I am a US citizen, but lived in Canada for 20 years as a child to my 20s. Parents are Canadian, and still live in Toronto, but I was born in NYC and was 4 when the family moved back. I went to school in the US and moved permanently here in 2003. From my work years, I have a small locked in RRSP and was told by TD Canada Trust that since I live in the US, the SEC only allows me to use GICs. Based on what I read here, that rule seems to have changed in 2000!!!!
Is TD blowing smoke up my a#$%%$? Or can I use other options? I have essentially been using 5 year renewals all these years. On top of that TD says due to new regulations, I cannot even renew over the phone as they need to see some ID to combat money laundering. I complained to a supervisor and they are trying to help me, hopefully the issue can be resolved. I am going to visit my parents in August and I can take care of it in person then.
Finally, I reviewed some of the new rules and it looks like I can actually withdraw the whole amount due to the fact that I am a non-resident.
I don't really want to pay a whole bunch in taxes, so I was thinking of just leaving it in Canada until I actually retire. If I do that, for the interest earned but not distributed, do I still need to complete the IRS form 8891? I just learned about that form as well. The only item I ever encountered on Turbo Tax was whether or not I had a foreign account greater than US 10k. Well I just hit 10k Canadian, so I may hit the US limit in the next couple of years. With the last 5 year renewal it was tied to the S&P in a Super GIC, I actually made a fair bit of $$$. All in all more than half of the account is undistributed interest. I would prefer not to pay an extra nickel in taxes!
Thanks.
Michael
Locked in RRSP Living in the US
Moderator: Mark T Serbinski CA CPA
The rules for TD Canada Trust have not changed. They are not allowed to deal with you. TD WATERHOUSE on the other hand, can, as a brokerage licensed in your state (which TD Canada Trust is not).
So, after you move the account to TDW (and, yes, you will have to provide ID etc, but this can be done by mail -- TDW is more knowledgeable in this aspect). you can decide to collapse the LIRA or not (you need to aslk permisiion for the governing body over your LIRA).
IN the meantime, you need to do something for your US taxes, as, since you have failed to elect to defer taxation, you are on the hook for back taxes, and failure to report the existence of the LIRA. Most in your situation need to appeal to IRS to allow you to back-file a deferral using 8891.
Whether your accoint gains or loses, and whether or not you take funds out of the account or not, you need to report the account , and its year-end value, on Form 8891. That is what that form is for. Otherwise there are penalties, as well as the tax issues for not deferring nor reporting the income.
That is separate from the FBAR requirments of foreign account reporting, which carries non-reporting fines as well.
As to collapsing a LIRA, yes, as a non-resident, most LIRAs can be collapsed. The tax in Canad will be 25%. The LIRA will be fully taxable in US as well, with IRS giving you "credit" for the 25% tax.
But first you need to fix your last six years of returns, and probably move your account to TDW.
Right now, you are facing tax, penalties nad interest on the LIRA internal income; penalties for failure to disclose your LIRA; and -- if you account is more than 10K, fines for failure to report foreign accounts.
So, after you move the account to TDW (and, yes, you will have to provide ID etc, but this can be done by mail -- TDW is more knowledgeable in this aspect). you can decide to collapse the LIRA or not (you need to aslk permisiion for the governing body over your LIRA).
IN the meantime, you need to do something for your US taxes, as, since you have failed to elect to defer taxation, you are on the hook for back taxes, and failure to report the existence of the LIRA. Most in your situation need to appeal to IRS to allow you to back-file a deferral using 8891.
Whether your accoint gains or loses, and whether or not you take funds out of the account or not, you need to report the account , and its year-end value, on Form 8891. That is what that form is for. Otherwise there are penalties, as well as the tax issues for not deferring nor reporting the income.
That is separate from the FBAR requirments of foreign account reporting, which carries non-reporting fines as well.
As to collapsing a LIRA, yes, as a non-resident, most LIRAs can be collapsed. The tax in Canad will be 25%. The LIRA will be fully taxable in US as well, with IRS giving you "credit" for the 25% tax.
But first you need to fix your last six years of returns, and probably move your account to TDW.
Right now, you are facing tax, penalties nad interest on the LIRA internal income; penalties for failure to disclose your LIRA; and -- if you account is more than 10K, fines for failure to report foreign accounts.
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
RRSP
Thank you for the answer,
So I can transfer a locked in RRSP to TDW? It is Victoria Day today so I will call the branch this week.
The FBAR does not apply as it is less than 10k US.
For the 8891 you stated 6 years? What is the basis for the 6 years? I just file a 1040X and include the 8891. Do I need to put in a letter of explanation?
Thanks.
Michael
So I can transfer a locked in RRSP to TDW? It is Victoria Day today so I will call the branch this week.
The FBAR does not apply as it is less than 10k US.
For the 8891 you stated 6 years? What is the basis for the 6 years? I just file a 1040X and include the 8891. Do I need to put in a letter of explanation?
Thanks.
Michael
You have no other Cdn accounts? It is the total of your accounts that matters.
Its six years. Feel free to read all the posts on this. You can't just file 1040-X, its too late.
Its six years. Feel free to read all the posts on this. You can't just file 1040-X, its too late.
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