Thanks to Phil Hodgen for his meeting with the IRS about #RRSP issues – also comments on #FBAR hodgen.com/irs-meetings-t… – One more step forward!
— U.S. Citizen Abroad (@USCitizenAbroad) May 8, 2012
Phil’s blog post is a “must read” (The Isaac Brock Society is mentioned). Full of all kinds of great ideas – including teaching how people how to get at “Private Letter Ruling”. Also, some interesting “non legal advice” thoughts on the FBAR problem. You will find the actual paper that was submitted to the IRS here. The paper was supported by the New York Society of CPAs.
Phil, thanks again for your help and support!
Re changes to RRSP form 8891
see also comment here:
…”Unfortunately, as of 2 weeks ago, IRS closed the
door to simple back-filing of form 8891, so now you will have to request
permission to back-file, or pay the penalties for failure to report the
income, and/or failure to report the trust (Form 3520 expalins those
*Badger , I don’t see a change in the form. There may be a change in policy. However, remember Serbinski is in the business of business. As Warren Buffet would say-‘don’t ask a barber if you need a haircut’
Good warning @Dukeof Devon, I understand what you’re saying above re the source. It isn’t definitive, and I could be wrong. I read it on two blogs (also here http://forum.keatsconnelly.com/yaf_postst366_Moved-to-US-in-2006–Didnt-realize-I-have-to-declare-RRSPs-on-US-tax-return.aspx ) , not just the Serbinski one, but it looked important enough to look into. I admit, again, not primary source material – only blogs. And one entry seems to be regarding RRSPs of some Canadians living inside the US, whereas the other seems to be a US taxable person inside Canada.
Here is the line in question as cited:
……”the important change, in the instructions for line 6(c), which is where you first declare the election
If you did not make the election under Article XVIII to defer income
tax on income earned by an RRSP or an RRIF in a previous year, you
cannot make a late election on Form 8891. However, you may be able to
seek relief from the IRS for failure to timely elect the deferral of
income on Form 8891 in an earlier year.”………
and also as discussed here: http://forums.serbinski.com/viewtopic.php?t=7161&postdays=0&postorder=asc&start=0&sid=6c3fb924270b9b2c057f45d8dea28c2c
I am interested in whether the IRS is telling people not to quietly backfile the 8891 as a change from previous policy, and whether any change is in explicit wording rather than as you say – possibly a policy change.
Seems important to know if there indeed has been a change, as RRSPs are one of the most common asset types that those in Canada who don’t know about FBARs and FATCA would have – and which if not tax deferred, could result in US tax being assessed.
I posted it here as Phil Hodgen and others had been trying to get the RRSP automatically recognized rather than being dependent on an annual election, with no way to fix any failure to have done that in past years.
Mea culpa if the two forum posts are inaccurate.
@ Badger & Duke: Form 8891 is the same for the 2012 tax year. The difference is in the instructions. Line 6c….one is no longer allowed to late file the election to defer. This means that when backfiling if there is income inside the RRSP it must be must be declared as regular income on the 1040. If that results in taxes owing, the taxes must be paid as well as interest and penalties.
The IRS says they want compliance; then they come out with another slap in the face. This would particularly be an issue for those trying to take advantage of the so called “streamlined procedure” that was announced last September. The very idea that the IRS would raid the retirement savings of Canadian residents makes me mad as hell.
As for Serbinski, that forum is a wonderful resource for those who are trying to navigate the murky world of IRS regs. But it’s not for the faint of heart! I doubt this is an attempt to drum up business or fear mongering….they’re just mentioning a change in IRS policy. (I don’t work for “em and I’m not a customer).
Well, I see I took a little too long to bang that one out!
Thanks maz57 for the clarification. It seemed to me to be yet another action by the IRS to make it impossible for us to live normal lives abroad – or to try and fix some of the things we had no idea were a problem. Rather than making compliance achievable, they are still intent on making it impossible – and thus generate penalties. The RRSP problem is especially egregious as it should just be automatic. If the IRS has agreed to the Canada-US treaty election for RRSPs, then why make it harder to claim something they’ve already acceded to in principal? And why make it something that has to be claimed every year – for the life of the RRSP – which in theory could be from the first year of an RRSP creation – until >40 years later – when it is converted to a RRIF, or cashed in on retirement.
Only reason to make this an annual election over a potentially 40 year span, is to use it as a hammer against us.
Could turn it to our advantage: start writing Minister Flaherty, and all of our politicians in Canada – and title it – the US declares WAR against Canadians and the RRSP!
A really big reason for those who can get out, to get out now, before it gets worse.