RPP turned LIRA in 2013, confused about reporting

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larklab
Posts: 14
Joined: Thu May 01, 2014 1:28 am

RPP turned LIRA in 2013, confused about reporting

Post by larklab »

Hi,

I've gone over many of the other posts regarding RPPs and RRSPs, and LIRAs..but I'm still confused, so I'm posting these questions.

I am a Canadian citizen. I was resident for tax purposes in the U.S. while an F-1 visa student from 2008-2012. In 2012, I became a permanent resident.

From 2002-2012 I had a Canadian employer based RPP. I stopped contributing in 2006 and it sat there until my unpaid leave ran out and I resigned from the position in 2012. In 2012 I was sent paperwork to roll it into a LIRA. It sat in the RPP for almost a year although the LIRA was opened and remained empty. In 2013, part of it rolled into a LIRA and the remainder was cut to me as a cheque with RPP contributions made on my behalf while I was on leave but that I did not buy back, CDN federal tax and provincial tax removed. This act was simultaneous. I'm not sure if that matters.

So now I'm completing my U.S. taxes for 2013 (filed an extension) and need to know the following

1) for 2013 do I file an 8891 for the LIRA?
2) The LIRA is over 10K, so this means I have to report all of my Canadian accounts via the FBAR system, correct?
3) for 2013 I should submit an 8938 for the LIRA as well?
4) This will sound ridiculous - but do I need to report the empty LIRA in 2012?
5) I'm really unclear on how the cheque..which I think is effectively a withdrawal... is to be reported
5) Do I need to file 1040x or any other documents for 2008-2012 to report the RPP with either IRS or Treasury? This is a particularly confusing point for me. My understanding is that the U.S.-Canadian tax treaty XVIII.7 and XV111.8 automatically defers the tax and that I don't have to elect to have that done - but, it is a pension fund. I keep running across various accountant sites stating it must be reported via an 8891...but it isn't an RRSP or RFIF. One U.S. Canadian tax specialist stated I could file an election letter, while the IRS Foreign tax call line told me I had to file a 3520 or 3520A.

This last point is clearly the one I am most confused by. Happy for advice, or a url to a discussion on the board that helps.

Thanks
nelsona
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Post by nelsona »

First off, you need to fix the Cdn taxation of the pension. Since you were non-resident, a flat NR tax of 25% should have been withheld, not federal and provincial tax (I assume your pension was in QC?).

More later on US.
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nelsona
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Post by nelsona »

For US.

Only your LIRA is to be reported on 8891. Since the LIRA did exist in 2012, I would submit an 8891 for 2012 with zeor closing balance. Do not make the election to defer on that year, make it on the 8891 you send with 2013 return.

Just to clarify, the treaty ALLOWS deferal, but it is not automatic. In fact the treaty states that deferral is permitted as long as you follow the rules dset out by the IRS. 8891 is the current version of those rules for RRSP/RRIFs (and LIRAS since they are merely locked-in RRSPs.)

For future, all withdrawls from your lira will be taxable in both Canada (at flat 15 or 25% rate) and in US, included in your income. US will credit you for the Cdn tax using form 1116 general limitation income. The same is true for your lump-sum that you recieved in 2013.

The IRS does not require any form/procedure for deferring RPP. And until they were part of your LIRA, you did not have to include them on your FBAR. But once they became your LIRA, they were an account which you controlled, and thus needed to be counted towards your 10K limit. I assume before the LIRA you did not have 10K in all your foreign accounts? Then FBAR need only be filed, for all your foreign accounts, for 2013 and forward.

Since 2012 however, there are other reporting mechanism (form 8983) related to your foreign HOLDINGS (not accounts, not income) and your RPP needed to be included on that for 2012 and 2013, along with your LIRA and any other foreign asset (according to the rules of that form).

I disagree with IRS that RPPs require a 3520. The IRS telephlunkies are often wrong. No one on this site is submitting 3520's for Cdn pensions that I'm aware of.

so, for 2012: you need at least an 8891 for the LIRA and you need to re-examine whether you need 8938 based on the rules set out on that form, as well as whether you needed FBAR for tha year based on all of your accounts (not including RPP).

