I still have to send 8891 (first time reporting RRSP and new in the US). I read this thread but not clear about what exactly to put on line 8 - year end balance. I have my RRSPs in one year term GIC goes from January 20th to following year Jan 20th. From the TD Canada trust bank statement for year ending Dec 31 2004, I see 2 ways of coming up with the balance.
I had on last maturity (Jan 20th 2004) $5163 then Jan 20th 2005 at the next maturity the value was $5253. SO for 2004 the principal for GIC was $5163 and no interest were deposited during the whole year.
Then it says current value on Dec 31, 2004 is $5249 (this figure I think the market value of the GIC since the interest for the GIC does not get deposited until the maturity on Jan 20, 05) I think it meant if I were to withdraw the GIC on Dec 31, 04 I would get $5249. Does it?
So for line 8 what do I put? Do I put the book value $5163 (this is the value on Jan 20, 2004 and since then there were no interest deposit until Jan 20, 2005)
Or do I put current value on Dec 31, $5249? I don’t think I can put the value on Jan 20, 2005
Form 8891 questions here please!!!!
Moderator: Mark T Serbinski CA CPA
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by Cathy</i>
I still have to send 8891 (first time reporting RRSP and new in the US). I read this thread but not clear about what exactly to put on line 8 - year end balance. I have my RRSPs in one year term GIC goes from January 20th to following year Jan 20th. From the TD Canada trust bank statement for year ending Dec 31 2004, I see 2 ways of coming up with the balance.
I had on last maturity (Jan 20th 2004) $5163 then Jan 20th 2005 at the next maturity the value was $5253. SO for 2004 the principal for GIC was $5163 and no interest were deposited during the whole year.
Then it says current value on Dec 31, 2004 is $5249 (this figure I think the market value of the GIC since the interest for the GIC does not get deposited until the maturity on Jan 20, 05) I think it meant if I were to withdraw the GIC on Dec 31, 04 I would get $5249. Does it?
So for line 8 what do I put? Do I put the book value $5163 (this is the value on Jan 20, 2004 and since then there were no interest deposit until Jan 20, 2005)
Or do I put current value on Dec 31, $5249? I don’t think I can put the value on Jan 20, 2005
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Cathy, in truth, it really doesn't matter, since the figure is not used by the IRS for anything. It's not well understood why they require a figure at all. For an accountant, I have a strong rebel streak...odd. [}:)]
The proper answer though is to use the year-end value, which is the GIC value including accrued interest, which is $5,249. Remember to convert that figure (Cdn $?) to US $. You can divide by 1.202 (Bank of Canada figure) to get the year-end value in US $.
The rule is, always give a bureaucrat what they want. That keeps them happy and not bothering you. [:p]
Regards,
CRH
I still have to send 8891 (first time reporting RRSP and new in the US). I read this thread but not clear about what exactly to put on line 8 - year end balance. I have my RRSPs in one year term GIC goes from January 20th to following year Jan 20th. From the TD Canada trust bank statement for year ending Dec 31 2004, I see 2 ways of coming up with the balance.
I had on last maturity (Jan 20th 2004) $5163 then Jan 20th 2005 at the next maturity the value was $5253. SO for 2004 the principal for GIC was $5163 and no interest were deposited during the whole year.
Then it says current value on Dec 31, 2004 is $5249 (this figure I think the market value of the GIC since the interest for the GIC does not get deposited until the maturity on Jan 20, 05) I think it meant if I were to withdraw the GIC on Dec 31, 04 I would get $5249. Does it?
So for line 8 what do I put? Do I put the book value $5163 (this is the value on Jan 20, 2004 and since then there were no interest deposit until Jan 20, 2005)
Or do I put current value on Dec 31, $5249? I don’t think I can put the value on Jan 20, 2005
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Cathy, in truth, it really doesn't matter, since the figure is not used by the IRS for anything. It's not well understood why they require a figure at all. For an accountant, I have a strong rebel streak...odd. [}:)]
The proper answer though is to use the year-end value, which is the GIC value including accrued interest, which is $5,249. Remember to convert that figure (Cdn $?) to US $. You can divide by 1.202 (Bank of Canada figure) to get the year-end value in US $.
