I'm hoping I can get some assistance on an RESP windup. I'm not sure what to do...
My father in law circa 2005 opened an RESP in his name with my son as beneficiary. Since my son was living in the US the RESP govt grants were repaid as we were ineligible to use them as a USA resident. Over 2011-2012 my father in law gifted some money via check to him over from funds not from this RESP which we used for tuition. My father in law has now withdrawn the RESP funds ~$14291 in 2013 to cover what he had separately given as money in 2011-2012. Shortly after we got a letter from RBC saying my son will get an RESP-T4A for the $14,291 for the 2013 tax year and is responsible for taxes due since he was the beneficiary.
How do I report this T4A on my son's 1040 even though in 2013 we did not actually get any of the RESP money? Since my son was listed as beneficiary of this RESP were we supposed to report the RESP on a 3520/3520a though in my Father in law's name ? My son had no signing authority on the account.
help please this has my spinning
thanks
Tony
Filing needs for RESP from grandparents
Moderator: Mark T Serbinski CA CPA
Did your father-in-law not tell the bank that his grandson was a US resident?
The first thing that needs to be done is to pay the Cdn tax due on this income. For non-residents this a flat 25% (sent by check, not on a return).
Obviously, RBC was told that the money was given to your son, and RBC accepted this, otherwise the suscriber is taxable. You need to sort this out first. The other thing that needs to be sorted is how much of that money is actually taxable. The contributions are not, neither to the subscriber nor the beneficiary.
It may be better for your son to pay the tax than your father-in-law, especilly if he is NOT a qualified school, since the tax that your father-in-law weould pay would be quite high (including a penalty).
It only needs to be reorted on 3520 in the year(s) he gets the money, not all past years. That would have been the subscibers responsibility, but since he was not US taxapayer, no 3520 would be required. That is the advantage of having a non-US subscriber.
In US he has to report the income, but presumably he has tuition, etc expenses he can write off, as well as any Cdn tax he pays on the money (use on form 1116).
The first thing that needs to be done is to pay the Cdn tax due on this income. For non-residents this a flat 25% (sent by check, not on a return).
Obviously, RBC was told that the money was given to your son, and RBC accepted this, otherwise the suscriber is taxable. You need to sort this out first. The other thing that needs to be sorted is how much of that money is actually taxable. The contributions are not, neither to the subscriber nor the beneficiary.
It may be better for your son to pay the tax than your father-in-law, especilly if he is NOT a qualified school, since the tax that your father-in-law weould pay would be quite high (including a penalty).
It only needs to be reorted on 3520 in the year(s) he gets the money, not all past years. That would have been the subscibers responsibility, but since he was not US taxapayer, no 3520 would be required. That is the advantage of having a non-US subscriber.
In US he has to report the income, but presumably he has tuition, etc expenses he can write off, as well as any Cdn tax he pays on the money (use on form 1116).
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing 
Hi Nelson,
I've been trying to sort this out with my father in law and quite upset with him over this. I feel like this a bit like Dear Abbey. Sorry about that you've been most helpful to all of us in these forums.
Right now we are in a big disagreement I need some impartial expertise to help navigate this. No he did not inform RBC my Son was a US citizen with a US tax address because by his thinking my son (who also has a Cdn passport) was going to School in Canada and is now a Cdn resident. He also only recently just indicated that the withdrawal was essentially a return of his contribution. Other stuff he quoted me in his disertation...
[i]"Most importantly, xxx did not receive any of the proceeds of the closure of the Plan. There were no $$$ transfers to him in Canada nor the USA. Thus, the IRS stipulation of declaring "World-Wide" income does not apply. xxx did not receive any "income" from the Plan in 2013. [His parents previously received $$$$, as pre-delivered $$$$, given the fungibility of $$$$ allocations for use in .....?"[/i]
He is also claiming now CRA Regulations stipulate that "the promoter (RBC in this case) can return contributions to the subscriber tax-free when the contract ends or at any time before".
The contributions that he made to this Plan amounted to $14,400" . This was a fact he had not disclosed originally.
Furthermore he still claims my Son just needs to fill in a CDN return to declare on line 130 the T4A income and with his deductions the taxes are either negligible or none.
The still leaves with the 1040 where I'm not sure what to show the money in turbotax as is it 1099-misc or something else. As there were no NR taxes withheld there wouldn't be any 1116 to fill in
My thinking is he doesn't need to fill in a Cdn return as he is not working there merely going to school. On the 1040 if he did not get the money he has no income to report and I merely need to clear the T4A up with RBC
does my thinking make sense ?
thanks
Tony
I've been trying to sort this out with my father in law and quite upset with him over this. I feel like this a bit like Dear Abbey. Sorry about that you've been most helpful to all of us in these forums.
Right now we are in a big disagreement I need some impartial expertise to help navigate this. No he did not inform RBC my Son was a US citizen with a US tax address because by his thinking my son (who also has a Cdn passport) was going to School in Canada and is now a Cdn resident. He also only recently just indicated that the withdrawal was essentially a return of his contribution. Other stuff he quoted me in his disertation...
[i]"Most importantly, xxx did not receive any of the proceeds of the closure of the Plan. There were no $$$ transfers to him in Canada nor the USA. Thus, the IRS stipulation of declaring "World-Wide" income does not apply. xxx did not receive any "income" from the Plan in 2013. [His parents previously received $$$$, as pre-delivered $$$$, given the fungibility of $$$$ allocations for use in .....?"[/i]
He is also claiming now CRA Regulations stipulate that "the promoter (RBC in this case) can return contributions to the subscriber tax-free when the contract ends or at any time before".
The contributions that he made to this Plan amounted to $14,400" . This was a fact he had not disclosed originally.
Furthermore he still claims my Son just needs to fill in a CDN return to declare on line 130 the T4A income and with his deductions the taxes are either negligible or none.
The still leaves with the 1040 where I'm not sure what to show the money in turbotax as is it 1099-misc or something else. As there were no NR taxes withheld there wouldn't be any 1116 to fill in
My thinking is he doesn't need to fill in a Cdn return as he is not working there merely going to school. On the 1040 if he did not get the money he has no income to report and I merely need to clear the T4A up with RBC
does my thinking make sense ?
thanks
Tony