Private Letter Rulings use on Excluding RRSP holdings

sparkytx · Post by **sparkytx** » Thu Jun 30, 2011 12:34 pm

I decided to enter the OVDI program with RRSP and non-RRSP accounts.

My accountant recommended a lawyer to file a PLR so all RRSP accounts will be excluded from penalty. The legal costs for that is north of $10,000.

Does anyone have experience in having their RRSP excluded with or without a PLR?

thanks!

nelsona · Post by **nelsona** » Thu Jun 30, 2011 12:46 pm

By filing 8891 and TDF forms for past six years I know of NO ONE that has had any penalty, tax, or fine on non-reported RRSP.

You are wasting your money with a PLR.

tsanaha · Post by **tsanaha** » Thu Jun 30, 2011 12:48 pm

I did RRSP and non-RRSP with OVDI 2011. No idea what outcome would be...

Within OVDI, you may ask to have RRSP not included for base penalty -- that means, you will file f8891 and make election from 2003 or the year that you have to report RRSP undistributed income without an election for deferral.

I do not see you need any lawyer's help --- if it can be done yourself clean/complete.

tsanaha · Post by **tsanaha** » Thu Jun 30, 2011 12:55 pm

nelsona,

it is an complicated issue when a taxpayer has both non-RRSP and RRSP. he/she can not just back file 6 years of RRSP with FBAR and f8891 -- that he/she has to deal with non-RRSP problem.

I agree that is wasting money to hire a lawyer for PLR, i would just send all to OVDI, and ask for consideration f8891 back filing within OVDI. If IRS wants a taxpayer to waive statute of limitation of 3 year/6 years FBAR, that means the taxpayer should have a benefit (due process ?) to back file f8891 to make this election -- thus, no tax due for RRSP and then no penalty should be applied to RRSP.

thank you Nelsona, i wish I had known you/this forum many yaers ago...

but anyway, if i could get off the penalty on my RRSP, i will send you a case of beer to cheer my win.

sparkytx · Post by **sparkytx** » Thu Jun 30, 2011 12:59 pm

Thank you for the reply. That was the way I was leaning.

Today, I received my letter from the IRS welcoming me into the program. I will keep the group updated on my experience.

tsanaha · Post by **tsanaha** » Thu Jun 30, 2011 1:03 pm

sparkytx,

we are on the same boat. i did all the work myself... please do keep us informed...

i will do the same.

it is sad that we are in OVDI, but we can help other (just as nelsona has been doing for years) not get into any future OVDI..

nelsona · Post by **nelsona** » Thu Jun 30, 2011 2:16 pm

Remember, the reason you are in OVDI is not because your forgot to file your RRSP forms, or forgot to file your TDFs or even forgot to file your return.

You are in OVDI because you did not report INCOME of your fiiled tax return, and pay tax on it. That is under-reporting, and the fact that it was foreign makes it worse.

US citizens in canada are almost NEVER taxable on their Cdn income, so OVDI does not apply to them, especially if they never filed a tax return.

Only those Cdns who lived in US and failed to report income are subject to OVDI, and only on non-RRSP income.

Our poster is already in OVDI, so he is dealing with the non-RRSP. His RRSP handling is cut-and-dried. back-file and be done with it, no tax, no penalty.

ikeaidea · Post by **ikeaidea** » Thu Jun 30, 2011 3:17 pm

Trust Nelsona, no PRL is necessary. Don't waste money. At least I got some IRS letters stated determined they had adjusted the my account and no further action was needed for the 1040X (back filing 8891).

tsanaha, did you get any response for the 1040X?

tsanaha · Post by **tsanaha** » Thu Jun 30, 2011 5:32 pm

ikeaidea,

no words yet from IRS, i sent it all in OVDI because of non-RRSP issue. if it is pure RRSP issue, filing f1040x with f8891 back for 6 years without PRL seems okay... but it won't work if non-RRSP is involved. OVDI 2011 covers 2003 to 2010, and if a taxpayer has both RRSP and non-RRSP problem (no election and under report), then he has to go through OVDI, because if he sent RRSP outside OVDI, that would be for 6 years, then with his problem on non-RRSP, that would be from 2003 --- that will cause problem with RRSP as he has made election (say on 2005 back 6 years), then for 2003 and 2004 these two years would be problem for RRSP -- as he has waived the statute of limitation --back as far as to 2003. With these two years of RRSP no tax deferral election (as he has made on 2005), the RRSP will have to be included in FBAR penalty base.

nelsona · Post by **nelsona** » Thu Jun 30, 2011 7:39 pm

This is only if he filed incorrectly. If one never filed (becasue living in canada) OVDI is not needed. Simple 3/6 year filing is sufficent.

tsanaha · Post by **tsanaha** » Thu Jun 30, 2011 7:51 pm

The poster moved to US 10 years ago, that means he has been US taxpayer for the last 10 years. He is better off with all in OVDI -- so that will give him a chance to back file all back to 2003.

nelsona · Post by **nelsona** » Thu Jun 30, 2011 10:01 pm

Indeed. I was speaking more generally, since very few Cdns living 'forget' to report all their taxes, while many were unaware of TDF and 8891.

tsanaha · Post by **tsanaha** » Fri Jul 01, 2011 5:54 am

IRS may not forgive RRSP missing filing on f8891/TDF because the taxpayer also has non-RRSP issue.

It has been said that IRS' approach in OVDI is to get most money from non-compliance.

So be prepare to get penalty on RRSP.

nelsona · Post by **nelsona** » Fri Jul 01, 2011 7:12 am

I disagree. there has benn no evidence of that regarding RRSPs, proabably because theiRS itsekf hs been all over the map on RRSPs in the past decade.

tsanaha · Post by **tsanaha** » Fri Jul 01, 2011 8:02 am

From the legal point of view, IRS should let a taxpayer off the RRSP FBAR penalty even if he/she has non-RRSP non-compliance.

in OVDI, a taxpayer has to sign to waive tax assessment/FBAR statute limitation -- all the way back to 2003. That is to allow IRS to get the tax owed as well FBAR penalty (in OVDI that is 5%, 12.5% and 25%) on the max from 2003 to 2010. My view of due process on this issue, the taxpayer should also entitle to file f8891 because these years are open for amending -- it should not be only for IRS but also to the taxpayer.

So, there is a hope that RRSP in OVDI will be off the penalty.

A pure RRSP problem is smiple -- no PRL/no OVDI.