I am a Canadian citizen. I moved to California in November 2000 with about 30K in an RRSP. I moved back to Canada and resumed my Canadian residency in May 2008. I was on TN1s while living in the US, and I never touched the RRSP. After doing research on this forum for the last couple of days, I have discovered that I blew it with my RRSP reporting while living in the US.
As such, I will be filing a TD F 90-22.1 to report my now worth about 20K RRSP for 2008 immediately. My next thought was to file the 1040x and 8891s federally, and then the 540x for California, claiming and paying backtaxes to California on the 7 years of unreported dividend income.
But now I’m wondering if there is a smarter way to go about this considering I have left the US. Instead of filing the 8891 and deferring everything, would it be better to settle my account so to speak with the IRS? I don’t plan on moving back to the US, so is it possible to just wrap things up with them on what I owe for 2001 – 2008, or must I wait for 30 years until I withdraw money from the RRSP? Similar question for California. I know I still need to file the 540X for the years of unpaid dividend income, but can I settle things with them for good now that I am no longer a resident? Although I do have IRAs that I’ve kept and so will have to file US tax returns when I pull that money out in 30 years, I was thinking it would still probably be simpler if I could somehow cut the RRSP out of the picture US-wise.
Thanks.
Correcting RRSP reporting after resuming residency in Canada
Moderator: Mark T Serbinski CA CPA
From an IRS point of view, you owe no tax on your RRSP whatsoever IF you elect to def, so that is what I'd be doing. If you lived anywhere else other than california, you would not owe California tax either, but california is the only state that taxes RRSP accrued income (ie. income earned within the RRSP).
You would only owe IRS tax if you later moved back to US and withdrew funds. and at that time, you will have sufficient Cdn tax to cover the US tax.
For california, don't forget that it works both ways: you owe tax on the years that you made income, but you get deductions in the years that you lost (this would be when you triggered cap losses by selling losers -- which unfortunately you never did).
So, for feds, I would simply back-file my 8891s. Your idea of paying now what you owe, would make sense if you (a) were doing this every year on time, and (b) you definitely plan to return to US. Doing it now, since you would owe back taxes and penalties, and that you are no longer taxable in US, doesn't help you much. better just to keep track of what was defferred during those years (it REALLY would have been nice to trigger that loss before you left - you would owe nothing).
Btw, When you start taking your IRA, you won't have to file a US tax return: your IRA will be flat taxed 15%.
You would only owe IRS tax if you later moved back to US and withdrew funds. and at that time, you will have sufficient Cdn tax to cover the US tax.
For california, don't forget that it works both ways: you owe tax on the years that you made income, but you get deductions in the years that you lost (this would be when you triggered cap losses by selling losers -- which unfortunately you never did).
So, for feds, I would simply back-file my 8891s. Your idea of paying now what you owe, would make sense if you (a) were doing this every year on time, and (b) you definitely plan to return to US. Doing it now, since you would owe back taxes and penalties, and that you are no longer taxable in US, doesn't help you much. better just to keep track of what was defferred during those years (it REALLY would have been nice to trigger that loss before you left - you would owe nothing).
Btw, When you start taking your IRA, you won't have to file a US tax return: your IRA will be flat taxed 15%.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best