Thought you Canadians would be interested in this little Jello shot from Phil Hodgens…
He is off on a mission, to The Center of the Universe @ 1111 Constitution Avenue NW, Washington DC 20224.
I am on my way to Washington, DC for three days. The key meeting is at the Internal Revenue Service, Office of Associate Chief Counsel (International), Branch 1.
The objective: create a free and simple way for Canadians living in the USA to fix broken RRSPs.
Oh. And sign up for my “Fix Your Own RRSP” Workshop just in case the IRS doesn’t see the innate wisdom of what I’m telling them. 🙂
RRSPS IN THE USA ARE BROKEN
Canadians who move to the USA to live usually have an RRSP or two. (That’s the Canadian equivalent of a U.S. IRA).
Equally usually, they are unaware that there are special Federal tax paperwork requirements. Years go by. They’re out of compliance with IRS requirements. They wake up. Horrified.
The only way the IRS lets them fix this problem is by applying for a Private Letter Ruling — a letter from the IRS, tailored to YOU, that allows you and only you to do a certain thing. This is expensive (a $2,000 filing fee, plus legal fees) and takes months.
I think that’s wrong. There should be a cheap (how about free?) and easy way to fix these.
I mean, it’s not like you could use an IRA to cheat on your taxes, right? It’s a heavily regulated thing. Same with RRSPs. The Canadian government is all over these things and you couldn’t cheat on your U.S. or Canadian taxes with an RRSP if you tried.
“DEAR IRS, YOU’RE DOING IT ALL WRONG” ETC.
I’m part of this year’s State Bar of California’s annual trip to Washington DC by the Tax Section. Along with a co-author, Steven Walker of San Jose, California, I am presenting a proposal to the IRS. In a nutshell:
“Hey IRS, instead of $10,000 of expense and months of work to fix U.S. paperwork for RRSPs, why not let people do this for free, just by filing amended tax returns (late) with some simple paperwork attached?”
(And if we can get a fix here, maybe we can expand the fix to Australian superannuations. And other countries’ equivalent pension plan schemes).
MEANWHILE, A DIY PLR WORKSHOP
In the meantime (and in case this doesn’t work) I am going to do a “Do It Yourself Private Letter Ruling” workshop in Pasadena in July. Ten people max, so I can give each of you personal attention. All day.
Everything I know and every tool I have to file an application for a Private Letter Ruling — you’ll get it. I supply the forms, the checklists, and the knowledge. You do the work. If the IRS won’t let you fix the problem for free, at least you can do the work yourself and save a metric ton of money and get the official relief — a Private Letter Ruling.
Sign up for the mailing list for the RRSP workshop here.
This is the only shameless pimping I’m going to do for the workshop in the Jell-O Shots. Watch the blog or sign up for the special mailing list if you’re interested.
SO, ANYWAY. . .
Keep in touch. My mobile is +1 626-999-4000 and my email is email@example.com.
And those of you who like to follow his blog, it is http://hodgen.com/phils-blog/
Well at least the Canadians have a paperwork way out. For the rest of the world, there is only pain. Swiss equivalent of IRA/RRSP is third pillar, and it is only a disadvantage to have one if a US person. All pensions/retirement savings accounts should have an exemption.
‘The objective: create a free and simple way for Canadians living in U.S.A. to fix broken RRSPs’. My question: Will this also fix the RRSP issue for Americans or dual American/Canadians living in Canada?
@nofatcat Yes, Hong Kong has the same problem with our own equivalent (Mandatory Provident Fund). In fact the MPF administrators have been the first in Hong Kong to speak out against FATCA. But oh well, Carl Levin says we must be punished for living in “tax havens”.
Agreed. And, I think, when we Canadians offer our outrage on what is going one for us as Canadians, we also include the rest of US persons anywhere in the world, although we don’t always emphasize that. We are all in this together, whatever country we now reside in.
@tiger, good point. If the IRS, or our respective governments start making distinctions that parse out only some of us, then justice is not served – and our cause is weakened. The over arching principal is still the same – we are not evading taxes and we are law-abiding, we pay where we work, earn and live, – we deserve the same rights to save for our families and retirement without draconian burdens and penalties, just as any other citizens and residents – we are not living in tax havens, – we deserve to be treated fairly and ethically. We should not be paying penalties incurred based on having or inheriting US status outside the US, and we should not have to paying thousands in legal and accounting fees to ‘comply’. We should only be taxed where we live and earn – like the other vast majority of people on this earth. We should not be subjected to US government created extortion. We should be able to shed our unwanted citizenship without being held hostage, and paying a ransom – either to tax professionals, or to the US.
This should apply to ALL of us, whether greencard immigrants to the US, permanent residents, or US born or US inherited, or snowbirds, or duals – everywhere in the world. Citizenship based taxation is wrong.
Hey Canadians in Canada, get a backbone. RRSPs are here in Canada, and unless you have some significant assets in US then you have nothing to worry about. I recommend that US resident Canadians gets their assets and their asses out of the United States.
But here’s the thing: you’ve had an RRSP for years. It is protected by the tax treaty between the US and Canada. Suppose the IRS doesn’t like it that you reported it late? Suppose you don’t report it? What can they do? They don’t have power over you.
My wife’s nephew’s wife is US person in Canada. I told her to get her Canadian citizenship right away. It’s the best protection she can have against the United States. I suggest Canadians in Canada stop worrying and just simply take advantage of their protection.
One good thing has come of all this, for me. It’s solidified my patriotic Canadian feelings. I’d always been proud of being Canadian, but now I’m vocal about it, when given the chance. Not only am I removing my RRSPs from any US involvement, I am also investing in my province and my country. My local credit union offers something called the “Performance Alberta” plan, that invests ONLY in Albertan and Canadian companies, and as soon as I can, that’s what I’m moving to. Probably there are similar plans all over, and I’d just never heard of them before, but this meshes well with how I’m feeling these days!
AT least the IRS acknowledges that yourCanadian pension plans are pension plans. There is no such recognition from the IRS for private pension savings in other countries (except the UK, I think). Not my problem anymore, luckily. 😉
Phil Hodgens is awesome. 🙂
Phil, is going to have a new blog post up tonight. He had additional meetings with Nina Olsen and some individuals at the US Treasury Department.
Great to know. Thanks. Will read it when I get to LAX tomorrow.
Phil has posted the details of his meeting with the IRS. There is considerable interest within the IRS to simplify deferring tax on RRSP’s without going through the hassle of Private letter rulings.
I submitted a PLR request in October 2011 and have yet to hear back.
He is suggesting several actions that we could pursue to help the process. It’s a long post. Perhaps one of you could post the link.
The link is: