What's the deal with having a registered, defined-benefit pension plan and deferring either the contributions to it or the earnings in it?
I'm being told by a CPA that I should have filed this form in the past for my pension plan.
In looking at various threads here, I see some similar questions asks, but with various responses.
Registered Pension Plans (Not RRSP) in Canada and form 8833
Moderator: Mark T Serbinski CA CPA
Yes, generally a US taxpayer living in Canada would exclude his pension contributions from his wages for US purposes. The internal earnings of the pension are tax-deferred anyways.
An 8833 can be filed to describe this. No harm following the advice of that professional.
An 8833 can be filed to describe this. No harm following the advice of that professional.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Nelsona,
In the case of a Canadian DB pension plan I'm guessing that filing 8833 would be more optional than mandatory?
My wife (USC Perm Resident of Canada) has a defined benefit pension plan through the Ontario Teachers Pension Plan...
Her school board deducts contributions from her pay as a percentage of salary, those contributions are matched by the Ontario government and other employers on behalf of all members. Contributions are tax deductible and reflected on her T4 slip.
She has otherwise zero control over the pension...
As a result of this we have never included her pension with any IRS filings or information forms. I did some digging on this site and from what I have read, everything seems to confirm this.
Of course, I realize that IF she were able to determine the value of the pension, and if the thresholds were met, then form 8938 would be required. At this point she does not meet 8938 thresholds...
In the case of a Canadian DB pension plan I'm guessing that filing 8833 would be more optional than mandatory?
My wife (USC Perm Resident of Canada) has a defined benefit pension plan through the Ontario Teachers Pension Plan...
Her school board deducts contributions from her pay as a percentage of salary, those contributions are matched by the Ontario government and other employers on behalf of all members. Contributions are tax deductible and reflected on her T4 slip.
She has otherwise zero control over the pension...
As a result of this we have never included her pension with any IRS filings or information forms. I did some digging on this site and from what I have read, everything seems to confirm this.
Of course, I realize that IF she were able to determine the value of the pension, and if the thresholds were met, then form 8938 would be required. At this point she does not meet 8938 thresholds...
In the case of a Canadian DB pension plan I'm guessing that filing 8833 would be more optional than mandatory?
Yup: "no harm' = not required.
However, note that many DB plans have an employee contribution component. there is the OPTION of including or not including contributions in income.
If one were to opt to deduct the contributions from income (like canada allows) then an 8833 would be useful, as an explicit notice to IRS that one is using Article XVIII(13).
Yup: "no harm' = not required.
However, note that many DB plans have an employee contribution component. there is the OPTION of including or not including contributions in income.
If one were to opt to deduct the contributions from income (like canada allows) then an 8833 would be useful, as an explicit notice to IRS that one is using Article XVIII(13).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Thanks nelsona!
With regards to the employee contribution component that you refer to, this would be the automatic contributions that the school board deducts from her paycheck, based on percentage of her salary?
I realize that these contributions are tax deductible and reflect on her T4 slip, so our cpa files them accordingly on her annual CRA return.
However, being optional for IRS, we haven't up to this point specifically deducted the contributions from income for IRS purposes...
So it sounds like up to this point she is squared away with regards to her DB pension.
Thanks for the article number by the way
With regards to the employee contribution component that you refer to, this would be the automatic contributions that the school board deducts from her paycheck, based on percentage of her salary?
I realize that these contributions are tax deductible and reflect on her T4 slip, so our cpa files them accordingly on her annual CRA return.
However, being optional for IRS, we haven't up to this point specifically deducted the contributions from income for IRS purposes...
So it sounds like up to this point she is squared away with regards to her DB pension.
Thanks for the article number by the way
Correct.
so rememeber that in future the contributions that have been reported will not be taxable when she starts drwaing a pension.
It would be diffciult in a defined benefit pension to determine what percentage of her pension is the return of her contributions. But if that DB is ever converted to a lump-sum/lira or other type of account for whiuch you knw the balance. then you will ahve that amount at your disposal.
so rememeber that in future the contributions that have been reported will not be taxable when she starts drwaing a pension.
It would be diffciult in a defined benefit pension to determine what percentage of her pension is the return of her contributions. But if that DB is ever converted to a lump-sum/lira or other type of account for whiuch you knw the balance. then you will ahve that amount at your disposal.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
And remebember: for these contributions to be considered tax-free later, you MUST (a) have included them in income on the 1040 and (b) NOT have excluded that income using 2555.
if she is using 2555, she is not building up any US-tax-free portion of her future pension.
if she is using 2555, she is not building up any US-tax-free portion of her future pension.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
She always uses 1116 for the FTC
OK I think I understand...
1. So basically, if one does NOT specifically report these contributions to the IRS, they will be taxable by the IRS when you start drawing from your DB pension.
However, going forward, if one reports the contributions then they are not taxable when you draw your pension.
But as you mention it would be difficult with a DB plan to determine what percentage is the return of her contributions.
2. Just out of curiosity (and I know that you generally don't discuss the mechanics of various forms), aside from 8833 and article XVIII(13) where does one show the contributions on the 1040?
3. You mentioned converting to a lump-sum/LIRA which is something we have been thinking about...
a couple of options we are considering:
A. She continues to teach (even on a part time basis) all the while contributing through payroll deduction until eligible for retirement, at which time she draws from her DB pension reporting income from pension accordingly to CRA and IRS.
B. Resign completely from teaching in the next couple of years (good chance of this) and convert DB pension to a LIRA to draw from later on when eligible. She is currently only 40 years old.
- if I understand correctly, if converting to a LIRA, the LIRA is treated exactly the same as her RRSP for IRS reporting purpose.
ie LIRA will be reported on FBAR/FinCEN and if threshold is met, also reported for FATCA: form 8938
When eligible to draw from LIRA, then it is reported as income accordingly.
OK I think I understand...
1. So basically, if one does NOT specifically report these contributions to the IRS, they will be taxable by the IRS when you start drawing from your DB pension.
However, going forward, if one reports the contributions then they are not taxable when you draw your pension.
But as you mention it would be difficult with a DB plan to determine what percentage is the return of her contributions.
2. Just out of curiosity (and I know that you generally don't discuss the mechanics of various forms), aside from 8833 and article XVIII(13) where does one show the contributions on the 1040?
3. You mentioned converting to a lump-sum/LIRA which is something we have been thinking about...
a couple of options we are considering:
A. She continues to teach (even on a part time basis) all the while contributing through payroll deduction until eligible for retirement, at which time she draws from her DB pension reporting income from pension accordingly to CRA and IRS.
B. Resign completely from teaching in the next couple of years (good chance of this) and convert DB pension to a LIRA to draw from later on when eligible. She is currently only 40 years old.
- if I understand correctly, if converting to a LIRA, the LIRA is treated exactly the same as her RRSP for IRS reporting purpose.
ie LIRA will be reported on FBAR/FinCEN and if threshold is met, also reported for FATCA: form 8938
When eligible to draw from LIRA, then it is reported as income accordingly.
I think you might have it backawards.
Your T4 wages include your pension contributions, then you deduct them later on your Cdn tax return.
If you do nothing for your 1040, ie. you simply report the wages as on T$, and don't reduce it by your contributions, then these are considered non-deducted pension contributios, eligible for exclusion later.
Its if you actually deduct the pension contribution from wageson your 1040 that you should use 8833, and then tehse will no longer be eleigible for tax-free removal later.
There is no place on the 1040 to "deduct" these contributions, one does so by reducing the wage ammount on 1040 by the contriution amount.
If she converts to a LIRA, then it is treated like an RRSP, except that only the reported contributions wiill be later tax-free eligible.
Your T4 wages include your pension contributions, then you deduct them later on your Cdn tax return.
If you do nothing for your 1040, ie. you simply report the wages as on T$, and don't reduce it by your contributions, then these are considered non-deducted pension contributios, eligible for exclusion later.
Its if you actually deduct the pension contribution from wageson your 1040 that you should use 8833, and then tehse will no longer be eleigible for tax-free removal later.
There is no place on the 1040 to "deduct" these contributions, one does so by reducing the wage ammount on 1040 by the contriution amount.
If she converts to a LIRA, then it is treated like an RRSP, except that only the reported contributions wiill be later tax-free eligible.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Hi Nelsona,
I'm the original poster of this thread. I forgot I had asked the question, as I have been recovering from a medical procedure (induced by stress of taxes, no doubt).
I'm still confused on this issue. I managed to get hold of my old accountant who used to file my taxes. She's the queen of monosyllable replies, so I don't really get much explanation from her.
In looking at my previous returns, I noticed that she had included my yearly pension adjustment amount into my 1040 as "other" income. This stopped in 2009 and when I asked why, she said something about changes to the rules of contributions...and then just trailed off....her lack of communication is why I do not use her anymore.
I always thought I was squared away with my DB work pension plan. I only had heard of this form 8833 because the new accountant I am using this year insists that it is needed and it should have been filed in previous years.
Of note with my plan, is that I have not contributed anything for years and neither has my employer, as I have been off on LTD for many years due to illness.
I'm not sure anymore what should or should not have been done for this plan.
Thanks for your help.
I'm the original poster of this thread. I forgot I had asked the question, as I have been recovering from a medical procedure (induced by stress of taxes, no doubt).
I'm still confused on this issue. I managed to get hold of my old accountant who used to file my taxes. She's the queen of monosyllable replies, so I don't really get much explanation from her.
In looking at my previous returns, I noticed that she had included my yearly pension adjustment amount into my 1040 as "other" income. This stopped in 2009 and when I asked why, she said something about changes to the rules of contributions...and then just trailed off....her lack of communication is why I do not use her anymore.
I always thought I was squared away with my DB work pension plan. I only had heard of this form 8833 because the new accountant I am using this year insists that it is needed and it should have been filed in previous years.
Of note with my plan, is that I have not contributed anything for years and neither has my employer, as I have been off on LTD for many years due to illness.
I'm not sure anymore what should or should not have been done for this plan.
Thanks for your help.
I don't know of anyone adding "PA" to their 1040, there is no basis for that.
Nor was therr any basis for saying that the rules had been changed in the last protocoal for foreign pensions.
Re-read this thread anbd decide for yourself what you want to do, but there is no requirement to file an 8833 in order to defer taxation on yearly INTERNAL pension gains. if you wish to exclude pension CONTRIBUTIONS from income (which is a choice) then that CHOICE could be mentionned in an 8833, but is not required in my opinion.
Nor was therr any basis for saying that the rules had been changed in the last protocoal for foreign pensions.
Re-read this thread anbd decide for yourself what you want to do, but there is no requirement to file an 8833 in order to defer taxation on yearly INTERNAL pension gains. if you wish to exclude pension CONTRIBUTIONS from income (which is a choice) then that CHOICE could be mentionned in an 8833, but is not required in my opinion.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing