zeeshanbmerchant (Jan 4, 2014)

I know IRS will soon receive Canadian Bank Information for US Citizens, 

however is it entitled to information on Canadian Citizens working and filing taxes in the US?


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## james4beach (Nov 15, 2012)

Good question.

Due to FATCA, the IRS has forced Canadian banks to report information for US citizens, green card holders, and possibly even non-citizens who have lived or worked in the US.

http://www2.macleans.ca/2013/10/31/...-only-affects-canadian-americans-think-again/

It's very broad legislation and it's just incredible that Canadian banks will have to hand over this information, but that's the reality. *Yes* it could impact you as a Canadian citizen even if you don't have US citizenship. FBAR/FATCA can impact you if you're a US resident.

I am not an expert, but I suggest avoiding becoming a US resident... my earlier post has some pointers (what I learned from my accountant) and the point of all this for me is to avoid becoming a US resident, specifically because of FBAR/FATCA


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## Zeeshanbmerchant (Jan 4, 2014)

^ I dont ever recall the bank ever asking me if i was a US Citizen. I reckon they are going to be scrambling for this information, and desperately at that. 

CRA is actually coming closer and closer to becoming IRS. Probably Role Models


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## james4beach (Nov 15, 2012)

I filled an account application with Scotia iTrade last week and the form asked me Citizenship (obviously indicating US citizenship would flag your account), and also asked

"Are you considered to be a US person?"

Which... wow... is a *very* loaded question. See they're asking that to see if they should send your info to the IRS under FATCA. Do you know how easy it is to become a US person? Spend too many days visiting the US over 3 years and bam -- you're a US Person. Many people are US persons and don't even realize it.

Penalties for failing to report the correct info can be as much as $10,000 per year.


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## Guban (Jul 5, 2011)

Zeeshanbmerchant said:


> I know IRS will soon receive Canadian Bank Information for US Citizens,
> 
> however is it entitled to information on Canadian Citizens working and filing taxes in the US?


As James has mentioned, it doesn't matter if it is a Canadian citizen, or not. It is about residency on this side of the border.

Canada has long shared financial/taxation information, so this is not a change. FATCA seems like it will make it very easy for the US to see what its citizens are not declaring.


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