Form 8891 questions here please!!!!

This is our main tax information forum which deals with topics concerning Canadians living and working in the U.S., U.S. citizens contemplating working in Canada, and all aspects of Canadian and U.S. income tax and related adminstrative issues.

Moderator: Mark T Serbinski CA CPA

Post Reply
marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

Hi, I hope this is the right place to ask about record-keeping on RRSPs. I've happily sent off my tax return, thanks to great help from Nelson and Carson.

I'm a US citizen living in Canada ever since I began earning an income (not counting summers as a camp counselor and lifeguard in the US, during which I don't think I earned enough to qualify for US social security!). In 1995, I filed US returns for 7 years back, according to the rules at that time. I didn't defer any RRSP income until 2003.

I'm now trying to update my records, so that when I begin living on RRSP and QPP, I can accurately reflect the amounts of US taxes already declared for the years previous to 2003.

The problem is, Nelson has convinced me that the RRSP income I declared was probably incorrect. (He said that didn't matter, because the income was still less than my deductions, and so (at least as I understood it) I didn't need to re-file my returns.)

My questions are--

1) Do I just correct my own records on the actual income I should have declared, in order to build a proper basis for the fraction to be subtracted from future amounts I'm living on?

2) Do I convert all the income and (contribution amounts) to US dollars for each year?

Thanks,
Marge
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

What I am doing, is keeping my own 8891s for every year that I have been in US, tracking the deferred income every year, in then-current dollars of course.

I suggest this to every one: preparing an 8891 for every accouint, and every year (even the past), AS IF ONE HAD NOT DEFERRED TAXATION.
This will prove invaluable in detrrmining (under current rules) what the taxable portion of any withdrawl will be.

As A non-US citizen, my investment basis is market value on the day I became resident.

AS a US citizen, your basis, as you have found, is contributions in then current US dollars PLUS any income that you reported obver the years to the IRS. I would be tracking what you DID submit as income, in your case, rather than what you should have submitted.

<i>nelsona non grata... and non pro</i>
marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

Hi, If the answer to my second question is yes, as I'm afraid it is, then I have another question to add--

At the US Consulate, they gave us a conversion figure to use every year. This year the rate they gave us was 0.7744. But the figure I've seen here, and I verified it on the Fed. Reserve site, was 1.2 (1.2034) @ Dec. 31/05--and that translates to 0.8310. I just called the consulate, and they said their figure is always an average of the rates for the four quarters.

So my question is, I have to apply the same procedure to years when I didn't file at all, right?

(I contributed from 1979 to now, but in 1995 I only filed back to 1989. Therefore, I need to have records on the income and contribution amounts for 1979 through 1988.)

I'm assuming you'd always have to use the same system, because if you changed the way you caculated the rate from year to year, in some years it might really help you, as in 2004.

Or not?

marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

Oops [:D] Thanks, Nelson for the quick reply! Your explanation is so clear and I will do that (whoa, if I can--for capital gains, I am sooooooooo lost without amount in box A goes on Schedule Z!!).

On that score, you wouldn't want to recommend a reliable, inexpensive software that also makes me coffee? [:)]

As you can see, my question of my last post still stands...

Thanks again!
Marge
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

You don't have to use the same sytsem throughout, but you do have to be consistet.

The generally accepted practice on ALL matters of exchange conversion are: for single transactions (like a $10,000 RRSP contribution)occuring occasionally, you use the rate in effect that day. For periodic payments (like the monthly/quarterly dividends that you received) you can use either the rate for each dsay or the average yearly rate.

<i>nelsona non grata... and non pro</i>
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

I would use the fed rate.

It's time to ditch the consualte on tax matters.

<i>nelsona non grata... and non pro</i>
liz
Posts: 12
Joined: Thu Jun 09, 2005 2:14 pm

Post by liz »

I have read this forum and the Grasmick web site. I have a unique situation that I could not find any answer in both web sites.

I told my former company to transfer RPP into a RRSP in 2003. They said they mailed the check on December 12th 2003. So I sent the statement to defer tax on RRSP income with 2003 form 1040 and I wrote in that saying:

I have transferred $800 of Registered pension plan from company XXX to RRSP in bank XXX. This tax free transfer was made under Revenue Canada laws on December 12th, 2003.

But later I found out that the RRSP statement from the bank says, $800 was contributed to the Plan on February 10th 2004. What has happened was the bank misplaced the check and therefore it did not get deposited in 2003 and got deposited on February 10th 2004

So there is a discrepancy since I reported to IRS with 2003 tax return that I have made a tax free transfer to RRSP in Dec 2003 and while the bank actually got their acts together to do the deposit to the RRSP account in Feb. 2004.

According to the bank statement transfer actually occurred in Feb. 2004. But I have a paper from the company shows that they sent the check in December 2003

Do I have to revise the deferral statement for 2003 deleting the transfer and put that transfer in 8891 as it actually recorded in the bank?

Simply stating the company sent the check in 2003. But the bank deposited in 2004 and I reported it as transfer occurred in 2003.

To make the problem more complicated, with out realizing all that I called the bank and withdrew the RRSP in March 2004. I am getting ready to send the tax return & 8891 and report the income as described in many places in this wonderful forum.

nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Not a big problem. Your RRSP is gone now, so merely report all the withdrawal on 7a of 8891 (and line 16a of 1040) and your taxable portion on line 7b of 8891 (16b of 1040).

You have already acounted for the contribution last year, forget about their delay.

<i>nelsona non grata... and non pro</i>
marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

Hi, Nelson,

Again, you've made it so clear! Thank you <font color="red"><i>so much</i></font id="red">! [:X]

Since you seem to be able to work magic with these murky (to me, at least!) subjects, can we address reporting of capital gains sometime? Where in the forum would I ask this? Could it be addressed?

Best regards,
Marge
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Capital gains calculations are really only a matter of record keeping and math.

There are dozens of programs and spreadsheets that can handle these.

<i>nelsona non grata... and non pro</i>
marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

OK, >sigh<.

Thanks again for all your help.
marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

Help! A friend who is a US citizen and living in Canada just learned about form 8891 (from me), and can't get ahold of some of the the information needed in time for June 15th.

Is there any way to obtain an extension?

Thanks for any and all assistance!
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

Like any one else.

Look at IRS website.

<i>nelsona non grata... and non pro</i>
marge
Posts: 66
Joined: Mon May 09, 2005 1:26 pm

Post by marge »

Sorry!

I did look, but I thought it only talked about an extension from April 15th to June 15th (for the form 4868).

I see now it applies to us, also.
nelsona
Posts: 18311
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

I guess 4868 must be poorly worded, because nowhere does it give an extension from April to June. It grants a <i>4-month </i> extension (to, for most, Aug 15th).

The two-month extension for those abroad is automatic, not on form 4868.

<i>nelsona non grata... and non pro</i>
Post Reply