Living in US for 15 years - Just tuning into RRSP challenge!

[canuckinpa2014]

I've been living in the US for 15 years and have just started looking into how to move my RRSP funds to the US. I'm 51 years old, now a US citizen, currently have $135K in Canadian RRSP which has appreciated $47K since I left in 1999. Is it correct to assume that: I can withdraw it all, pay 25% tax to the Canadian government, declare this to this IRS and hope they recognize this 25% Canadian tax to offset US taxes I now owe on the $47K the funds appreciated while I have been in the US? Will I be pealized for not knowing I should have declared anything previously? Will currency exchanges be applied (in 1999 the Canadian dollar was approx 65 cents to the US dollar)?

[nelsona]

Before you take any income, you need to get compliant on reporting the existence of the RRSP to IRS. Otherwise, YES, you will be subject to fines.

You need to produce at the least the last 3 years of form 8891, and you need to produce FBAR for the past 3 to 6 years.


As for US taxes: You need to come up with the US dollar figure for your RRSP value on the date you arrived in US. This part of your RRSP is not taxable in US. Then when you sell, you will include the difference, in USD, as taxable, and then use the 25% Cdn as a credit on form 1116.

[Fug1]

I have a similar problem. I've been filing 8891 every year since I left Canada (2006), but I just realized that I should have also been filing 8938 and FBAR.

My RRSP is currently with a financial institution that doesn't allow trading of mutual funds for non-residents of Canada. I've been told that I can move my account to another financial institution that does allow the trading of funds for non-residents.

So I have a couple of questions on this...

1. When I change financial institutions, will that trigger taxation of gains in my current RRSP account with the IRS? If so, I won't have a foreign tax credit to apply, so this would seem to be a double-taxation situation.

2. Should I get compliant with 8938 and FBAR before I make this change? If so, how does one go about doing that? Amend my previous 3 years of returns?

3. I'm also considering just cashing out the RRSP, to avoid the hassle every year. Based on your previous reply, it sounds like I should definitely get compliant with 8938 and FBAR before doing so.

[Frommontreal2AZ]

Moved to US from Canada in 1999. Submitted FBARs for the last 6 years. Liquidated my rrsp and rrif last year and purchased a second home in Canada. 25% tax was withheld for Canadian taxes. What must I now submit to irs for 2023 taxes? I understand form 8891 is no longer required.

[ND]

Nelsona - can you pls cite the source for saying 'You need to produce at the least the last 3 years of form 8891'? Just curious how you know that once the 8891 requirement was dropped years ago, cannuckinpa would now need to file those? My gut reaction would have been otherwise.

cannuckinpa consider waiting it out til converting to RRIF (you can defer the conversion to RRIF until you start taking distributions) as that reduces the wh tax from 25 to 15%. If the total withdrawals you make from a RRIF in a calendar year are within certain limits, the withdrawals may qualify as periodic pension payments. For Canada as a treaty country with USA, the withholding tax rate on RRIF withdrawals is reduced to 15% for periodic pension payments. A periodic pension payment is an amount withdrawn in a calendar year from a RRIF that does not exceed the greater of Twice the RRIF minimum amount for the year; or 10% of the fair market value of the RRIF at the beginning of the year.

Also, in years where additional lump sum amounts are withdrawn from the RRIF, you have the ability to file a section 217 Canadian income tax return to tax the withdrawals at graduated Canadian tax rates.

A RRSP must be converted to a Registered Retirement Income Fund (RRIF) by the end of the year in which the owner turns 71, but can be converted at any time before that. RRIF owners are required to withdraw a minimum amount each year, starting the year after the RRIF is established. If you don't initiate the conversion by a certain time they will likely start the conversion automatically.

There is no minimum age for conversion to a RRIF, however, if you plan to make regular withdrawals from your RRSP before you turn 65, check to see if the fees charged by your financial institution would be less if the RRSP, or a portion of it, was converted to a RRIF.

[ND]

IR-2014-97, Oct. 7, 2014 The Internal Revenue Service today made it easier for taxpayers who hold interests in either of two popular Canadian retirement plans to get favorable U.S. tax treatment and took additional steps to simplify procedures for U.S. taxpayers with these plans.
As part of this, the IRS provided RETROACTIVE relief to eligible taxpayers who failed to properly choose this benefit in the past.
https://www.irs.gov/pub/irs-news/IR-14-097.pdf

[ND]

Fug 1
2. Should I get compliant with 8938 and FBAR before I make this change? If so, how does one go about doing that? Amend my previous 3 years of returns?

file streamlined amended 1040s before it closes. https://www.irs.gov/individuals/interna ... ted-states.

The failure to timely file a Form 8938 (or timely filing a Form 8938, but one which was incorrect or incomplete) is subject to a $10,000 penalty for each year of noncompliance. (and a penalty up to $50,000 for continued failure after IRS notification). On top of that, the IRS says that “underpayments of tax attributable to non-disclosed foreign financial assets will be subject to an additional substantial underpayment penalty of 40%.”

if not, then at least file FBAR: https://www.irs.gov/individuals/interna ... procedures

[nelsona]

So, look at the date of my post. Previous to the relief.

[nelsona]

No need to resurrect 10- year old posts.

[ND]

say that to Frommontreal2AZ. I responded to his 2024 addition