Plan to collapase RRSP ( bought with after-us-tax money)

[octane99]

In 2006 and 2007, I was working in USA and my wife went to school in Canada. In early 2007, Ｉbought $4000 RRSP for me and $4000 Spouse RRSP for my wife using my after-us-tax money. ( I exchanged US dollars to Canadian dollars and bought it).

My wife has moved to US in late 2007. Now we are filing 2007 joint US return. I plan to collapse my RRSP this March as we want to pay back the student loan.

I believe that both I and my wife need to file 8891 this year. My questions are:

1.) I did not have RRSP before I entered US. Last year is my first RRSP, Is form 8891 enough or there are something else?

2.) If I collapse RRSP this March, I will report this distribution to IRS in my 2008 return. Since I used after-us-tax money to buy RRSP, all my distribution should be non-taxable in US except interest earnings. Is my understanding right? How does IRS know that my RRSP distribution is not taxable? I tried to read Pub 939 – General Rules for Pensions and Annuities, but it did not cover RRSP.

Thanks for tips.

[nelsona]

In your 8891 forms for each year you had an RRSP, you are supposed to include your contributions for the year on that form.

Your contributions, since they were not tax deductible, form your 'cost' in the RRSP, so can be withdrawn tax-free.