Please read/post about RRSP in US Here!!!

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NKy586
Posts: 7
Joined: Thu Dec 09, 2004 5:46 pm

Post by NKy586 » Fri Dec 10, 2004 12:12 pm

Thanks Nelson for the info. I do know about the post-US arrival reporting of gains and I was wondering if I could "assign" all of the gains to my ex as her share of the account. It sounds like I can.

But Form 8833 is a nightmare. I'm not at all sure what this form is telling them. Am I going to file a 1040-X and report all of the split/withdrawal as 16a income, then report 0 on 16b with 8833 as the explanation? Or report all of the gains (assigned to my ex) on 16b? Or neither???

Also, what are all the treaty and IRS articles and provisions referred to on the form?

Question 3 seems to imply I am receiving income not paying to someone. How do I answer that?

Sorry for all the questions. As I said 8833 is a confusing form.


nelsona
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Post by nelsona » Fri Dec 10, 2004 2:06 pm

The gains/income that occured in your RRSP between your arrival in US and your divorce, is YOUR income, not hers. Thus you have to account for it, not her. Besides, by you taking it, you get to exclude it. Your ex living in Canada doesn't even have to bother with US tax reporting at all.


The treaty article is Art. XVIII Para. (1). That is really all that you have to put on the 8833 (its a very simple form by IRS standards).

You technically are receiving income, but it is the subsequent transfer to your wife (she wouldn't need to even report this) that makes it wholly non-taxable in both US and Canada.

I would put the entire transfer on 16a, and 0 on 16b for that year, with the explanation on 8833.

Then, begin tracking the gains in your account from the transfer forward; these will eventually be reported on 16b at some point in the future when you make a bonaa fide withdrawl from your RRSP/RRIF.

<i>nelsona non grata</i>

NKy586
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Joined: Thu Dec 09, 2004 5:46 pm

Post by NKy586 » Fri Dec 10, 2004 6:07 pm

Sorry, I didn't state it very well in my last post. What I meant was when I withdraw from MY account to give her the split, I'm going to first withdraw the income earned during my US residency before withdrawing from the original contributions.

eg. Balance when entering the US was $50K. Balance at time of divorce $70K. I withdraw $35K to give to ex, composed of $20K of US-earned income plus $15K from the original balance. I'm left with $35K of the original balance and future income is determined from the $35K basis.

I'm assuming that's what you meant in the tax tip.

Thanks for the help. It's been very useful.

NKy586
Posts: 7
Joined: Thu Dec 09, 2004 5:46 pm

Post by NKy586 » Fri Jan 07, 2005 4:05 pm

Here's another turn I have to deal with ... my ex-wife does not want to cooperate in signing the bottom of the 1040X forms for the years prior to our divorce. Even if she did, she has changed her name since then so that her current legal signature would be different than the one on the original returns.

Should I send the 1040X's in with my signature only?

MaggieA
Posts: 112
Joined: Sun Oct 31, 2004 4:06 pm

Post by MaggieA » Sun Jan 16, 2005 4:15 pm

About the new IRS form 8891 for reporting Canadian RRSPs, the IRS release date for the darned form keeps receding. Currently at 1/24/2005 according to http://www.irs.gov/formspubs/article/0, ... 67,00.html

As far as I can tell from checking out Intuit's website, TurboTax (my historic product of choice, sigh) is not going to be supporting 8891 for 2004. However according to the IRS website at http://www.irs.gov/taxpros/providers/ar ... 48,00.html it looks like E-filed returns including 8891 are supposed to be sent to Philadelphia rather than the normal processing center for one's state.

Therefore if TurboTax does not provide 8891 I'm wondering whether or not it will be OK to E-file via TurboTax then send in an amendment to add the 8891, or whether I should regretfully skip E-filing and send all the paper at once to the correct destination (which I suspect will Philadelphia but haven't attempted to verify).

Any thoughts from experts?

nelsona
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Post by nelsona » Mon Jan 17, 2005 11:48 am

We've had the same discussion before with regards to RPs 89-45 and 02-23.

The correct procedure for e-filing is to simply file as any other would, and send any added forms/statements etc to your normal processing center. Do not send them to a different center.

The references to e-filing this particular form are for professonal tax packages that have ALL forms etc. Turbotax and Taxcut have only the minimum required forms, and are not well-equiped for foreign matters (you can't even complete a 1040NR).

