New IRS RRSP Form 8891 available @ IRS.gov - Post Q's here
Moderator: Mark T Serbinski CA CPA
New IRS RRSP Form 8891 available @ IRS.gov - Post Q's here
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Hello everybody,
I am a resident of US for entire 2005 and non-resident for Canada from January 19, 2005 (departure date). I had RRSP and did not make any contribution for 2005.
In July 2005 I cashed out all my RRSP account, no balance left.
Would you help me out with the questions I have, please:
1. For Canadian tax:
I just realized that RRSP manager withhold not 25 % NR tax ( but only 20%) despite I have informed them before of withdrawal that I was Canadian non-resident for 2005. I have not received NR4 receipt or T4RSP from them yet. When and what shall I do to pay difference in tax to CRA? Can this mistake affect my residence statues in eye of CRA?
2. For USA tax:
I have RRSP statement, which says literally that 'value of the plan on December 31, 2004' was CAD $11000. Amount on the plan on the day of withdrawal was CAD $13000.
There is no words "book value" or "market value" in my statement. Can I use CAD $11000 as 'book value'?
And if yes, will I do it right if I fill in line 7 in form 8891 as I described below:
For line 7a - I put all $13000 converted to US $ using exchange rate on the day of withdrawal
For line 7b - I put the difference between 13000 x (exchange rate) on the day of withdrawal, and 11000 x (exchange rate) on the December 31,2004.
Do I have to fill in the lines 10 (a-e) if I have 0 on balance after cashing out RRSP?
Thanks for any advice
I am a resident of US for entire 2005 and non-resident for Canada from January 19, 2005 (departure date). I had RRSP and did not make any contribution for 2005.
In July 2005 I cashed out all my RRSP account, no balance left.
Would you help me out with the questions I have, please:
1. For Canadian tax:
I just realized that RRSP manager withhold not 25 % NR tax ( but only 20%) despite I have informed them before of withdrawal that I was Canadian non-resident for 2005. I have not received NR4 receipt or T4RSP from them yet. When and what shall I do to pay difference in tax to CRA? Can this mistake affect my residence statues in eye of CRA?
2. For USA tax:
I have RRSP statement, which says literally that 'value of the plan on December 31, 2004' was CAD $11000. Amount on the plan on the day of withdrawal was CAD $13000.
There is no words "book value" or "market value" in my statement. Can I use CAD $11000 as 'book value'?
And if yes, will I do it right if I fill in line 7 in form 8891 as I described below:
For line 7a - I put all $13000 converted to US $ using exchange rate on the day of withdrawal
For line 7b - I put the difference between 13000 x (exchange rate) on the day of withdrawal, and 11000 x (exchange rate) on the December 31,2004.
Do I have to fill in the lines 10 (a-e) if I have 0 on balance after cashing out RRSP?
Thanks for any advice
Book value is the price you PAID for each investment in your portfolio, and has NOTHING to do with the value at year end or on any particular date.
It should be quite simple to determine the average price that you paid for each investment you had in your RRSP (in USD, and even easier to come up withe the proceeds of each one you sold after entering US (ie. when you collapsed them) again in USD. Even if it is not simple, this is what you have to do; this is what you would have had to do in Canada if this was not an RRSP. When you make investments, you have to be able to know what you paid for each item. Note that if you had traded all your investements justy before coming down (switching them around within your RRSP), your US tax liability might have been zero.
Anyone moving to US should always 'bump up' the book value of all their investments before arrival.
Since you collapsed the RRSP in the first year of US residency, you will not be making the 'election' availalable on 8891 to defer tax: you don't need to.
As to your NR tax, your broker did not withhold correctly because your status wasn't correctly entered in his system. To correct this you will have to send a letter to CRA along with a cheque for %5 more. That will be all.
You can use the full 25% either as in calculating a foreign tax credit on form 1116 or as a deduction on Schedule A. If you use schedlue A, you can only use what you actually paid in 2005 (20%), and use the 5% on next year
It should be quite simple to determine the average price that you paid for each investment you had in your RRSP (in USD, and even easier to come up withe the proceeds of each one you sold after entering US (ie. when you collapsed them) again in USD. Even if it is not simple, this is what you have to do; this is what you would have had to do in Canada if this was not an RRSP. When you make investments, you have to be able to know what you paid for each item. Note that if you had traded all your investements justy before coming down (switching them around within your RRSP), your US tax liability might have been zero.
