I recently found out that I have a pension plan ($2200) from a Canadian company that I quit in 1998. They could not contact me since I moved many times after 1998. They wanted to give me the option to keep the pension plan in the company and receive the distribution at age 65 or transfer it into a locked-in RRSP. They also told me that I have excess contribution of few hundred dollars, which I can transfer to a regular RRSP. I found out that there was no interest accrued in the plan since I left Canada. I have never informed IRS about it. What should I do? Is there a provision in rev. prc. 2002-23 to report this company pension plan? If then do I have to go back and amend the 1040 to include it in rev. prc. 2002-23?
Now, since there were no gains in last 6 years in the plan, probability I did not have to report, right?
If I roll this over to a locked-in RRSP and will I not be able to withdraw until I am 65? If that is the case then I have to file 8891 for the rest of my life.
Any help would be greatly appreciated. Thanks a million.
How to report a company retirement fund to IRS
Moderator: Mark T Serbinski CA CPA
In general, true Cdn pensions are not reportable in US, as they inherently meet all the reporting requiremnts.
I would only be reporting actual INCOME that I receive from thiese funds (be it excess contributions or a payout) in the years when I receive them.
If you transfer this to a LIRa, then yes, you will have to begin filing 8891's until the account is closed.
<i>nelsona non grata... and non pro</i>
I would only be reporting actual INCOME that I receive from thiese funds (be it excess contributions or a payout) in the years when I receive them.
If you transfer this to a LIRa, then yes, you will have to begin filing 8891's until the account is closed.
<i>nelsona non grata... and non pro</i>
Thank you Nelson, I am so glad I found out this great site and great people.
What is LIRA?
Contrary to what I was told before, I found out there was interest accrued in the company plan every year since I left the company. But they don't want to tell me how much each year. Is it good to transfer this to a locked in RRSP and then withdraw from that. But the company is telling me according to Ontario law that I can't break Locked in RRSP and withdraw money out. Is this true? I wonder is there any one has done that? I thought for GC holders Canada allows to get their all the assets out of the country.
I don't know what is the best thing to do, whether to leave it in the company or transfer it to a locked in RRSP. IF I transfer it to locked in RRSP do I have to file 8891 every year or in the first year to defer it. Then the deferal will be effective for all the following years until a distribution is taken.
How is this treated for state taxes? THis is a big mess!!!
Appreciate any help [:)]
What is LIRA?
Contrary to what I was told before, I found out there was interest accrued in the company plan every year since I left the company. But they don't want to tell me how much each year. Is it good to transfer this to a locked in RRSP and then withdraw from that. But the company is telling me according to Ontario law that I can't break Locked in RRSP and withdraw money out. Is this true? I wonder is there any one has done that? I thought for GC holders Canada allows to get their all the assets out of the country.
I don't know what is the best thing to do, whether to leave it in the company or transfer it to a locked in RRSP. IF I transfer it to locked in RRSP do I have to file 8891 every year or in the first year to defer it. Then the deferal will be effective for all the following years until a distribution is taken.
How is this treated for state taxes? THis is a big mess!!!
Appreciate any help [:)]
A LIRA is a <b>L</b>ocked-<b>I</b>n <b>R</b>etirement <b>A</b>ccount, which is exactly what your firm is offering.
The 8891 election, if you choose it, must be repeated every year, even though once made it is irrevoccable. IRS logic for you.[xx(]
The 8891 also serves as a reporting mechanism, so, even if you didn't makje the deferral election, you would still need to report the existence of your LIRA every year, either by 8891, or the ridiculuously onerous 3520.[:(!]
As to breaking your LIRA, this can be done, as you say, once you establish that you are a non-resident of Canada (having a GC is not crucial).
<i>nelsona non grata... and non pro</i>
The 8891 election, if you choose it, must be repeated every year, even though once made it is irrevoccable. IRS logic for you.[xx(]
The 8891 also serves as a reporting mechanism, so, even if you didn't makje the deferral election, you would still need to report the existence of your LIRA every year, either by 8891, or the ridiculuously onerous 3520.[:(!]
As to breaking your LIRA, this can be done, as you say, once you establish that you are a non-resident of Canada (having a GC is not crucial).
