Forms for RRSP and RESP - Canadian citizen on TN in USA

[smzsul]

I am a Canadian that moved to the US in April 2012. This is the first year I will be filing US taxes. I am planning to opt for a full year resident (US taxes on worldwide income). I have the following accounts in Canada
(FBAR and FATCA disclosures eligible)
1) Self RRSP - CAD 25000
2) Spousal RRSP - CAD 25000
3)RESP for kids - CAD 40000

Can someone advise what are the forms I need to fill. I tried looking for "nelsona's" posts on how to fill the forms. But I wasn't able to find them. Kindly share.

If I approach an accountant how much do I expect to pay for both my Canadian and US returns ?. If any accountants are on this form, please provide a quote.

Thanks for any help

[CdnAmerican]

Others know more than I do .. but my first kick at the can would be
a) 1040
b) 2555 (which defers most/all of your US tax)
c) 1116 (if you have any tax left over, this may help cancel it out with what you've paid to the govt of Canada)
d) 8891 (for each RRSP)
e) 3520/3520A (for each RESP)
f) FBAR

You can probably defer all the earnings from your RRSP on the 8891. You'll probably claim the increase in value of your RESPs on the 3520 and then include it in your total income on your 1040.

The 3520/3520A are probably the most unpleasant. If you search for that, you can find how someone else filled his/hers out, and this model may work for you.

If you have Cdn mutual funds, you will probably need an 8621 as well. If you have a lot of Cdn assets (see form for details), you'll need an 8938 too.

I'm not an accountant, and others on here know more than me, but that will get you started. I don't know what the cost would be for an accountant, but I do know you'd want to get someone who really knows cross-border issues. I would rather do it myself unless I was 100% confident in the preparer.

Your 3520A is the first thing due; it's due on March 15, typically. You can get an extension, I think, if you need one. But if you owe tax, that's still due on time whether or not you get an extension.

Good luck!

[nelsona]

c) above is incorrect on the use of 1116. 1116 would be used on the non-wage income, not simply if he had Cdn tax left over. Since tax is always apportionned pro rata for each type of income reported, he will by defaault have CDn tax associated with non-wage Cdn income.

[smzsul]

Thanks both.
1) I don't think I can use 2555, as this if for US citizens working abroad.

2)All of my income from Jan to April,2012 in Canada is from wages. Therefore, I think I can use 1116 (General Category Income) to get U.S tax credit for taxes paid to Canada

3)Can you pl. share nelsona's earlier posts on how to calculate the income from RRSP (form 8891). He referred to a formula in an earlier post

4)Do I need to show the increase in value of RESPs/RRSPs on 8891/3520 every year and include it on 1040, even though there are no distributions i.e I don't withdraw any monies from them.

Thanks,

[nelsona]

1) Incorrect. It is for US taxfilers who worked abroad for at any 12 month period, including the 12 months just prior to moving to US.
2) you can, but you will find that you will not get full credit, that is why 2555 works better in the year of move.
4) RESP are not treated like RRSPs. RRSPs are protected in the treaty, and you simply elect not to report the year-by-year income until you make a withdrawal, and this is covered by form 8891. RESP internal income (not simply the cahnge in 'value') MUST be reported every year to IRS, and also a trust report form 3520 must be filed.

[smzsul]

Hi Nelsona,

I think I don't pass the Bona fide resident test due to the following :


Form 2555. My answers to this are Yes and No.

I have notified Canada that I have moved to US and hence a non-resident and not required to pay taxes in Canada.

13 a Have you submitted a statement to the authorities of the foreign country where you claim bona fide
residence that you are not a resident of that country? See instructions . . . . . . . . . . . . Yes No

b Are you required to pay income tax to the country where you claim bona fide residence? See instructions . Yes No

If you answered “Yesâ€￾ to 13a and “Noâ€￾ to 13b, you do not qualify as a bona fide resident. Do not complete the rest of this part.

[nelsona]

you don't need to use the Bona fide test, you use the physical presence test.

In any event, the period you are looking at is BEFORE you moved to US, before you became non-resident of canada. the period from april 2011 to April 2012 for example.

Your wages before you became a US resident qualify for 2555. Period.

[smzsul]

Thanks for the clarification.

1)My spouse and kids moved to he U.S in September. My spouse had Canadian wages until September (and continues to work remotely for Canadian employer from US). Since I am planning to opt to file as full year resident for both of us, how much of her foreign source income can be deducted on 2555 ?.
a) Wages from Jan to April - when I moved to US
b) Wages from Jan to September - when she moved to the US
c) All wages from Jan to December
Again, she only has Canadian source income for the full year.

2) If I use 2555 for both of us, are we still eligible for all/full standard deductions on our U.S wages (my wages from April to December) ?.

I somehow thought I am better off doing 1116 rather than 2555 due to the above confusion.

Thanks for your help.

[nelsona]

1) you can exclude using 2555 (assuming you spent l;ess than 30 days in US in the year before April 2012) your jan-apr wages (1/3 the yearly limit)
2) youre spouse (assuming she spent less than 30 days in US in the year before Sept 2012) can exclude her jan-sept wages.

Your spouse also needs to havbe her employer beging paying her as a US employee, not a Cdn one.

2) yes. Your tax calculation may change slightly if you are over the standard deduction limit however, as this is a proportional exclusion (you must use software to determine this).

You will of course use both methods to see which one yields lowest tax.

[smzsul]

Hi nelsona,
What is the "foreign housing exclusion or deduction" on 2555 ?. Is it relevant in my case, does it help in reducing tax ?. If so, how can I use it ?.
Thanks as always.

[nelsona]

no.