New in Waterloo: Need bank account, credit card, grocery stores, auto insurance, and snow tires

When I moved to Canada I had trouble getting credit cards and auto insurance.

One of my friends, who was a postdoc at McGill, told me that I should first get an American Express card in the USA.  After a few months AmEx will let you apply for a global transfer of credit, converting your US credit card to a Canadian one.  I got a no-fee Canadian card with some airline benefits.

I also had trouble finding reasonable auto insurance, because I didn’t have a Canadian driver’s record.  Eventually one of the guys in my building recommended Dan Proctor, an agent at Keil Dadson Insurance Brokers, who got me a good rate from Dominion of Canada.   As I recall, I had ordered a copy of my driving record from the state of Massachusetts before I came to Canada.  I also had to provide a statement from my US auto insurance company about my claims history.   

If you get Canadian auto insurance then consider asking them about extending coverage to any rental-cars you rent, since this isn’t automatic. BTW, if you’ve just moved to Canada from someplace sunny like California or Hawaii, be warned that it’s a good idea to have some snow tires for the winter.  The rubber doesn’t stand up well to summer use, but they’re better on ice than all-season tires.  (Don’t even think about using California summer-only tires, or you’ll crash for sure.)

I found a free checking account from PCfinancial, which operates psuedo-branches out of Zehr’s supermarkets. (Zehr’s is cheaper than Sobey’s supermarket but nowhere near as good as the St. Jacob’s Farmer’s Market or Herrles for produce.)  PCfinancial has no monthly fee, free access to CIBC ATMs. Their debit card also gets you a little money back from shopping at Zehr’s. In the end PCfinancial annoyed me with fees for international transfers, so I opened a second (dual) account with the more friendly Education Credit Union, not far from the University of Waterloo campus.  I used currencyfair to transfer money to from Canada to the USA.

After I left Canada I regretted not having an existing relationship with a financial institution that could move my Canadian pension to a US-friendly self-directed LIRA (Locked in Retirement Account), but that will be the subject of another post.  I might have considered trying to set up nominal checking, brokerage, or credit card accounts with BMO if I had foreseen this problem.

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Avoid a Pitfall: Don’t get treated like a money launderer

The IRS, CRA, and US Treasury are extremely harsh with people who don’t file timely paperwork to disclose their foreign accounts:

  • There is a $25/day late penalty for Canadian taxpayers failing to report foreign accounts on time.  As of 2014, you must file Canada Form T1135 if you have >$100,000 CAD of assets in foreign accounts.
  • As reported in Forbes, a Miami man was fined 150% of the value of his foreign accounts for failure to report them. A US citizen (including ones resident in Canada) or US resident who has more than $10,000 USD in foreign accounts at any time during the year must report these accounts to the treasury (not the IRS) by June 30 each year.
  • A US citizen (including ones resident in Canada) or US resident with substantial foreign accounts must also report them to the IRS on Form 8938.

The CRA also has some ridiculous late penalties for those leaving their tax winter wonderland:

  • There is a $25/day penalty for late reporting of assets held at the time of Canada exit on Form T1161.  As of 2014, you must file this form if ALL of your assets upon Canada  exit amount to more than $25000 CAD.

The moral of the story is that International people tend to get lumped in with money-launderers by the tax agencies, so watch out.

Disclaimer: I’m not a tax professional, just an academic who wasted too much time dealing with the US-Canada tax system.

Avoid a pitfall: Keep the CRA’s sticky fingers off of your IRA

One of the more sleazy and obnoxious things the Canada Revenue Agency (CRA) will do is to try to tax a young, non-retired person’s US retirement account, such as a ROTH IRA.

Taking a page out of Kafka’s book, the US-Canada tax treaty will only keep the Canada Revenue Agency (CRA) out of your Roth IRA if you file the proper treaty election in a timely fashion. If you are a single day late in telling the CRA that you don’t actually want your retirement money to be taxed then they can tax your ROTH IRA for as long as you remain in Canada. Furthermore, if you make the mistake of contributing to your ROTH IRA while you’re a resident of Canada then they can also tax your retirement plan.

Detailed instructions for taking the treaty election may be found at CRA Income Tax Technical News #43.

This issue is also discussed on this page from BDO Canada.

For reference, here is a copy of  the letter I sent to the CRA to take the treaty election.

Disclaimer: I’m not a tax professional, just an academic who wasted too much time dealing with the US-Canada tax system.

Taxation and the US citizen in Canada

I am a US citizen who moved to Canada for a postdoctoral fellowship at a Canadian university in Ontario from 2010 to 2013, on a 3-year work permit.   I’m creating this blog to help other US citizens in a similar situation, particularly those who have US investments and who will encounter the same cross-border tax (and other) issues I faced.  Perhaps others in a similar situation might appear as guest bloggers.