Non Resident - RRSP/Interest Income in Canada

[penjoy777]

Hi
My wife and I (both Canadian citizens) had file a departure return last year in Canada. I am on a H1b status in US and my wife on H4.
This year we have no income from Canada but do have RRSP/RESP and savings account in Canada.
My wife has an online savings account from which she received a T5 this year (interest income approx $1800).
1. Where do I report this interest income? Should I just convert to US currency and show it as interest income in 1040?
2. Since a T5 is sent to us, I believe a copy should have gone to revenue Canada. Do I have to report (file return) in Canada?
3. For the RRSP/RESP we have not received any tax documents from the Canadian banks. Do we need any documents to file US Return or just report these accounts in TDF90-22.1?

Thanks for help in advance!

[nelsona]

1. Yes. It is interest income to be reported on your 1040.
2. Non-residens don't pay tax on interst. Even if they did, it would havebeen withheld monthly by the bank and that would be your final Cdn tax on it. Canada removed taxation of interst for non-residents last year.
3. Your RRSPs need to be reported on form 8891. You can elect not to have them taxed for now in US, until you take the money, on that form. You RESPs however are not sheltered, and, even though there is no statement from the govt, any income it makes every year is taxable in US. You will never get any receipt for your RRSP/RESPs until you withdraw money.

[penjoy777]

Thanks for a quick reply. So I should just convert the interest income on T5 to US currency and show it on 1040; and not worry about the Canadian reporting part even though a T5 has been sent.
I am not sure if the bank is withhelding any money from the account. The account is an online banking account (Pc Financial) and they indicated my wife to close the account within 6-8 months as they do not honour any non resident account.
When I report on the form 8891, do I show the book value of the funds for the year ending? Last year was horrible return-wise and hence there is no income as such made from these investments.

[nelsona]

The fact that you got a T5 is meaningless. One thing it does tell you though, is that your bank does not seem to be aware that you are a non-resident, otherwise they probably would have sent you an NR4 form. In any event, you aren't taxabler in canada on interest. There is no withholding.

As to your RRSP, you report the MARKET value at year-end. The book value (which is the COST of your investments) is information that you keep for future calculations. You need to determine this based on the day you arrived in US.

And, although your investments performed poorly, I'm quite sure that you got a distribution or two during the year, so your RRSPs DID generate income. You have to choose whther or not to exclude that income on your 1040, by indicating so on your 8891s.
I would advise that you elect to defer taxation.

[ski-matic]

I'm confused about something. In other posts about non-residents receiving T5 statements I've seen the advice that one should mail CRA a cheque for 10%, and then use this value on form 1116 to get credit for it.

But in this thread it is said that non-residents don't pay tax on interest, and there is no withholding.

This seems like a contradiction - did I miss something?

Thanks!

[nelsona]

Yes, you did miss something. Both the treaty, and CRA regs reduced the NR tax on interest to ZERO, 3 years ago.

[nelsona]

This does not apply to dividends etc however.

In any event, correctly notifying all Cdn account managers of your current residency status will mitigate any of these confusing situations -- as well as avoid illegal trading.

[ski-matic]

Ahh, ok! Thanks for the clarification!