RESP, 3520, and 3520-a

nakubo.1974 · Post by **nakubo.1974** » Tue Mar 04, 2014 11:50 pm

Thank you in advance for your assistance. I am a married Canadian citizen who immigrated to the US in 2013.

My wife and I contributed to an RESP between 2007 and 2012 (no contributions in 2013). We did not close the RESP before leaving Canada because there were reasonable gains (besides CESG) and my child had not yet started university so I would have been unable to withdraw those gains. I also didn't know about all the onerous US filing requirements :)

I intend to close the RESP soon (I will lose the CESG since our son also immigrated to the US and goes to university here).

Thanks to others on this forum, I have figured out the details for Form 8621 (http://forums.serbinski.com/viewtopic.php?t=8223) and will be reporting the interest income from the RESP on Schedule B line 1 and 1040 line 8a.

It is my understanding that I also need to fill out Forms 3520 and 3520-a. I have already read through almost all the threads relating to those two forms. However, I still have one major doubt which I hope someone can clarify.

Since the Canadian RESP Provider will not file the 3520-a, do I simply submit the 3520 and "best of my ability" substitute 3520-a together by April 15th? Or is the 3520-a still due by March 15th?

If the latter, do I have to include the 3520-a again when mailing the 3520?

Wow, these requirements are a beast!

MGeorge · Post by **MGeorge** » Wed Mar 05, 2014 9:16 am

Hi nakubo,

Yes - unfortunately, you have to complete form 3520A which is due by March 15th. I generally file it in the same envelope as my 3520 - but the 3520 is only due when my 1040 is due, for me, both 3520 and 1040 are due on June 15th since I live in Canada.

Have a look at other threads. the one I refer to the most is called "Taking stab at 3520 for a TFSA" or something like that. Another thread is called "algorithm for 3520 for an RESP" or something similar.

By the way - check the rules for the RESP - I think you should be able to use all of the funds (contributions, income, and CESG) for your child's education in the US. I believe (and I'm not an expert) that if you live in the US, you can use the RESP, but you can't contribute to it and receive grants. I don't know for sure - but I think you should check this.

Best of luck.

nakubo.1974 · Post by **nakubo.1974** » Wed Mar 05, 2014 11:23 am

Thank you MGeorge. From reading numerous websites, I have concluded that CESG grants go back to the government once the beneficiary becomes a non-resident. When I go to withdraw the RESP from TD soon, I will find out anyway :)

nelsona · Post by **nelsona** » Wed Mar 05, 2014 11:42 am

Just a thought on CESG:

Obviously most Cdn students going to US can and do use their RESP funds, including CESG. That is because students going to the US to study are not automatically considered non-residents.

So there may be a way that you can claim that your son is merely in US to study and has not given up Cdn residency. It may depend on his US imigration status or citizenship.

So, I'm not so sure that you should (a) be withdrawing the funds from TDW, instead of merely having your child spending the money on school, nor (b) having to return the CESG.

nakubo.1974 · Post by **nakubo.1974** » Wed Mar 05, 2014 11:53 am

Our son moved with us to the US on an immigrant visa (aka greencard). I want to also file my son's Canada tax return as an emigrant so that there is absolutely no question of my wife and I having any ties to Canada. If CRA ever asks us to fill out the NR73 forms, I want it to be relatively painless.

I will be withdrawing gains as EAP and my contributions as a PSE.

nakubo.1974 · Post by **nakubo.1974** » Wed Mar 05, 2014 11:54 am

Sorry I forgot to add that my son is a Canadian citizen.

nelsona · Post by **nelsona** » Wed Mar 05, 2014 12:01 pm

I would not worry about your residency, once living legally in US, the treaty protects you 100% from such a claim. The "house and spouse" standard makes you unassailably a US tax resident.

There should be 25% tax withheld, in his name. He can get most of this back by filing what is known as a 217 retrun, where he pretends all his income for the year is from Canada. He will als report the income on his 1040

nelsona · Post by **nelsona** » Wed Mar 05, 2014 12:09 pm

sorry, I mispoke. the resp money is not eligible for 217 reduction. The EAP portion would be 25% taxable in his hands.

nakubo.1974 · Post by **nakubo.1974** » Wed Mar 05, 2014 12:11 pm

Nelsona, thank you for your reply. I am confused though. Will the 25% be deducted only if he declares himself a non-resident of Canada?

Would you recommend that my son file his Canada return as a full-year resident and not file an emigrant return? In 2013, his income was around $1250 in Canada and $50 in the US.

nelsona · Post by **nelsona** » Wed Mar 05, 2014 12:18 pm

As I said, in order for him to avoid this non-refundable 25% tax (and to get the grant money) he needs to remain at least for the first year Cdn tax resident (which has no impact on you). He should then get as much of the grant money and EAL he is entitled to, and then use whatever expenses deductions, etc to reduce his taxes.

he still has to file a 1040 in US of course, and report the EAL, but there are plenty of tax deductions and credits available to him to reduce his taxes there.
As long as he did not file a departure return for 2013 yet, he should be fine. There is an expectation that Cdns who goto US to study remain Cdn residents for tax purposes, so it is unlikley that they would question him.

angela · Post by **angela** » Thu Mar 06, 2014 2:58 pm

Hi nelsona, we have similar concerns, can only the parents claim non-residents of Canada, after the whole family relocated to US. But the children remain Canadian residents, in order to maintain the RESP account?

nelsona · Post by **nelsona** » Thu Mar 06, 2014 3:07 pm

Well. are they still residents. You can't fake them being resident.

nelsona · Post by **nelsona** » Thu Mar 06, 2014 3:08 pm

nakubo's case is different, as it appears that his child moved to the uS in order to go to school, or at least it could appear that way.

This doesn't apply to 12 yr olds.

angela · Post by **angela** » Thu Mar 06, 2014 3:12 pm

Hi nelsona, we have similar concerns, can only the parents claim non-residents of Canada, after the whole family relocated to US. But the children remain Canadian residents, in order to maintain the RESP account?

nelsona · Post by **nelsona** » Thu Mar 06, 2014 3:17 pm

Angela, if you keep repeating questions I will stop answering you altogether.
It is bad eneough that you are stepping in someone elses' threads, don't make it more rude.