<i>nelsona non grata... and non pro</i>
Indeed.
A LIRA set up exclusively under Ontario Pension rules is 99.9% unbreakable, except for hardship, and certainly not for non-residency.
The only hope is if the worker was Pensioned under Federal rather than Ontario law . Those LIRAs, as well as those from other provinces, have more liberal non-residency policies.
<i>nelsona non grata... and non pro</i>
A LIRA set up exclusively under Ontario Pension rules is 99.9% unbreakable, except for hardship, and certainly not for non-residency.
The only hope is if the worker was Pensioned under Federal rather than Ontario law . Those LIRAs, as well as those from other provinces, have more liberal non-residency policies.
<i>nelsona non grata... and non pro</i>
I am from Ontario. my former company in Ontario told me that their company pension fund was set up under Ontario law. Does that mean if I trsfer it to a bank under LIRA that can not be broken?? Ontario certainly got a way to mess up people. How about I trasfer it to a bank out side Ontario. Let say some little bank in Quebec or BC Does that work?
Now what is better under the circumstance; to leave it in the company so I don't have to go through the headache of reporting to IRS every year or trasfer to LIRA and then report one page simple form 8891 every year rest of my life??? Please help
Now what is better under the circumstance; to leave it in the company so I don't have to go through the headache of reporting to IRS every year or trasfer to LIRA and then report one page simple form 8891 every year rest of my life??? Please help
Ontario will not allow you to transfer it outside ontario without 100% assurance that the other institution will abide by Ontario rules (which means no collapse).
Their Documentation expressly mentions this.
You should not overdramatize the fact that you would have to report something every year for the rest of your life to the IRS. This is not a big deal. 8891 is MUCH easier than any of the other reporting mechanisms that were in force before, and these too were required every year.
It will be one form with one check box and one number to enter (your year-end balance).
<i>nelsona non grata... and non pro</i>
Their Documentation expressly mentions this.
You should not overdramatize the fact that you would have to report something every year for the rest of your life to the IRS. This is not a big deal. 8891 is MUCH easier than any of the other reporting mechanisms that were in force before, and these too were required every year.
It will be one form with one check box and one number to enter (your year-end balance).
<i>nelsona non grata... and non pro</i>
My company told me that I could transfer it to a bank in Quebec or BC. IF I do so then can I collapse later on under Revenue Canada law?
I read some place on the forum. Rev Prc. 2002-23 requires to report existance of company retirement plan. But I don't see it 8891 form Do I have to go back and include this for 2001, 2002 and 2003 tax returns?
What is the right term to describe this plan? RPP or Define Pension Plan or what?
I read some place on the forum. Rev Prc. 2002-23 requires to report existance of company retirement plan. But I don't see it 8891 form Do I have to go back and include this for 2001, 2002 and 2003 tax returns?
What is the right term to describe this plan? RPP or Define Pension Plan or what?
My <u>non-pro</u> advice is to not question what to report for RRSP/LIRA in your state.
The vast majority of states accept IRS definition of income, so, no fed income equals no state income.
I believe that it has been the constant questionning of State tax authorities that have, for example, caused California to tax phantom RRSP/LIRA income.
If you do not live in California, you do not have to do anything different for your state tax return that for your IRS return, and have nothing additional to report.
Your pension, if left intact, would not be taxed in any state until withdrawn. Remember that the issue for Cdn pension being held by US residents is not an income question, it is a reporting matter.
<i>nelsona non grata... and non pro</i>
The vast majority of states accept IRS definition of income, so, no fed income equals no state income.
I believe that it has been the constant questionning of State tax authorities that have, for example, caused California to tax phantom RRSP/LIRA income.
If you do not live in California, you do not have to do anything different for your state tax return that for your IRS return, and have nothing additional to report.
Your pension, if left intact, would not be taxed in any state until withdrawn. Remember that the issue for Cdn pension being held by US residents is not an income question, it is a reporting matter.
