Section 217 filing

[cnytax]

My wife and I are U.S. green card holders but are Canadians with RRSPs. We are full time residents in the U.S..

My wife filed CRA Form NR5 last year for a reduction in withholding tax. She received a reply from CRA with a reduced tax rate later last year.

However, she did not actually make a withdrawal from her RRSP and has no other Canadian source income so she has no Canadian taxes to pay for last year.

I understand that by filing NR5, she is required to file a Canadian tax return every year for 5 years following the approval.

I'm guessing that even though she has no Canadian income, that she should file a "dummy" Canadian return with a letter of explanation anyway just to maintain eligibility for future sec 217 tax rates.

Is this reasonable?

[nelsona]

Its not a question of "maintaining" 217 eligibility. There are no such requirement. A 217 election can be made or not on a yearly basis.

However, by filing an NR5 one is the required to file a 217 return, but only IF one recieved a lower withholding rate as a result of the letter. She did not.

So, no, she does not have to file this year (the deadline would be June 30, btw).

She would only HAVE TO file if a Cdn payor of a pension had paid her and withheld at the NR5-determined rate. Not if the payor had withheld at the 25% rate, nor if the payor had withheld at a lower treaty-specified rate.

[nelsona]

She really should have withdrawn a good amount if she did not work. With her personal exemption, plus all the medical premiums you likely pay in US, she could have easily taken out $12,000 tax free, and maybe 25K at less than 15%, which is the best you can hope for

Missed opportunity....

[cnytax]

Thank you