Author Topic: Can a NR alien with tIRAs and Roth IRAs in the US do Roth conversions?  (Read 217 times)

EnjoyTheJourney

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The situation:

Canadian citizen lives as a long term resident in the US (green card holder) and who ...
- will leave the US before age 59.5 and will start taking SS at age 70
- would like to reduce RMDs from a rollover tIRA account before reaching age 70 because SS + tIRA RMDs would push income into higher tax brackets
- would like to use Roth conversions to fill out lower tax brackets while not in the US, after reaching age 59.5 and before age 70

All investment accounts would be set up before leaving the US, which would ultimately lead to a rollover IRA account and a Roth IRA account at the same broker.

Leaving the US would mean changing to "non resident alien" and I'm not certain that I can do Roth conversions as a non resident alien. I'm also not certain that I can continue to file as "married, filing jointly" while a non resident alien (spouse is not a US citizen, either)*. I've done research into this topic, but as of yet I've found no clear answer.

* This affects the amount of income one can have for each tax bracket, which has clear implications for how much money can be converted to a Roch each year.

jojoguy

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Re: Can a NR alien with tIRAs and Roth IRAs in the US do Roth conversions?
« Reply #1 on: January 02, 2019, 05:01:56 AM »
You asked a question that I also needed to ask. My wife is from Southeast Asia with a green card as well. We plan on traveling back and forth once we become FI. We were wondering if her status would complicate matters?

flipboard

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Re: Can a NR alien with tIRAs and Roth IRAs in the US do Roth conversions?
« Reply #2 on: January 02, 2019, 09:57:43 AM »
Roth conversion as an NRA might either be useless or actively harmful, you need to figure out how all these accounts are taxed *in your specific situation (i.e. country) first*.

The key thing to note is that US taxes aren't the main issue, taxes in your country of residence are generally the sticky point.

The first thing to do is check whether your country and the USA have a dual-taxation agreement. If there is one, it will govern how withdrawals from 401k's/IRA's/Roth's are taxed. If the US doesn't tax the withdrawal you can essentially ignore US tax law, in other cases things might get more complicated. (RMD's I'm less sure about, but since you aren't required to file US taxes it would be hard for them to even apply the RMD.)


As it turns out, Canada does have a dual tax treaty, and you can find out a little more about Roth's if you search the web. Here's the first link I found:
https://www.expattaxprofessionals.com/roth-ira-taxation-expats-canada/

Now that link doesn't talk about Roth conversion, but based on the next link it sounds like only Canada taxes any withdrawal (modulo a US tax withholding which you claim back in Canada). Since only Canada is taxing the withdrawal, you only need to care about Canadian tax law, and it sounds like a conversion won't really work.
http://madanca.com/blog/steps-withdrawing-ira-401k-returning-canadian/

TL;DR: RMD's might not even apply, reducing the incentive to convert to Roth - but you can move the money out of the 401k/IRA and into Canada to completely avoid worrying about the US.


For "Southeast Asia" I can't really help, but similar to the example above: you just need to figure out tax agreements between country of residence and the US, and taxation in country of residence, and you'll be much better prepared to figure out taxation. As long as someone holds a greencard they'll be taxed in the US though, regardless of any additional taxes that the US assesses (in some cases, the country of residence taxes first, and that tax is credited towards the tax the US assesses on retirement withdrawals - but it's a country specific thing).

EnjoyTheJourney

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Re: Can a NR alien with tIRAs and Roth IRAs in the US do Roth conversions?
« Reply #3 on: January 02, 2019, 08:08:27 PM »
I'm not able to speak to Southeast Asia, either. But, I did get referred on another set of boards to the following web resources that were particularly helpful:

https://www.sunnet.sunlife.com/files/advisor/english/PDF/IRA_401k_to_RRSP.pdf

http://garygauvin.com/WebDocs/CCRA/CRA%20Roth%20Guidance.pdf

The short answer is that if a Canadian citizen converts tIRA holdings to Roth IRA holdings after having left the US and after becoming a Canadian resident, then all distributions from the converted Roth IRA must be declared as income in Canada. Practically speaking that means it is key to do all Roth conversions before leaving the United States for Canadians who plan to return home.