The rule is, always give a bureaucrat what they want. That keeps them happy and not bothering you. [:p]
Regards,
CRH
Thank you carson. One more question please. I also withdrew a RRSP of $8500 last year. I needed the cash. I had to fill out a separate 8891 form for that. Since the RRSP was in a GIC and gained interest, do I have to report that interest also in schedule B part 1 ??
After reading this forum, For 16b I wrote the explanation:
Since Canadian RRSP does not meet the IRC requirements for a pension plan and it is considered by IRS as a foreign grantor trust, the income for RRSP was determined using the cost basis when I became a US resident according to section 72, publication 939 and 575.
Cost (Investment in the RRSP plan for US tax) = Contribution made prior to US residency from Canadian source income + Income reinvested in the plan prior to becoming US resident
The book value of the plan was $8250 when I became a US resident. Then when I withdrew it was $8500. So the cost = $8250
Therefore the gain = distribution - cost = $8500-$8250 = $250
So I reported $250 on line 16b and $8500 on line 16a.
Please let me know whether I have done this correctly. If you know a better way to explain this I would be grateful.
After reading this forum, For 16b I wrote the explanation:
Since Canadian RRSP does not meet the IRC requirements for a pension plan and it is considered by IRS as a foreign grantor trust, the income for RRSP was determined using the cost basis when I became a US resident according to section 72, publication 939 and 575.
Cost (Investment in the RRSP plan for US tax) = Contribution made prior to US residency from Canadian source income + Income reinvested in the plan prior to becoming US resident
The book value of the plan was $8250 when I became a US resident. Then when I withdrew it was $8500. So the cost = $8250
Therefore the gain = distribution - cost = $8500-$8250 = $250
So I reported $250 on line 16b and $8500 on line 16a.
Please let me know whether I have done this correctly. If you know a better way to explain this I would be grateful.
I wouldn't explain in detail how you got your figures.
And remember, that the cot basis is in then-curent US dollars, and the proceeds are in USD on the day you sold up.
By the way, for the RRSP that you simply cashed in, you will need an 8891, but you don't have to go thru any 'cost basis' gymnastics. You aren't applying the treaty to this account, since you aren't differing anything from one year to the future. You simply elect to treat this as an ordinary account and report the interest income on line 10a on form 8891, sched B and line 8a of 1040.
<i>nelsona non grata... and non pro</i>
And remember, that the cot basis is in then-curent US dollars, and the proceeds are in USD on the day you sold up.
By the way, for the RRSP that you simply cashed in, you will need an 8891, but you don't have to go thru any 'cost basis' gymnastics. You aren't applying the treaty to this account, since you aren't differing anything from one year to the future. You simply elect to treat this as an ordinary account and report the interest income on line 10a on form 8891, sched B and line 8a of 1040.
<i>nelsona non grata... and non pro</i>
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica" id="quote">quote:<hr height="1" noshade id="quote"><i>Originally posted by nelsona</i>
I wouldn't explain in detail how you got your figures.
By the way, for the RRSP that you simply cashed in, you will need an 8891, but you don't have to go thru any 'cost basis' gymnastics. You aren't applying the treaty to this account, since you aren't differing anything from one year to the future.
<i>nelsona non grata... and non pro</i>
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I am finding out my tax problems are deeper than I thought. I was a resident in US in 2003 and haven't told IRS about my RRSPs. Just finding out the issue. So I have to send 8891 for 2003 for defering tax for that year and with defering I may have to go through 'cost basis' gymnastics and applying the so called treaty to this account, since I have to differ one year to the future.
Please clarify this - I am not sure about reporting interest on 10a on 8891 & line 8a on 1040. Because I don't have undistributed interest for that RRSP anymore.
But I will report it on schedule B as you said. I thought I have to report the total distribution on line 16 on 1040 from what I read on this forum.
This is very stressful situation. I don't know how to deal with it.
I wouldn't explain in detail how you got your figures.
By the way, for the RRSP that you simply cashed in, you will need an 8891, but you don't have to go thru any 'cost basis' gymnastics. You aren't applying the treaty to this account, since you aren't differing anything from one year to the future.