For 2013, same as for 2012, except that you must correct your Cdn tax on the RRP withdrawl. and you must report the incoem on your 1040 and claim the corrected Cdn tax on your form 1116.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
larklab
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Joined: Thu May 01, 2014 1:28 am

Post by larklab »

Thanks nelsona. I'm sorry for the delay in my response.

So the fbar deadline is approaching and I think I have that under control.

The rpp existed in 2012 but the fund can't figure out what the peak value was...or any value it had at anytime that year. Basically, they can give me the value on the day it rolled into the lira in 2013. I could ball park it, I suppose. I'm not sure how to handle form 8983.

Also, do I file a 2012 8983 with a 2012 tax amendment?

Again sorry for delay.
nelsona
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Post by nelsona »

Why are you needing a value for your RPP in 2012? I said you needed a value for 2012 for your LIRA, which you said existed in 2012. Now you say it existed only in 2013.

So, you need 8891 for 2013 only.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
larklab
Posts: 14
Joined: Thu May 01, 2014 1:28 am

Post by larklab »

Hi there,

Thanks for your speedy response. The LIRA has only existed since 2013. I was referring to this passage in your note

"Since 2012 however, there are other reporting mechanism (form 8983) related to your foreign HOLDINGS (not accounts, not income) and your RPP needed to be included on that for 2012 and 2013, along with your LIRA and any other foreign asset (according to the rules of that form)".

I was on the IRS website and am a little confused about how I would complete form 8983 if I can't get a value for the RPP in 2012. But - the language of the form is suitably vague that it sounds like I would have to file it with an amendment for this RPP of unknown value. Basically, in 2012 that RPP sat with no contributions and no dollar value attributed to it, as far as I can tell. They only gave it a value when it was rolled in 2013.

Maybe that's not how it works - but the retirement fund could not get me a 2012 maximum value when I asked for it.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Funny how they couldn't ell you the value AT ANY TIME IN 2012 (that would be sufficient) but they were able to value your pension for the payout a couple of months later.

No need to be too coy about reporting a value -- any value - rather than leaving it balnk. Im quite sure your RPP did not quadruple in value form december 31 2012 until you rolled it in 2013. Put a reasonable estimate.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
larklab
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Joined: Thu May 01, 2014 1:28 am

Post by larklab »

The people I dealt with were surprisingly clueless. There has to be a value, right? or some proxy. How else would they know how to roll it out.

Okay - thanks for the info.. So to recap

2012 - amend taxes reporting empty LIRA (8891) and unrolled RPP (8983)
2013 - FBAR LIRA and other accounts, report LIRA on taxes (8891).

Thanks again.
nelsona
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Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

sounds right.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
larklab
Posts: 14
Joined: Thu May 01, 2014 1:28 am

Post by larklab »

I'm staring at form 1116 right now and have trouble figuring out where to report the amount I was refunded. Is this a reduction?
larklab
Posts: 14
Joined: Thu May 01, 2014 1:28 am

Post by larklab »

sorry - I posted this under the wrong topic. Will post in the appropriate place now.
larklab
Posts: 14
Joined: Thu May 01, 2014 1:28 am

Post by larklab »

I looking to clarify a point about deferral of taxation on a LIRA via form 8891.

I made the original RPP contributions while a resident of Canada. The RPP was rolled into a LIRA years later while I was a U.S. permanent resident. My understanding is that I can defer tax via 8891 provided the contributions were made while I was a resident of Canada. Does the roll into the LIRA count a contribution?
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

A lira is merely a locked-in RRSP, so yes 8891 can be used. Transfers to a LIRA or RRSP are not considerd contributions, they are simply rolowvers, with no US tax consequence.

But if you have been reading the new threads you see that beginning in 2014 tax year, you don't need 8891 anymore, deferral is automatic.

LIRA will be 100% taxable in US, which is different than RRSP>
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
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