Hi,
I am confused regarding the IRS filing requirements for Canadian mutual funds. I have sold ALL my mutual funds during 2011, the year when I moved to USA.
What forms do I need to file to be in compliant with IRS? I see that there are two possible forms: 8621 and 3520.... Do I need to file them given that I sold ALL my mutual funds, or do I just report the capital gain (or loss) on schedule D?
What about the mutual funds held inside RRSP that are NOT sold? Reportable to IRS?
Thanks!
Canadian Mutual Funds....
Moderator: Mark T Serbinski CA CPA
Let me rephrase my questions.
1) What is the difference between the 3520 and 8621 forms?
My impression is that everyone is talking about both forms. But isn't there just one form to report the sale of mutual fund units? Both forms must be used or just one or the other?
2) Are mutual funds held inside RRSPs reportable on one of these forms IF I do a 8891 election to defer tax?
Lets say I have $1K in mutual fund "A". By the end of the year, this 1K grows to 1.2K. Is the extra 200 bucks reportable anywhere or if it is deferred when I do 8891?
I am leaning towards the ENTIRE balance being deferred based on what I read so far...
1) What is the difference between the 3520 and 8621 forms?
My impression is that everyone is talking about both forms. But isn't there just one form to report the sale of mutual fund units? Both forms must be used or just one or the other?
2) Are mutual funds held inside RRSPs reportable on one of these forms IF I do a 8891 election to defer tax?
Lets say I have $1K in mutual fund "A". By the end of the year, this 1K grows to 1.2K. Is the extra 200 bucks reportable anywhere or if it is deferred when I do 8891?
I am leaning towards the ENTIRE balance being deferred based on what I read so far...
Mutual Funds in Canada first started to become popular in the early 60's and very few investors and Canadians knew about them at the beginning. Mutual Funds were understood to be a very sophisticated product at the time and known to be for high net worth clients, families and institutional investing only.
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CdnAmerican
- Posts: 245
- Joined: Tue Aug 30, 2011 12:15 am
Khykau - I'm no expert either, but here's my understanding. If you have a mutual fund in Canada and are a US citizen, you have to file 8621 on it. If you do mark-to-market (which seems the easiest, at least to me) then you would note the appreciation (deprecition) of the fund & add it in as Other Income on your 1040.
The 3520 and 3520A come in if you have a mutual fund that's set up as a trust. That includes, as far as I can see, an RESP or a TFSA, which seem to be defined as trusts for IRS purposes.
As for the RRSP, my understanding is that if you file 8891, you don't have to claim the appreciation or income from the mutual fund. You're just stating that you have it, and stating how much is in there now. The appreciation is non-taxable to the IRS. You would do this form whether or not it's a mutual fund, as long as it's an RRSP. My understanding is that RRSP's don't require an 8621 if you account for them using the 8891.
But I am totally no expert .. just someone who's tryinig to figure all this out too! Good luck ..
The 3520 and 3520A come in if you have a mutual fund that's set up as a trust. That includes, as far as I can see, an RESP or a TFSA, which seem to be defined as trusts for IRS purposes.
As for the RRSP, my understanding is that if you file 8891, you don't have to claim the appreciation or income from the mutual fund. You're just stating that you have it, and stating how much is in there now. The appreciation is non-taxable to the IRS. You would do this form whether or not it's a mutual fund, as long as it's an RRSP. My understanding is that RRSP's don't require an 8621 if you account for them using the 8891.
But I am totally no expert .. just someone who's tryinig to figure all this out too! Good luck ..
Not a professional opinion.
Thanks CdnAmerican!
With 8621, the mark-to-market has a first year co-ordination rule. Basically, to my understanding, if you elect to mark-to-market for the first time, you still cannot do the mark-to-market in the first year. You'll have to do the pain in the backside section 1291 fund with all that 125% stuff.
Of course, I have no way to elect mark-to-market when I first purchase the fund as I was in Canada and no connection to USA. Seems to me that I still have to suffer for the first year (unless somewhere in the treaty overrides this first-year-coordination rule).
With 8621, the mark-to-market has a first year co-ordination rule. Basically, to my understanding, if you elect to mark-to-market for the first time, you still cannot do the mark-to-market in the first year. You'll have to do the pain in the backside section 1291 fund with all that 125% stuff.
Of course, I have no way to elect mark-to-market when I first purchase the fund as I was in Canada and no connection to USA. Seems to me that I still have to suffer for the first year (unless somewhere in the treaty overrides this first-year-coordination rule).