From the IRS newsroom – released October 7, 2014:
IRS Simplifies Procedures for Favorable Tax Treatment on Canadian Retirement Plans and Annual Reporting Requirements
IR-2014-97, Oct. 7, 2014
WASHINGTON ― The Internal Revenue Service today made it easier for taxpayers who hold interests in either of two popular Canadian retirement plans to get favorable U.S. tax treatment and took additional steps to simplify procedures for U.S. taxpayers with these plans.
As part of this, the IRS provided retroactive relief to eligible taxpayers who failed to properly choose this benefit in the past. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.
Under this change, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRAs) and 401(k) plans. In general, U.S. citizens and resident aliens qualify for this special treatment as long as they filed and continue to file U.S. returns for any year they held an interest in an RRSP or RRIF and include any distributions as income on their U.S. returns.
The change relates to a longstanding provision in the U.S.-Canada tax treaty that enables U.S. citizens and resident aliens to defer tax on income accruing in their RRSP or RRIF until it is distributed. Otherwise, U.S. tax is due each year on this income, even if it is not distributed.
In the past, however, taxpayers generally would get tax deferral by attaching Form 8891 to their return and choosing this tax treaty benefit, something many eligible taxpayers failed to do. Before today’s change, a primary way to correct this omission and retroactively obtain the treaty benefit was to request a private letter ruling from the IRS, a costly and often time-consuming process.
Many taxpayers also failed to comply with another requirement; namely that they file Form 8891 each year reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether they chose the special tax treatment. The IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present.
The revenue procedure does not modify any other U.S. reporting requirements that may apply under the Bank Secrecy Act (BSA) and section 6038D. See FinCEN Form 114 due by June 30 of each year, and Form 8938 attached to a U.S. income tax return for more information about the reporting requirements under the BSA and section 6038D. Different reporting thresholds and special rules apply to each of these forms.
Further details on today’s change can be found in Revenue Procedure 2014-55, posted on IRS.gov.
Follow the IRS on New Media
Subscribe to IRS Newswire
Page Last Reviewed or Updated: 07-Oct-2014
@USCitizenAbroad “Instances have been reported of people entering OVDI who ceased to be U.S. citizens in the 70s. Think about it.”
Along the same lines, how about the current Moodys Gartner seminars on Renouncing featuring Roy Berg as a presenter, one of which I attended. When I asked specifically how their presentation applied to someone who had relinquished in 1972 but did not have a CLN, the reply was that since for tax purposes the person was still a US citizen, the way out was still to proceed with renouncing and getting tax compliant.
Think about it.
And how will the IRS treat our coming Ontario Pension plan?
It’ll take the IRS a quarter of a century to realize Ontario has a pension plan.
@maz57, first they will need to figure out what continent the Country of Ontario is located at and who is the US Ambassador to Ontario.
Pingback: The Isaac Brock Society | What are the benefits of the coming into U.S. tax compliance through the Streamlined program?
From Moodys Gartner Blog: Problems with new IRS procedures for Canadian retirement plans Published on October 14, 2014 at 10:08, by Roy A Berg JD, LLM:
For those who may be unclear about Roy Berg’s history regarding FATCA. He provided testimony at a Standing Committee on Finance back in May to basically encourage the signing of the fateful FATCA IGA. I think Badger’s comment bears a repost here:
Mr Berg also fits the definition of imperialist:
: the policy, practice, or advocacy of extending the power and dominion of a nation especially by direct territorial acquisitions or by gaining indirect control over the political or economic life of other areas; broadly : the extension or imposition of power, authority, or influence…
Americans would run people like him out of town, but the Harper government took his counsel. Just like John Weston paid our Canadian tax dollars to bring US lawyers into Canada to advise our government on how to uphold US tax law here.
That is what I never understood… this is a Canadian issue… why have the enemies come in & represent whatever nonsense they want… were all our canadian people on holidays… so that is why the canadian gov’t allowed them to talk? Did they vote for the PM or said they would in the next election…. we should make sure the PM didn’t sneak that into a bill…. all people the PM thinks is important… can vote for him… canadian or not. Why don’t they let the terrorists come talk also… how to defend our borders better… I am sorry if that last one was in bad taste… I am just angry that our gov’t will use our money against us & we have to raise additional funds to protect ourselves
Pingback: The Isaac Brock Society | Interesting article by @RoyBerg1 on the Oct. 2014 IRS treatment of #RRSP and #RRIF
Hi, just a quick note to say that I posted a response here: http://www.taxsamurai.com/2014/11/rrsp-response-to-concerns-regarding-revenue-procedure-2014-55-which-obsoletes-form-8891-and-changes-the-way-a-treaty-election-for-rrsps-is-made/
While Roy Berg made good points, in some cases reality is not as scary as it seems at first.
Just for FYI:
‘The Ultimate “RRSP and the IRS” Essay’
I love Phil’s phrase in response to the IRS solution to problems by creating “moments of fiction” as they apply to some of their rule making: “Because why not?”
I’ll try my own hand at it, but instead apply it to the State Department:
The State Department instantly and without much warning raised the renunciation fee from $450 to $2350. Because why not?
In fact, Badger, the phrase can be used to describe the US’s interaction with the entire world:
Because why not?
Why not? or *Just because we can.*
@bubblebustin and @calgary,
and I would add;
because the motto of the US is actually; “Might Makes Right” – which they should just print on the US dollar and everything else and just be done with the pretense.
Pingback: The Isaac Brock Society | IRS & State encourage ESL teachers abroad to join Streamlined?