The cross-border community has been doing the e-file then mail-in form for a while now with no hiccups (and there used to be verbage that talked about sending those statements to Int'l too, so don't place too much importance on that). Sending a sheet of paper to an office that otherwise has no dealings with you is a recipe for disaster.

E-file your return, and then mail 8891 to the same place. At least that way everything will be in the same district (and THEN they can be lose everything at once[;)])

<i>nelsona non grata</i>

MaggieA
Posts: 112
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Post by MaggieA » Mon Jan 17, 2005 10:06 pm

Thanks very much, Nelson. So you're recommending the same procedure as last year, except that new form 8891 is substituted for the RP-specified declarations.

Evidently I confused myself with too much information by searching for form 8891 on IRS website.

I was also prone to anxiety about where to send our return because for 2002 (relocation year) our Canadian and US returns were prepared by "professionals" as part of my relocation package. The professionals (large firm with initials PW, and I did not have a good experience with them) sent me a pre-addressed envelope in which to mail the US return they had prepared, after signing it. The envelope was addressed to IRS Atlanta. In due course, Atlanta sent me a letter informing me that the return should have gone to Philadelphia due to foreign income, and they had forwarded it there, but it would count as late. (Fortunately the lateness didn't matter as I was due a refund).

For 2003 I E-filed via TurboTax and sent in my RP declarations to Atlanta as an amendment, as you had recommended. I can handle repeating this approach with the 8891 for 2004.

cyalin
Posts: 2
Joined: Wed Jan 19, 2005 6:32 pm

Post by cyalin » Wed Jan 19, 2005 8:02 pm

Both my husband and I have RRSP accounts. We would like to start taking out the money. I understand that if one spouse is not working (me) I can take out up to $8000 tax-free from Canada, because I am a non-resident. Can we take it out from his account as well? (They are not joint RRSPs but we do file joint taxes) I saw something mentioned about section 217 - if I fill out that form, is that the only form I fill out or do I have to do a full Canadian tax return? And I think I read I only report on the growth for the US taxes - but I am not sure what that means and what the account growth actually is. Does this mean growth in C$ so that the exchange rate fluctuations play no part? And if I don’t know what the actual growth is - what do I report? Where do I report this?
Thanks in advance for the answers, Carolyn

nelsona
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Post by nelsona » Thu Jan 20, 2005 10:25 am

A 217 return in Canada allows you to *pretend* to ba a Cdn resident in order to pay a lower <b>Cdn </b> tax rate on certain retirement income.

To do this you file a non-resident return, on which you report only Cdn-source income not otherwise subject to automatic withholding, along with this Cdn pension/rssp money.

You are thus electing to pay normal Cdn tax on that incoem, rather than the flat rate.

HOWEVER, in determining this new taxrate, you have to state your WORLD income, and this will be used to determine your Cdn tax.

For this reason, it is usually of no use for someone who is working outside Canada, or has large source of non-Cdn income, such as investments etc, to elect to file this way.

Your working husband would gain nothing to do this, for example.

For the 217 election, you file as an individual (there is no such thing as 'joint filing' in Canada) and do not claim a deduction for your spouse, unless he too is making little foreign income.

As pointed out in this thread, there is a debate has to how your withdrawal is taxed in US. I'll leave that alone for the moment.

I would suggest that you pay attention to the thread about Form 8891, as this will become crucial to you.

You should, by the way, have been reporting the existence of your RRSP to IRS since you have been in US.

How long have you been in US?


<i>nelsona non grata</i>

cyalin
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Joined: Wed Jan 19, 2005 6:32 pm

Post by cyalin » Thu Jan 20, 2005 1:04 pm

Thanks for the answers Nelson. I read some previous postings about Form 8891 and see they will be released January 24.
I have been in the US since 2000 and my husband since 1996. Only recently, calendar year 2002, did we realize we had to declare our RRSPs. We are looking into doing 1040Xs - how far back should we go? I believe in the US auditing only goes back 3 years - is this right? If so I need to amend 2000, 2001, 2002... How do I handle it -- we filed separately in 2000, 2001 and I filed under my maiden name as we were not married? Carolyn

nelsona
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Post by nelsona » Thu Jan 20, 2005 3:56 pm

You should be ammneding (with Rev Prov 2002-23 statements for each ) ALL years that either of you were in US.

