Election to Defer Income from RRSP

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Election to Defer Income from RRSP

Post by eeyore »

I'm a U.S. citizen living in Canada. My husband also lives in Canada but is not a U.S. citizen. I file a U.S. income tax return as Married Filing Separately, since my husband does not file a U.S. income tax return. I'm a homemaker with no earned income, but I earn a few thousand dollars each year in interest income.

Years ago my husband did a spousal RRSP in my name, for which I used the Rev. Proc. to defer income on RRSP. In retrospect, it would have been better to simply declare the interest income each year on my U.S. tax return and be done with it, since the Standard Deduction would have been far more than enough to eliminate any tax payable for any of those years. Actually, that would have been the case, even if I had an earned income, given the Foreign Earned Income Exclusion. Even from the Canadian side, the Spousal RRSP was a mistake, since now CRA allows income averaging for seniors.

So the election to defer U.S. taxes on the Spousal RRSP was a dumb idea. Is it correct to say that, having used the election for my RRSP account, I can't reverse course and simply declare the income from my Spousal RRSP account each year? There never would have been any U.S. tax payable (not even close), and there likely never will be down the road either when the RRSPs are withdrawn, but the deferral leaves me with more downstream reporting requirements on the U.S. side, which is what I'd prefer to avoid.
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Re: Election to Defer Income from RRSP

Post by nelsona »

No. Once made, the elsection to defer stands, Besides, there is no longer a provision to elect to defrer; the deferral is now automatic, just like it is in canada for IRA, etc.

Whether or not you had declared the income or not, you would still ahve exactly the same reporting requirments now, based on the value of the RRSP.

I wouldn't be worrying that your past actions were a "mistake". You likley won;t pay any US tax when you do witrhdraw and even if you owe in US,m you will have more than enough Cdn tax to offset it.
I am taking my usual break from this site until May. Always too many tax-form specific questions at this time of year...
nelsona non grata. Non pro. Search previous posts. Happy Browsing :D
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