RRSP and RESP

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kalcium
Posts: 4
Joined: Sat Jul 05, 2014 9:24 pm

RRSP and RESP

Post by kalcium »

Our family moved to US from Canada in Sept 2010 (filed 1040NR for 2010 tax year) and became US tax resident in 2011 (filed 1040 for 2011 tax year and beyond). We have a few RRSP and RESP accounts that have never been disclosed in either FBARs or 1040s and I am in total panic mode after I found out the mistake I made. I talked to a local accountant who claimed to have experience with cross border tax preparation, she suggested quiet disclosure to amend 2011, 2012, and 2013 tax returns and attached all necessary forms (8891, 3520, and 3520a) and tax due for earnings received in the RESP accounts. After reading some of the posts in the forum, it seems we can no longer quietly disclose any RRSP and/or RESP with an amend 1040. So if I backfile those forms, it will flag IRS and trigger the audit? And the worst thing is the accountant will be in 2-month leave next week, but I am still waiting for TD to send me all the RESP statements for the last 3 years, should I get a new accountant?

I have disclosed everything in this year's FBAR and amend 2011 and 2012's FBARs to include those accounts. I feel I should left 2011 and 2012 untouched, now I have the pressure to bring our 1040s synched with FBARs immediately.
DaveM
Posts: 52
Joined: Thu Jun 12, 2014 12:46 am

Post by DaveM »

It's not clear whether you have already sent all these forms including Fbars to the IRS since you say you are still awaiting RESP info from TD.

You may not have heard about the new IRS Streamlined Program for US residents, but it could very well be your solution:

http://www.irs.gov/Individuals/Internat ... ted-States

If the above fits your situation, then don't wait 2 months for your accountant to get back.
kalcium
Posts: 4
Joined: Sat Jul 05, 2014 9:24 pm

Post by kalcium »

TD gave me the account balance through the phone when I filed FBARs on 6/30, I am waiting for the paper copies of the detailed statements.

Is streamlined program the only way? The accountant is not aware of the IRS Streamlined Program.

I have already filed and amended the FBARs for the last 3 years, how much time I have to amend 1040x or go through Streamlined Program to avoid further complication? I am a bit panic because there is discrepancies between 1040s and FBARs. :cry:
DaveM
Posts: 52
Joined: Thu Jun 12, 2014 12:46 am

Post by DaveM »

The Streamlined Program is only a few weeks old so unless accountants/lawyers are specialized in or have a specific interest in International Tax matters, they likely have not heard of it.

I would want a specialized accountant to guide me because I would want to make sure that the 3520 & 3520A forms were correctly filled out and other requirements met, but that's just me.

There isn't any time limit per se when it comes to entering the program, but if it were me, I wouldn't wait 2 months to get started on fulfilling the requirements. FATCA officially started July 1, 2014 whereby international banks will start sending the IRS information about offshore accounts. No one knows yet how or when that information will be used, but it may mean that those who follow the 'quiet disclosure' or Safe Harbor approach could be more likely to get an unsettling letter from the IRS.

The Streamlined Program for US Residents appears to be relatively fair and easy to do compared to past alternatives (eg. OVDP) for those who made non-willful mistakes especially for things as 'benign' as RESPs. It also seems to be set up to be lenient if non-willful minor mistakes were made in amounts or in the forms. All things considered, I look on it as a very good thing the IRS has done.
DaveM
Posts: 52
Joined: Thu Jun 12, 2014 12:46 am

Post by DaveM »

In the first line of my post above, I should have said 'The Streamlined Program for US residents...' There is a Streamlined Program for non-US residents that started in 2012.
kalcium
Posts: 4
Joined: Sat Jul 05, 2014 9:24 pm

Post by kalcium »

Here is an article saying RRSP accounts are exclude from 5% penalty from Streamlined Domestic Offshore Procedures (“SODPâ€￾).

http://www.pgdc.com/g/boston-foundation ... sp-or-rrif
DaveM
Posts: 52
Joined: Thu Jun 12, 2014 12:46 am

Post by DaveM »

Reporting requirements and penalties regarding RRSPs held by both US and non-US residents have undergone a long history of complex changes since circa 2002.

Just for interest sake: At one point during that time, the Canadian government, inspite of a treaty whereby both governments would assist each other in collecting income tax, refused to cooperate with the collection of RRSP Fbar penalites on the basis that they weren't income taxes. This meant that if affected US citizens residing in Canada simply decided to never go back to the US for vacations (to presumably avoid 'problems'), the US would suffer a reduction in valuable tourism. That led to some of the changes being made.

Other than having read about the history of the whole RRSP matter since at some points it both coincided with and diverged from the RESP subject, I don't know much about the current RRSP requirements and/or any penalties for failure to report.
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