On behalf of Michelle Rempel, MP, Calgary Centre-North, I would like to acknowledge receipt of your email and thank you for taking the time to share your concerns with her on this important issue. Please be assured that your comments have been carefully reviewed and recorded for the Member’s information. In addition, I will advise the Minister’s Office of our response and we look forward to his official response.
William, I appreciate your quick acknowledgement this time of my latest email … I hope that you are referring to a response to me from Michelle Rempel that you will relay to the Minister of Finance. I will very much appreciate it if this discrimination of RDSP Holders and Beneficiaries who are also US persons is given priority treatment – it is an urgent matter with the tax season upon us and the IRS breathing down the necks of US persons in Canada.
That there is not an exemption for the RDSP is the most abhorrent, and there is still the matter of non-exemption for TFSAs, RESPs and that payments we receive in retirement from our RRIFs and work pensions will be taxable to the US – it should be only to Canada / we did not earn our money in the US. I feel there are so many affected that do not yet know about the consequences of ignoring “their responsibilities to the USA,” not for taxes owed but for the endless forms to file or resultant penalties for not doing so or for making a mistake in interpretation of IRS instructions. The only reply to questions to the IRS is to consult a US tax accountant or a US tax lawyer with our questions. The emotional and financial cost of staying in compliance with the US is exorbitant for the ordinary Canadian US person.I have an appointment with the Calgary US Consulate on January 25th. The attached is a statement I will give to them in my quest for relinquishment (again) or renouncement of my US citizenship. How to renounce that of my son who was born in Canada and raised as a Canadian, never having been registered with the US or having lived in the US, is another matter. I am told that even with a court order, Guardianship/Trusteeship, I cannot renounce on his behalf; even if he does not have the perceptual capacity to understand the consequences of any decision he would make on his citizenship. It would all be very upsetting and confusing for him, something totally pointless and without meaning. I do not want, either, for him to be a SECOND-CLASS Canadian. It is really a catch-22.
* Protocol Amending the Convention Between Canada and the United States of America With Respect to Taxes on Income and on Capital Done at Washington on 26 September 1980, as Amended by the Protocols Done on 14 June 1983, 28 March 1984, 17 March 1995 and 29 July 1997
This electronic version of the Canada-United States Protocol signed on September 21, 2007, is provided for convenience of reference only and has no official sanction.
As far as we know, the IRS will most likely consider RDSP’s a foreign trust requiring the standard reporting requirements (i.e. IRS form 3520/3520A and quite likely IRS form TD F 90-22.1 under the FBAR requirements) for U.S. citizens and residents that are RDSP plan holders. Unlike RRSP’s/RRIF’s held by U.S. citizens that are afforded a tax deferral under Article XVIII(7) of the Treaty, RDSP’s are not yet eligible plans for such tax deferrals for U.S. citizens or residents. As a result, RDSP plan holders and beneficiaries that are U.S. citizens or residents will not benefit from the tax deferral currently enjoyed by Canadian RDSP plan holders.More importantly, the U.S. reporting requirement in itself may make it too difficult for U.S. citizens to be plan holders or beneficiaries of RDSP’s. Adding the RDSP to the agenda for Canada-U.S. Income Tax Convention discussions is critical for RDSP beneficiaries who are American citizens.