Blog post

Key Points

• The individual recently renounced U.S. permanent residency and established Canadian tax residency in 2022.
• They maintain U.S.-based retirement and savings accounts, with concerns about updating their address and filing a W-8BEN form.
• They seek advice on managing a Roth IRA, including filing an election with the CRA to ensure tax-free distributions in Canada.
• They inquire about using HSA funds for medical needs in Canada and potential complications.
• They are also concerned about the implications of their U.S. government pension after changing residency.

If you need help in reviewing your cross-border tax or investment situation, please feel free to reach out to us here. We look forward to speaking to you soon.

Question

Hello Phil,

Thanks for offering to answer a few cross-border tax questions. Like I said in the chat, I don’t think they will be challenging for you at all!

First a bit of background:

Citizenship and residency

• Canadian citizen by birth
• US LPR status (Green Card)
  • Granded 2013_09_09
  • Card expired 2022_09_09
  • SB officially renounced 2022_10_12
  • US CIS confirmation notice of LPR abandonent received 2023_01_05
  • I was in Quebec all of 2022 and established residence around August 2022 via lease, driving license and health insurance card.

Financial overview

• • I maintain several accounts with Fidelity in the US: Roth IRA, Traditional IRA, Self-employed 401k, HSA, savings account, checking account, credit card. (I have a brokerage account but it has a zero balance and has been unused for a while).
  • I will likely leave the IRAs in the US until retirement.
  • All other bank accounts, credit cards have been closed.
  • I have no other assets or property in the US

Here are my questions:

Q1: I have a US mail forwarding address in San Jose, CA. It is a commercial service (Anytime Mailbox) with a physical street address but it is clearly not residential. The address is associated with all my Fidelity accounts and Fidelity does not seem to care. (I was out of the US temporarily in 2020 and 2021 and had no fixed address in the US). As I have now officially taken up tax residence in Canada, should I change my address at Fidelity to my permanent Canadian address? Are there any downsides to doing this?

Q2: Should I provide Fidelity with a W-8BEN? My understanding is that this US form is used to activate withholding for non-resident account holders. I’ve been told that as long as 1) I continue to file any required (US?) return and 2) the bank/broker does not ask for the form, I should not offer to send it to them. What’s your take on this? (I don’t really fancy filing US 1040 and 8854 every year going forward!)

Q3: Regarding my Roth IRA at Fidelity, I will be 59 ½ in August 2022 and will have the option of withdrawing it tax free (in the US and in Canada). That said, should I nonetheless file an Election with the CRA (attached to my 2021 income tax filing) to defer taxation in Canada of income accrued in my Roth IRA?

Q4: I have a small amount remaining in my HSA. Can I use the funds for medical needs in Canada in the coming years? If so, will this trigger any US reporting or filing requirements?

Q5: Other than providing a change of address, do I have to do anything in particular regarding my US government pension? Is there any scenario by which it might be forfeited?

Thanks in advance for your input!

Regards,

Answer

Hi XXXXXX

Thanks for the questions, I’ll do my best to provide some general answers, however they will be brief:

1.  If you change your address on your US accounts they will likely not allow you to keep the investment in the US. We can help clients transfer up US accounts as we can manage both Canadian and US accounts directly from Victoria.
2. If you no longer have a green card you’ll need to supply them with a W8. However as mentioned above likely best to move everything to Canada if possible.
3. Yes, you’ll certainly want to file the ROTH election to ensure the distributions are tax-free in Canada going forward
4. If the HSA is small I would close it down. Lots of complications on the Canadian side potentially.
5. The government pension should be fine in the US.

We should flush these issues out more via a proper consultation. You can find a time here to connect: https://beaconhillwm.ca/contact/

Hope that helps.

Cheers

Phil