<i>nelsona non grata... and non pro</i>
Let me clarify that I understood you completely and I will do
1. I will leave company pension plan with the excess contribution in the company for this year as it is.
2. I will not report it on 8891 (or 3520/3520A) or to the state
3. I will trasfer it to LIRA in a future year and I will report it on 8891 (even though it says only for RRSP/RRIF) and I will still not report it to state
I have talked to someone in my state tax office. He told me that they follow the Federal rules (you are awesome! with the same info) But He told me that He is not sure that I will be able to use the foreign tax credit for any RRSP withdrawal since they only give crdit for the taxes paid to another state NOT for a foreign country.
But when I talked to another person in the state tax place, She said that if I file the tax return in canada (considered as a filing in another state) then I will be able to take the foreign tax credit as credit for taxes paid to another state. SO then I talked to CRA they told me I will have to file 217 and show the world income. Even though I will not be getting any refund with 25% taxes I paid to CRA that mere filing seems to tell the my state tax authorities that Canadian tax of 25% withheld is indeed the taxes I had to pay. Because they only give credit for taxes actually paid Not withheld.
I did not know the life is this complicated south of the border [:I]
1. I will leave company pension plan with the excess contribution in the company for this year as it is.
2. I will not report it on 8891 (or 3520/3520A) or to the state
3. I will trasfer it to LIRA in a future year and I will report it on 8891 (even though it says only for RRSP/RRIF) and I will still not report it to state
I have talked to someone in my state tax office. He told me that they follow the Federal rules (you are awesome! with the same info) But He told me that He is not sure that I will be able to use the foreign tax credit for any RRSP withdrawal since they only give crdit for the taxes paid to another state NOT for a foreign country.
But when I talked to another person in the state tax place, She said that if I file the tax return in canada (considered as a filing in another state) then I will be able to take the foreign tax credit as credit for taxes paid to another state. SO then I talked to CRA they told me I will have to file 217 and show the world income. Even though I will not be getting any refund with 25% taxes I paid to CRA that mere filing seems to tell the my state tax authorities that Canadian tax of 25% withheld is indeed the taxes I had to pay. Because they only give credit for taxes actually paid Not withheld.
I did not know the life is this complicated south of the border [:I]
Sounds good.
Most states don't allow any foreign tax credit, so don't scratch your head about that. But if they do, good for you.
By the way, that is a great strategy for getting your 25% tax to show up in a tax return. Usually, as CRA explained, you would only file a 217 if you were going to get a reduction in the tax rate. But your method will work quite nicely.
And, just so you have it clear, a LIRA <b>is</b> an RRSP. It merely has an extra locked-in feature. It is not a separate type of retirement account.
Simply think of it as a Locked-in RRSP, since that is exactly what it is.
<i>nelsona non grata... and non pro</i>
Most states don't allow any foreign tax credit, so don't scratch your head about that. But if they do, good for you.
By the way, that is a great strategy for getting your 25% tax to show up in a tax return. Usually, as CRA explained, you would only file a 217 if you were going to get a reduction in the tax rate. But your method will work quite nicely.
And, just so you have it clear, a LIRA <b>is</b> an RRSP. It merely has an extra locked-in feature. It is not a separate type of retirement account.
Simply think of it as a Locked-in RRSP, since that is exactly what it is.
<i>nelsona non grata... and non pro</i>
I was going to file 217 merely to show to my state that I actualy had to pay 25% tax to Canada and it was not just a withholding. but I am not sure about whether I may get it to a different problem with CRA by doing that. since I have to declare the world income for that process, How do I get around not paying additional tax to Canada on US source income if I do 217.
I paid Cd$3500 in tax for RRSP and when I put my world income with 217 taxes become $12000. So Can I say in the form since with my world income my taxes come to be more that 25% of RRSP I am not owing or requestin a refund for this year..........something like that.
My point is to file 217 to just to show tha I had to pay 25% tax not to pay more to Canada.
How do I get around that.....Any ideas?
I paid Cd$3500 in tax for RRSP and when I put my world income with 217 taxes become $12000. So Can I say in the form since with my world income my taxes come to be more that 25% of RRSP I am not owing or requestin a refund for this year..........something like that.
My point is to file 217 to just to show tha I had to pay 25% tax not to pay more to Canada.
How do I get around that.....Any ideas?