The statements are for each RRSP, so the manner in which you filed doesn't matter.

Go to the tax forum on grasmick.com for lengthy explanations about RP 02-23 or to canadatotwincities.com for actual examples of the statements.

I'm not about to rehash that here, since that regime is going away this tax year.


<i>nelsona non grata</i>

Claire
Posts: 1
Joined: Fri Jan 28, 2005 8:04 am

Post by Claire » Fri Jan 28, 2005 2:58 pm

Hello - new to the forum so I apologize if this has been previously covered ad infinitum - if it has, maybe someone can direct me to the archived topic?

I am single, 35 years old and working in the US, not sure if/when I might ever move back to Canada, but I own a house here now so not anytime in the near future. I have a Canadian RRSP (value about $10,000 Cdn) which is currently losing money because the fund picks aren't great. I'd like to change the mix but can't because of living here - they will only take liquidation orders while I continue to live in the US. Leaving the money in the RRSP is probably not a great idea because it will probably continue to lose. It was too tech heavy. And yes, I have reported the RRSP on my income tax prep last year here in the USA. [:)]

My Canadian investment guy suggested liquidating and re-investing the money here in an IRA. I realize I will be taxed when the money is taken out if I do this, and also that I'd have to do Canadian income taxes for that year. If I decided to move back to Canada at some point in time, would that money then be re-taxed by the US when I took it out of the IRA after retirement? Since the value of it is not all that high, I'm tempted to just do it and swallow the losses now, rather than watch it continue to decline and pay administrative fees for someone to handle it who can't even do anything with it. [:(]

Are there any other suggestions or options on what I could do given the facts of the situation? [?]

Thanks.

nelsona
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Post by nelsona » Fri Jan 28, 2005 8:35 pm

A $10K RRSP is hardly worth the trouble in keeping, particularly due to all the reporting issues.


Your other choice is to move it to TD Waterhouse in Canada, and there you will be allowed to manage it, for $100/yr.


I would cash in and use towards my home. The suggestion about putting it in an IRA is not that great since, as you say, you will be taxed twice on it (once now with the RRSP withdrawl, and once later by US and by Canada if living there).

You will not have to file a Cdn tax return on this, as the 25% tax will be the final dispostion on that. On your US tax return you will report the ammount on line 16a and <b>$0</b> on 16b of 1040 and claim the 25% Cdn tax as a foreign tax deduction on your schedule A. The foreign tax credit in this case is noyt useful since it will yield no credit. Use it as a deduction instead. There is no requiremnt that the income be taxed in USD for their to be a foreign tax deduction.

<i>nelsona non grata</i>

GregC
Posts: 1
Joined: Fri Feb 04, 2005 10:13 pm

Post by GregC » Sat Feb 05, 2005 9:06 am

I would suggest putting the money into a no fee Roth IRA. This type allows tax free withdrawals of the principal and, after a time, tax free withdrawals of earnings as well. Downside is no tax deduction for contibutions.

GregC

TomLed
Posts: 2
Joined: Fri Feb 04, 2005 10:21 pm

Post by TomLed » Sat Feb 05, 2005 9:42 am

Hello,

I was hoping someone could comment on my situation. It is as follows.

2000: Move to US from Canada. Leave < 10000 US$ in RRSP and about $200 in stock. Tax returns prepared professionally for both countries. Despite the sum of my foreign investments, they were reported.

2001: The portion of my RRSP that was with my old employer was moved to a GIC with RBC. Total foreign investment still < 10000US$. Prepared my own US taxes. Did not report my foreign investments because the total was <$10000.

2002, 2003: Did my own taxes, total still <$10000 -no reporting.

2004: Due to maturing GIC (now in the account as cash) and exchange rate, total investment >10000US$. Stock now worth about 450 $can.

Did I do anything wrong? I presume I need to declare my foreign investments for the year of 2004? With the new form, I presume I need to fill out a separate declaration for the $450 worth of stock?

It is probably 50/50 if I will ever return to Canada. Should I just liquidate my stock and reinvest the RRSP money in a new GIC?

When I report the RRSP, what exchange rate to I use? The highest rate in 2004 or the rate on Dec. 31?

Thanks for any help.

Tom

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