No need to declare RRSP, RESP etc accounts for 1040NR filers

jhuang1213 · Post by **jhuang1213** » Tue Mar 10, 2009 7:13 am

Hi, my questions might have been answered already. if so, please forgive my ignorance but I could find all the anwsers in past 6 month's post.

I am commuter (working in MI and living in ON) and file treaty-based 1040NR as always for last 5 years and never declare my RRSP and RESP to IRS before. Am I doing the correct thing in the eyes of IRS?

Somebody adviced me to file 1040 for 2008. My questions also are:
1. It is ok for commuter to file 1040?
2. If file 1040, I have to declare my CND investments (RRSP etc) right? From posts I read in this forum, it is a pain to figure out how to report RESP income. any other hassles just on the filing side?
3. I only have salary from US and a lot carry-forward RRSP in case of offseting any CND taxes (except healthcare premium :( ). My wife has no income. Is it really benefitial to file 1040 vs 1040NR (pro-rated).

Thanks for any help from you. It is really informative by reading the posts here.

nelsona · Post by **nelsona** » Tue Mar 10, 2009 7:46 am

I presume that by 'treaty-based' and 'pro-rated' 1040NR, you mean the special calculation for 1040NR based on 1040, which is described in the treaty under article xxV?

As you should know, married Cdns in your situation, should use 1040 to calculate a taxrate, and then apply this taxRATE on your 1040NR, on which you only report US-sourced income (ie. youer US wage) ,and file 1040NR.

But, in order to properly calculate the 1040 taxRATE, you should be reporting ALL your world income on the 'fake' 1040. This does NOT mean that you need to 'report' the existence of the RRSP or the RESP (on a form 8891 or on form 3520, or even TDF90-22.1) but it does mean you should include the yearly income from RESP , along with all other Cdn income (except for uncollapsed RRSPs as these are specifically exempt) to get an accurate calculation

Since you are in a position to pay low Cdn tax, it is in your best interest to lower your US tax as low as possible. I believe the special 1040NR is the way to go.

The person who advised you to file 1040 instead of 1040NR is preobably unaware of the special 1040NR.

nelsona · Post by **nelsona** » Tue Mar 10, 2009 7:49 am

While filing 1040 might reduce tax below the 'normal' 1040, it is impossible that it would reduce it below the special 1040NR, since, by definition, the special 1040NR as the same taxrate as 1040 but with less income.

Simple math tells you special 1040NR is the lowest.

jhuang1213 · Post by **jhuang1213** » Tue Mar 10, 2009 9:51 am

Thanks a lot, Nelsona. I will stick to 1040NR (aricle xxV) then not just for lowering US tax but avoiding headaches of 8891 and TD F 90-22.1 etc. I am so grateful that you pointed out I need to include RESP income on 1040 tax rate calculation.