Note: “ij” is a regular on Townsend’s blog. He is, from what I gathered, originally from China (I think), spent some time in Canada, when he opened up an RRSP account, and then moved to the United States. He entered the 2009 OVDP and has been very worried that an RRSP in Canada would be hit with a 20% fine. To this day, the IRS has not given guidance on RRSPs. If IJ is correct, and RRSPs will not be subject to OVDP fines, this sets a kind of precedent for all registered retirement accounts in the world, or so it could be argued, under the Equal Protection Clause.
From Just Me:
Just saw this here, and thought some Canadians might be interested. Can’t vouch for it….
ijJan 11, 2012 08:29 AM
Just an update,
IRS is not going to impose penalty on RRSP. So the past rumor about penalty on RRSP is unfounded.
Great move on IRS, it is more reasonable than most of us have expected. However, I do hope they will treat other countries retirement plans with same kindness.
Just MeJan 11, 2012 10:53 AM
ij…. Regarding the RRSP…. That would be good news for Canadians. Do you have a reference that one could refer to, or is this just what your Examiner said…
ijJan 11, 2012 11:09 AM
I was told by my examiner this morning. Of course, each one has its own unique case. My RRSP has never been cashed out and has never been moved since becoming a US person. So there is no tax implication except missing the deferral election.
I would not be surprised penalty would be imposed to some RRSP owners (US residents) have cashed out RRSP but never reported as income in US return.
That is why IRS has never publicly stated what is the rule on RRSP inside OVDI, and even some OVDI hotliners have said that penalty would be imposed on RRSP.
ijJan 11, 2012 11:12 AM
This is a reference (sort of)
Ask IJ if it was worth it to move to the USA.
This is quite interesting. I have just written a post on the RRSP question. I invite your comments on it.
My thinking is that (subject to their ability to just make a rule for all RRSPs) that whether an RRSP in part of the penalty base depends on whether it can be understood to be related to “tax noncompliance”.
I would appreciate comments on this -will cross post it here in a moment. This is a tough area.
In fact, I attended a tax conference hosted by IRS on Dec 16 and had the opportunity to ask the Commissioner of the IRS and the IRS agent in charge of the entire OVDI program about the treatment of RRSPs within OVDI. They acknowledged the problems and inequities resulting from including RRSPs in the OVDI penalty calculation. This acknowledgement leads me to conclude that guidance (and some sort of relief) will be issued soon. So far, however, we’ve heard nothing.
IJ just wants to be done with this, and was just going to pay up to get it over. I have been trying to stiffen his resolve not to roll over, but then I don’t really know all his facts. Certainly many other immigrants have expressed their dismay with their decision, and some have left… I give you this one…
“Surely if aware of the events over the last 3 or four years along with all the complex regulations: FBAR, FATCA, Tax Code, Exit Tax and etc., they [immigrants] will choose a different country.”
I certainly did.
I hold two advanced engineering degrees and have more than twenty years experience in my field. Three years ago, after over ten years as a US permanent resident, I moved myself and my family out of the US in direct response to HEART and the exit tax, which threatened over $100k in additional unrecoverable tax on my retirement savings.
I still do the same job as I did while in the US, just based outside the US and no longer a green card holder. I pay about the same tax annually as I did when in the US, but now to a different (and more appreciative) country. The cumulative tax lost by the US already dwarfs the amount it tried (and failed) to extract with the “exit tax”, and grows larger with each year that passes. ”
This is what I mean, when I say… Congress and the IRS have lost the plot!
okay, here I am IJ, flattered seeing my name all over. my discussion with my agent does give me the impression that IRS won’t include RRSP into base penalty — of course this is for me case. My RRSP has never been cashed out, and was opened while I was non-US person.
@ij, thanks for stopping by. You can thank Just Me, who alerted me to your comments at Jack’s blog. It is an honor to have you join us.