TD and ING TFSA savings account, trust, not trust?

sitonatree · Post by **sitonatree** » Tue Apr 08, 2014 1:04 am

Hello, I'm Canadian citizen living in US. 2013 is the first year I'm filing as resident alien. I was shocked to see how many forms I need to fill out to report my two TFSA accounts still open in Canada. The call center representative at TD told me my TD TFSA high interest savings account is just a "deposit account, not a trust". ING Direct representative said the same about my ING TFSA savings account. Both stated they are not filing form 3520a for their clients.

The more I read the more confused I got. Some seem to think these are just deposit accounts, others believe they are "foreign trust". I'm already late in filing form 3520/3520a since I was never aware of IRS's position on Canadian TFSA and the Mar 15 deadline for the forms. Has there been any ruling from IRS on this?

Should I report these two accounts as regular accounts and include the interests in income, or should I file 3520/3520a and attach a letter to try explain it's a good faith mistake? I'm kinda concerned if I will really be assessed the $20,000 penalty for late filing.

Thanks for your help.

nelsona · Post by **nelsona** » Tue Apr 08, 2014 11:34 am

If ING specifically says that your TFSA is NOT trust, then it is not a trust. They would hve this in writing somewhere.

Very few TFSA sellers are saying this however.

gpancio · Post by **gpancio** » Tue Apr 08, 2014 12:28 pm

I have an ING TFSA too (deposit account).
I spoke to them and they told me the same thing. (not a trust).

Their account terms don't say it is a trust either:
http://www.ingdirect.ca/en/legal/accountterms/

ON the other hand when I look at my RESP agreement, it is clear that there is a trust involved- it names the Trustee, and so on.

So ING Direct is not a trust, apparently, in Canada.

But would the IRS still consider it a trust?

nelsona · Post by **nelsona** » Tue Apr 08, 2014 12:45 pm

Note what I said: IF is sys SPECIFICALLY that it is NOT a trust, then it is not a trust. Otherwise IT IS A TRUST.

In reality, it dosen't matter what ING thinks it is, its what IRS thinks it is.

sitonatree · Post by **sitonatree** » Tue Apr 08, 2014 1:10 pm

Thanks Nelsona.

Gpancio, I can't even find my TFSA agreements because these accounts were opened years ago. Thanks for the link for ING account terms.

IRS should have more guidance on this issue...

gpancio · Post by **gpancio** » Tue Apr 08, 2014 1:14 pm

I agree with nelsona. The IRS will call it a foreign trust. BTW I called them and asked, and they said they cannot answer questions about foreign trusts- it's way above their level.
So I don't know who you could ask in the IRS.

I'm not even sure how they would know that you have a TFSA, ie "foreign trust", unless you file 3520/A !!

I have had this TFSA since 2009 and they have not said anything yet. I have not filed a 3520 for it.

I am trying to come clean because, well, the penalties are way too scary for not reporting. (they are scary enough for reporting late)

BTW, I don't have a single document for any ING account I opened. I only quoted account terms that are freely available on their web site.
And, those don't say that they ARE a trust, nor do they say they AREN'T a trust.

sarahp · Post by **sarahp** » Tue Apr 08, 2014 3:09 pm

My understanding is that the US considers all Canadian RESPs and TFSAs to be "foreign trusts" even though they are not really trusts in most cases. But since the IRS considers them to be, they expect us to file form 3520. Since our Canadian financial institutions do not file 3520a for these non-trusts, we're supposed to fill in a "substitute" form 3520a and attach it to our 3520 (although I was told by an IRS agent at the Ogden service center that they only need page 3 of 3520a... YMMV since the instructions specifically state otherwise). There is a really useful thread in this forum that I used as a starting point a couple years ago to file 3520 for our accounts. Much of the form does not apply (since it is not a trust) so I just filled in the parts that applied, wrote N/A next to others, and attached the relevant documents along with a letter explaining what I did and the basic facts about the account. It seems to have been acceptable.

sunnysga · Post by **sunnysga** » Tue Apr 08, 2014 3:20 pm

I agree with sarahp. That is my understanding as well and have been filing 3520/A for TFSA and RESP in the past five years or so. And of course, this year adding Form 8621 - cringe.