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I'm an American citizen, but I live and work in another country. Do I still need to file a US tax return?
Yes. Sorry, wish we had better news.
But, what if I'm paying income tax in another country?
Still a yes🤦🏼♀️, unless you give up your permanent resident status -or- renounce your US citizenship. (Worth it to get out of filing a tax return? 🤷🏼♀️ Now that we know that's an option....) The good news is you can likely get a foreign tax credit.
Can I transfer my retirement accounts across the border?
Wouldn't recommend it... unlike a like-to-like rollover or transfer like what you'd expect if you roll an old 401(k) Into an Individual IRA, if you were to take your money across the border, it would be considered an account liquidation, which would likely be subject to taxes and/or early withdrawal penalties. In other words, the Canadian retirement system and the US retirement system don't talk to each other.
Can I still work with my current advisor if I move out of the country?
Depends.... If your account is already set up before you move, your advisor *may* be allowed to manage it for you after you move. You'll want to ask your advisor exactly what they will and will not be able to do for you. For example- I once had a client temporarily work in Thailand, and my firm's policy was that I could not accept any orders from someone who was out of the country, even for a simple fund exchange. She would have had to establish a Power of Attorney in the states to place a simple order on her behalf. Not the end of the world, but you sure want to talk with your advisor before you move.
I can't speak for every company, but I think it's safe to say that many investment firms will not allow advisors to conduct new business (for example, opening a new account) with someone who is living outside the U.S. So again, try to knock out EVERYTHING POSSIBLE before you leave the country. I'm sure you're busy planning the move and all, but I can say with confidence, it'll be a bigger hassle if you put it off.
How do we file our taxes?
Great question, and I'm afraid the best answer I can offer is this: work with a cross-border tax accountant. At a MINIMUM, do this for the first year so you get the hang of things.
What should I do with my American bank accounts?
Well, that depends! Pro's of keeping the American accounts open, in American dollars:
- Diversifies your financial situation by having both Canadian and American funds
- May allow access and/or convenience in accessing US banking services
- Could be convenient if you come back for visits.
Some downsides of keeping the accounts open:
- Accounts may feel scattered more than diversified
- Small balances may not be worth the hassle
If you want to move the funds to Canada but you find the current exchange rate unfavorable, and don't need them immediately, you may consider moving a portion of the funds each year, a sort of dollar cost averaging move. This helps you avoid making a big currency exchange at the wrong time, while also gradually reuniting you with your money by not waiting around for the PERFECT time.
One big thing that I am not equipped to address is how all this stuff will impact any efforts towards citizenship, if that's a goal. So for that, you'd want to find an immigration attorney.