This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.
Technical question about the 8891:
I have been filing deferral elections under Rev.Proc. 89-45 and then 2002-23 for years. Line 6a of the form asks if you have previously made such an election, and page 2 of the form says to answer "no" if it was under 89-45. But what about 2002-23? Should I choose "yes"?
If you ever elected under 2002-23, then the answer is yes and the year would be the first year that you used 2002-23.
Did you not use 8891 last year? The same stipulation was on that version, too.
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
I am a US citizen living in Canada. I am married to a Canadian citizen (not a US resident). I am planning to contribute to a spousal RRSP before March 01, 2006 and include the resultant Canadian tax deduction on my 2005 Canadian tax return. I think in Canada I would be considered the contributor to and my spouse would be the beneficiary of the RRSP. I will be filing my 2005 US return as head of household (minor child qualifies me for that status and I meet the other requirements for that status).
Do I report this RRSP on form 8891 or perhaps form 3520?
When do I report this RRSP transaction – on my US 2005 return or on my US 2006 return?
Do I need to file a TD F 90-22.1 for 2006 as well?
You should proably merely be filing as Married filing separately, and using form 2555 to exclude your Cdn wages from US taxation. If your spouse has no US income, she can even be a dependant. Your goal should not be to lower your US taxrate, it should be to eliminate it all togethr.
As to your 8891, you don't need one for 2005, since there was no contribution in 2005.
It's debatable whether YOU should be filing a 88991 at all since it is not your account, but you could in 2006 file as a 'contributor'. Of course, should your spouse ever join you on your 1040, then SHE would have to file an 8891 yearly.
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
I am aware of FEIE via 2555 and I am going to use it. The question of head-of-household filing status is merely technical as neither it nor married filing separate will yield any tax liability for me this year. Next year may be different, but then this will become a topic for a different thread. At any rate, I am not planning to file any 8891 unless this gets clarified further between now and 2006.
Keep it simple.
While we are being technical, there is GREAT advantage for anyone living outside US with US citizen children to file a 1040, and NOT use FEIE, thus making themselves eligible for the $1000 per child tax credit, which would be paid even if there is no tax liability.
A Cdn resident would use the foreign tax credits to reduce the tax to zero instead of FEIE. I would need to check byut this may require joint filing, but that would stil yield a refund instead of ZERO, which would be your result using FEIE.
Look into it.
There is another thread on this "Additional Child Tax Credit"
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
Nelson, thanks for all of your posts to the various RRSP questions. I've read them and am just a little unclear how to treat the redemption of my RRSP.
I am Canadian and have been living in the US for 5 years, and decided to redeem my RRSP (about 20K USD) this year. I have no Canadian income (and don't file Canadian taxes). Canada took its 25% withholding tax. I am wondering if I have to report all of this money as earned income on my US tax (since it was never initially taxed as income until now), as well as capital gains income since the value of the RRSP has risen from its book value. Form 8891 says put it all in line 16a, but then doesn't make clear what is taxable to put in line 16b (is it still taxable even after I paid the 25% to Canada?). Someone in another post mentions putting the money in at line 7 and count it as income (since it was originally income some years ago). I'd love to hear your thoughts on this.
Also, I assume that I can credit that 25% withholding tax back on my US return as well?
The method for calculating yor 16b ammount has been thorougly covered on this site.
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
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
I’m a US citizen who lived in Canada from Jan 1991-Jul 1999, and filed both US and Can tax returns through an accountant each year. I never owed US taxes except in 1998. I opened RRSP accounts in 1994. As far as I can tell, none of the accountants ever filed anything with the US indicating I had RRSPs. I filed Rev Procs retroactively to 1996 when I first learned about it on this forum in 2002.
Upon leaving in 1999, I had an experienced US-Can tax accountant prepare a departure tax return. I sold all investments outside of RRSPs to establish a new cost basis and transferred my RRSPs into a self-balancing account. I thought at the time that would also establish a new cost basis for the RRSP, but now I’m not so sure. I don’t see them listed anywhere on my US tax return for 1999. I collapsed my RRSPs at the end of 2005, and now I need to pay up.
I think I understand the process for filing the 8891, but I’m not sure when to establish a cost basis since I was subject to US tax the whole time I was in Canada. Is it the sum of all contributions I made (which were included in my US taxes) from 1994 to 1999, or is it the value of the RRSPs upon returning to the US in Jul 99? As a US citizen, I’m not sure the deemed disposition on my departure from Canada applies to this. The thought of digging up my records from 1994 makes me ill!
As a US citizen, your cost basis at time of move to US is immaterial when it comes to eventual US taxation of your RRSP.
The only cost basis you will have in your RRSP is the sum of the original contributions you made (year by year using historical exchange rates). These are what you should be tracking. Only those contributions will come out free of US taxation.
The 'bumping up' of book value is only beneficial for non-US citizens moving to US.
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
That's what I was afraid of...but I should be able to find my old dusty records to establish a cost basis.
Is the US taxable portion only the difference between the US values of all the contributions and the final US value of the RRSP when cashing out? That seems too easy.
Or do I have to take into account any capital gains incurred when I transferred the money into a different account in 1999 and any dividends accrued through the years? Tracking unreported dividends and capital gains from 12 years back- what a nightmare!
The value of my account dropped like a stone shortly after I transferred to the new account in 1999. In addition, the hefty service fees over the past 6 years further depleted the value, which was why I collapsed it in the first place. Except for the change in exchange rates, there's not a huge gain in my account since about 1998. But if I report all the CG and dividends over 12 years, I may end up owing more in taxes than it was worth.
Your basis is strictly your contributions. The ebb and flow of your investments over the years will be reflected in the money you take out. If it turns out that it is less than what you origianlly put in, then you will have no US tax owing.
If you collapsed it all in one year, the calc is pretty cut and dried: all your withdrawal goes on line 7a ons on 1040 line 16a and 7b (16b) get 7a minus your contributions.
If. like most US citizens, you take your RRSP distribution at retirement, over several years, you have a choice on how to 'use up' your cost basis (either the non-taxable comes out first (IRS method for non-deductible IRAs), or it comes out last (strict interpretation of treaty), or it is a mixture year-by-year (usual IRS method for annuities)). This is a choice usually made on the basis of how one wants to co-ordinate the Cdn tax and the foreign tax credit/deduction.
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
for the purposes of form 8891 am I an annuitant or a beneficiary?
I did not contribute to my RRSP in 2005, I was a non-resident of Canada for all of 2005 and cashed it in and closed the account in January. AFAIK, there would have been no interest income on it, so I should be annuitant? I did not at any time elect to defer taxation because I couldn't be arsed to deal with that crap til the end of days.
I don't understand their definitions because the dictionary defintion of annuitant is "a beneficiary of annuity"
I did not at any time elect to defer taxation because I couldn't be arsed to deal with that crap til the end of days. 