Hi all,
My wife is from Canada and became a US resident in 2008 when she moved to California. She was unaware of the need to report the RRSPs, so she never filed the FBAR or 8891. The max amount of the RRSP was under $16,000 USD and
She made a disbursement in October 2013. Her dad e-mailed a T4RSP slip from Canada AFTER we filed our 2013 US taxes. She did some research and discovered the disbursement and RRSPs need to be reported for 2008 through the present. Additionally, she found her savings accounts were collecting interest of less than $100 USD each year.
Questions
1) Seems like the Offshore Voluntary Disclosure Program is the way to go. Disclosing saves you from the risk of criminal prosecution but you can opt out of the civil penalty side of the arrangement if the IRS penalties are too high. You then are subject to FBAR fines but I read their bylaws and they say they generally just give a warning letter for first time, individual filers. With the program, we need to send in amended 1040x for each year, complete the 8891s for each year, fill out the FBAR for those years, and do the OVDP paperwork. Is that correct?
2) Do we send amended federal tax returns to OVDP office in Philly? Or do we send it the regular IRS branch (that handles CA amended returns) in Fresno?
3) Can she back-file the 8891's and make a late selection to defer taxes until the RRSP is disbursed? (Thereby not having to list out the undistributed interest earned for each year going back to 2008.) If we do that, we'll be doubly taxed for the RRSP's yearly growth and future disbursement. Ugh.
4) When we backfile the 8891 with amended 1040x for each year, can we leave the 1040x numbers as the original, attach the 8891, and include an explanation that we are seeking to retroactively take the USA-Canada tax treaty election that defers USA taxation on RRSP growth until a disbursement is taken.
5) Does the interest earned on the Canadian savings account (less than $100 USD each of those years) be included on the 1040x?
I know that's a ton of questions. Just trying to figure out what to do. Great forum here. If you have any thoughts, I'd love to hear them. Thanks.
Sam
Filing backlogged RRSP and Canadian Savings
Moderator: Mark T Serbinski CA CPA
The fact she got a t4 rsp tells me that she never told her rrsp manager that she moved to US.
Lots of info here. You have until October to file, so last minute questions will be dealt with later. happy browsing.
Lots of info here. You have until October to file, so last minute questions will be dealt with later. happy browsing.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing
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Hi Sam - Yep, your best first bet is to do lots of browsing around the Forum. Lots of great info on it, much of it from nelsona. You'd have to make your own decision about OVDP, but while you likely qualify for it, the penalties are quite substantial. I am struck with the rareness of major penalties (and have never heard of criminal prosecution, though it's theoretically possible) for anyone in your kind of spot. Lots of people were simply unaware of their reporting obligations. The fear is that the IRS wields an enormous stick, which leads people to think that a civil penalty that results in no jail time is OK. But in fact, most people who have late-filed to make their situation right seem to incur no penalties.
What's different about yours is that you do have some unreported income, albeit a quite small amount. I don't know if you can back-defer on the 8891 or not (I think you can, but that's an uneducated guess). My gut would tell me that you are better off just backfiling the mistake, write a letter detailing your situation, and hope that will suffice.
If you are compulsive and have a hard time sleeping (like I did almost 3 years ago), it's reasonable to call the OVDP hotline (even anonymously) and describe your situation. I found them quite reasonable when I did that, and they recommended that I chill out and just backfile. Certainly, do all that due diligence before signing up for a huge penalty.
Good luck!
What's different about yours is that you do have some unreported income, albeit a quite small amount. I don't know if you can back-defer on the 8891 or not (I think you can, but that's an uneducated guess). My gut would tell me that you are better off just backfiling the mistake, write a letter detailing your situation, and hope that will suffice.
If you are compulsive and have a hard time sleeping (like I did almost 3 years ago), it's reasonable to call the OVDP hotline (even anonymously) and describe your situation. I found them quite reasonable when I did that, and they recommended that I chill out and just backfile. Certainly, do all that due diligence before signing up for a huge penalty.
Good luck!
Not a professional opinion.
Re: Filing backlogged RRSP and Canadian Savings
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Re: Filing backlogged RRSP and Canadian Savings
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