Anyone moving to US should always 'bump up' the book value of all their investments before arrival.
Since you collapsed the RRSP in the first year of US residency, you will not be making the 'election' availalable on 8891 to defer tax: you don't need to.
As to your NR tax, your broker did not withhold correctly because your status wasn't correctly entered in his system. To correct this you will have to send a letter to CRA along with a cheque for %5 more. That will be all.
You can use the full 25% either as in calculating a foreign tax credit on form 1116 or as a deduction on Schedule A. If you use schedlue A, you can only use what you actually paid in 2005 (20%), and use the 5% on next year
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
There is nothing about book value on 8891. There is year-end value, and that is available from your RRSP reports (you convert to USD of course).
YOU will need book value on the day you became a US tax resident (Sept 2005, or earlier in 2005 but not necessarily Jan 01, 200) in the future, should you begin cashing in your RRSP.
Book value is usually found right on your statements. It is the PRICE you PAID for the investments you curently have. If you bought a stock for $10, its book value will ALWAYS be $10. It doen't matter what the value is on any particular day. What was invested in past doesn't matter either.
Tip: For GICs, money market funds, and other interst-bearing investments, the book value is the same as the current value, because these are cash. Its you non-cash investments that you need to determine., and this is not the suiite for this.
Now, what complicates matters is distributions or dividends that you receive and reinvest. These affect the book value of that investment, and your mutual fund delaer can help you with this.
YOU will need book value on the day you became a US tax resident (Sept 2005, or earlier in 2005 but not necessarily Jan 01, 200) in the future, should you begin cashing in your RRSP.
Book value is usually found right on your statements. It is the PRICE you PAID for the investments you curently have. If you bought a stock for $10, its book value will ALWAYS be $10. It doen't matter what the value is on any particular day. What was invested in past doesn't matter either.
Tip: For GICs, money market funds, and other interst-bearing investments, the book value is the same as the current value, because these are cash. Its you non-cash investments that you need to determine., and this is not the suiite for this.
Now, what complicates matters is distributions or dividends that you receive and reinvest. These affect the book value of that investment, and your mutual fund delaer can help you with this.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
Of course, e-filing is never mandatory, besides, if this is your first year in US, you can't e-file.
By the by, the TD 90 foprm is not sent with your return, its sent separtely to a detroit address.
By the by, the TD 90 foprm is not sent with your return, its sent separtely to a detroit address.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
One of the checks on joint e-file (or at leat it used to be) was a check on last years joint info, so you probably won't be able to e-file your first return.
RRSP: You will need the book value when you became a US resident.
Get this number, write it down somewhere, and remember that that amount is not taxable when you begin withdrawing RRSP or RRIFs in the future. Regardless of what the value of your RRSP is or what investments you then have.
But the increase WILL be taxable in US, which is why some just choose to collapsetheir RRSPO pay the 25% tax now, and be done with it. Then they invest the proceeeds in tax-free investments, like their home or cottage.
RRSP: You will need the book value when you became a US resident.
Get this number, write it down somewhere, and remember that that amount is not taxable when you begin withdrawing RRSP or RRIFs in the future. Regardless of what the value of your RRSP is or what investments you then have.
But the increase WILL be taxable in US, which is why some just choose to collapsetheir RRSPO pay the 25% tax now, and be done with it. Then they invest the proceeeds in tax-free investments, like their home or cottage.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
That's a decision for you to make.
If you are not working, it's a no-brainer, since the Cdn gov't will treat this income like ordinary income and tlet you take it out and pay regular tax rates, instrad of flat 25%. Its called a 217 return.
For $8000 it would be ZERO, for $30,000 it certainly would be less than 25%.
My wife has been steasdily drawing down her RRSP $10K at a time and has paid $10 (that's DOLLARS) in tax.
If you are not working, it's a no-brainer, since the Cdn gov't will treat this income like ordinary income and tlet you take it out and pay regular tax rates, instrad of flat 25%. Its called a 217 return.
For $8000 it would be ZERO, for $30,000 it certainly would be less than 25%.
My wife has been steasdily drawing down her RRSP $10K at a time and has paid $10 (that's DOLLARS) in tax.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing