California Residents: Does Your Financial Advisor Tax-Manage Your RRSPs?
California residents who hold RRSPs, LIRAs, RRIFs or other Canadian tax-deferred accounts are subject to a unique set of tax planning and reporting requirements. Unlike most states, California does not allow Canadian retirement accounts to grow on a tax-deferred basis. And that can present a serious income-tax problem for residents of California, given the fact that the state taxes the annual income distributions (interest and dividends) and realized capital gains inside Canadian registered plans. What are California’s Tax Rules? California rules require its tax residents to include annual investment earnings on their Form 540. Unlike the taxpayer’s U.S. federal return, the State of California (Franchise Tax Board) requires that you pay tax annually on your RRSP earnings. You would be responsible for including your interest (line 8), dividends (line 9) and capital gains (line 12) of Schedule CA. They will ultimately appear in Column C for additions to income. If you have a capital...