Treatment of RESP for US Tax purposes

cdninca · Post by **cdninca** » Mon Feb 21, 2011 12:49 am

Hi,

I am filing as a US resident alien for the first time this year, as I had spent the entire last year working under TN visa. I moved to the US at the end of 2009 from Canada (filed as NR for the year 2009). My question was regarding the treatment of RESPs for tax purposes. Before we left Canada, we maxed out the RESP account, and did not contribute anything to it last year 2010. I have read somewhere on this forum that RESP are not tax sheltered and have to be declared using Form 3520. My question is regarding the mechanics of filling out that form:

1. In my case, would I have to fill out Section 2 of the form since I am not contributing to / taking a distribution out of the RESP?

2. It says that the foreign trust has to fill out Form 3520 A. I am not sure how I could compel my RESP provider to fill this form out. Can I fill it myself? And in that case, what would be the minimal amount of information that I need to provide, since there is a lot of information required.

3. How is the interest on the RESP reported? Would it be as an amount in Schedule B?

I would appreciate an expert advice on this. Thanks

Diskdoctor · Post by **Diskdoctor** » Wed Feb 23, 2011 12:57 pm

First the caveat - I am not an expert

1) You should only have to fill out Part II of the 3520 and be able to skip Parts I, III, & IV.

2) It also baffles me as to why a Canadian financial institution would feel any compulsion to complete forms for U.S. taxes. I raised the question with both my RESP institutions and the answers ware, not surprisingly, no.
According to form 3520, Part II:
If â€œNo,â€ to the best of your ability, complete and attach a substitute Form 3520-A for the foreign trust.

3) Here's how I handled this. If your only income in the RESP is interest, the amount (converted to USD of course) should appear on the following:
* 3520-A Part II line 1
* factored into 3520-A Part III line 18
* 3520-A page 3 2010 Statement of Foreign Trust Income Attributable to U.S. Owner line 1a
* Schedule B, part I, line 1
* 1040, line 8a

Good luck!

cdninca · Post by **cdninca** » Wed Feb 23, 2011 1:11 pm

Thank you very much DiskDoctor for your input!

So I am assuming that for 3520 A, the financial details of the trust are not necessary to report? Should I use the annual financial statement received from the trust to fill some of the information? Did you receive any feedback from IRS regarding the filing?

Thanks once again

Diskdoctor · Post by **Diskdoctor** » Wed Feb 23, 2011 1:27 pm

[quote="cdninca"]So I am assuming that for 3520 A, the financial details of the trust are not necessary to report? Should I use the annual financial statement received from the trust to fill some of the information? Did you receive any feedback from IRS regarding the filing? [/quote]

I'm not sure what you mean by the financial details of the trust. Definitely you should fill out the Income Statement and Balance Sheet sections of the 3520-A and you should submit a copy of the RESP financial statements you have.

I have received no feedback from the IRS. When I have tried to call for help I have been told that they do not have the expertise to answer questions on those forms. I did have a tax accountant who handles U.S. taxes for Canadian residents help me with these forms though I don't think she was really familiar with them either so I'm not sure how much to trust her advice.

cdninca · Post by **cdninca** » Wed Feb 23, 2011 1:50 pm

Thanks once again, I really appreciate the info.

Diskdoctor · Post by **Diskdoctor** » Wed Mar 02, 2011 5:07 pm

There is now a great thread here:
http://forums.serbinski.com/viewtopic.php?p=19169
giving some details for filling out the 3520/3520A.

nelsona · Post by **nelsona** » Sun Mar 06, 2011 11:12 am

Reporting RESP is oner thing, having to pay the tax each year is not solved by 3520, but at least it helps the complexity.