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I am Canadian. I lived and worked in the US until 2021. I am in the process of cashing out my Traditional Roth IRA (I am over 59 1/2). Do I need to pay US Taxes on this?

This is the only money left in the US and I want to cash it all out now. Does this money need to go to my RRSP or can it be used? What's the tax implications?
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I am Canadian. I lived and worked in the US until 2021. I am in the process of cashing out my Traditional Roth IRA (I am over 59 1/2). Do I need to pay US Taxes on this?

Not as far as I can tell.

 

If you are not a US person or US resident alien, then you only pay US tax on income that is either "effectively connected" to work, or that is considered "Fixed, determinant and periodic payments" (FDAP).

 

Pensions and IRAs are considered FDAP, so IRA withdrawals are taxed according to US law even if you no longer live in the US (because they are based on work you did while living in the US).

 

However, Roth IRA withdrawals are not taxable under US law if you are over age 59-1/2 and the Roth IRA has been open at least 5 years.  So, while IRA withdrawals are technically taxable, this one is not as long as it is "qualified" (you are over 59-1/2 and the Roth IRA is at least 5 years old).

 

The trustee may be required to withhold tax, which means you have to file a 1040-NR to get the tax back.  And, if you get a 1099-R, you should probably file a tax return to show that you received the income but it is not taxable (lines 4a and 4b)--otherwise the IRS may assume it is taxable and send you a bill or create a bill against you that could affect any potential return to the US later. 

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