Canadian pension converted to Locked-In Retirement Account (LIRA) - tax implications for Canada/US dual ciitizen

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Atown575
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Canadian pension converted to Locked-In Retirement Account (LIRA) - tax implications for Canada/US dual ciitizen

Post by Atown575 »

I am an American living in Canada for several years. I left my employer who was still offering a DB plan and now have to convert it into a LIRA. I have been looking online for US tax implications of this conversion, but haven't found anything. Has anyone done this or know if there are any tax implications? Total amount to be converted is about C$40k. Is this looked at similarly to a RRSP? Thanks
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LadyGeek
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Re: Canadian pension converted to Locked-In Retirement Account (LIRA) - tax implications for Canada/US dual ciitizen

Post by LadyGeek »

Welcome (again)! Atown575 has also posted this question in the Bogleheads forum. See: Canadian pension converted to Locked-In Retirement Account (LIRA) - tax implications for Canada/US dual ciitizen

A Bogleheads forum member has posted some helpful info which I'll repeat here:
overthought wrote: 28 Oct 2017 08:05 I wasn't able to register at Financial Wisdom (my browser rejected it for lack of https support), so I'll give a bit of an answer here:

I was in basically the same situation a few years ago. As far as I understand, the IRS has recognized LIRA for what it is for a long time now and RRSP gained similar treatment in 2015 or so***. So you shouldn't expect any particular penalties as long as you declare the account properly every year in perpetuity.

Managing the LIRA portfolio is another matter entirely. My LIRA custodian told me that only a custodian licensed to operate in both US and Canada could honor buy/sell orders within the LIRA. But that claim may have been influenced by the incredibly fee-laden "self-managing portfolio" fund he was pushing. I need to do further research there, the darn thing hasn't grown at all in 3 years because the fees always seem to match growth.

(***) This is in contrast with TFSA and RESP accounts. Heaven help you if you own either of those, doubly so if you haven't been filing the significant tax paperwork the IRS requires every year.

As a general note: every US expat should become *very* familiar with IRS publication 54, which lists a lot of the gotchas and hoop jumping that are required to avoid tax problems.

DISCLAIMER: I am neither lawyer nor accountant!
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