<i>nelsona non grata... and non pro</i>
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
I am finding out my tax problems are deeper than I thought. I was a resident in US in 2003 and haven't told IRS about my RRSPs. Just finding out the issue. So I have to send 8891 for 2003 for defering tax for that year and with defering I may have to go through 'cost basis' gymnastics and applying the so called treaty to this account, since I have to differ one year to the future.
Please clarify this - I am not sure about reporting interest on 10a on 8891 & line 8a on 1040. Because I don't have undistributed interest for that RRSP anymore.
But I will report it on schedule B as you said. I thought I have to report the total distribution on line 16 on 1040 from what I read on this forum.
This is very stressful situation. I don't know how to deal with it.
-
geekinfinity
- Posts: 7
- Joined: Sun Jun 05, 2005 4:25 pm
I learned a lot reading this thread.
My situation: Became US resident in 1998 (first full year). Never realized that I have to explicitly use the tax treaty to tax defer the interests earned in RRSP.
From what I read here, I should do the following:
1) File a 1040X for each year from 1998 to 2003 with P02-23 using examples given by nelsona on his webpage. File everything in ONE envelope.
2) File a 1040X for 2004 with From 8891. I think I should check yes on 6a as I have done 1) to amend from 1997-2003, and put 1998 in 6b. In addition, I should send in TD 90-22 for 2004 by June.
Now the questions.
1) Is checking 6a and putting 1998 in 6b correct in 2)?
2) Should I file group 1 (1998-2003) together with the one for 2004 or
should I file group 1, wait 2 weeks and then file the part for 2004. The reason I ask is because I plan to check yes on 6a.
3) Should I write a cover letter?
Thanks
My situation: Became US resident in 1998 (first full year). Never realized that I have to explicitly use the tax treaty to tax defer the interests earned in RRSP.
From what I read here, I should do the following:
1) File a 1040X for each year from 1998 to 2003 with P02-23 using examples given by nelsona on his webpage. File everything in ONE envelope.
2) File a 1040X for 2004 with From 8891. I think I should check yes on 6a as I have done 1) to amend from 1997-2003, and put 1998 in 6b. In addition, I should send in TD 90-22 for 2004 by June.
Now the questions.
1) Is checking 6a and putting 1998 in 6b correct in 2)?
2) Should I file group 1 (1998-2003) together with the one for 2004 or
should I file group 1, wait 2 weeks and then file the part for 2004. The reason I ask is because I plan to check yes on 6a.
3) Should I write a cover letter?
Thanks
OK I got it. I got the form from the canadatotwincities.com website and that will take care of hopefully 2003. Then for 2004, I will send 8891 right?
Can I still write this statement for 2004 as I have posted before?
____________________________________________________________________
Since Canadian RRSP does not meet the IRC requirements for a pension plan and it is considered by IRS as a foreign grantor trust, the income for RRSP was determined using the cost basis when I became a US resident according to section 72, publication 939 and 575.
Cost (Investment in the RRSP plan for US tax) = Contribution made prior to US residency from Canadian source income + Income reinvested in the plan prior to becoming US resident
The book value of the plan was $8250 when I became a US resident. Then when I withdrew it was $8500. So the cost = $8250
Therefore the gain = distribution - cost = $8500-$8250 = $250
So I reported $250 on line 16b and $8500 on line 16a.
_______________________________________________________________
I am so thankful to this forum and the guys who have answered me!
One more thing. For RRSP I don't have a signature authority like for a checking account. so I assume that I don't have to report the retirement accounts on TD form. IS this correct?
Can I still write this statement for 2004 as I have posted before?
____________________________________________________________________
Since Canadian RRSP does not meet the IRC requirements for a pension plan and it is considered by IRS as a foreign grantor trust, the income for RRSP was determined using the cost basis when I became a US resident according to section 72, publication 939 and 575.
Cost (Investment in the RRSP plan for US tax) = Contribution made prior to US residency from Canadian source income + Income reinvested in the plan prior to becoming US resident
The book value of the plan was $8250 when I became a US resident. Then when I withdrew it was $8500. So the cost = $8250
Therefore the gain = distribution - cost = $8500-$8250 = $250
So I reported $250 on line 16b and $8500 on line 16a.
_______________________________________________________________
I am so thankful to this forum and the guys who have answered me!
One more thing. For RRSP I don't have a signature authority like for a checking account. so I assume that I don't have to report the retirement accounts on TD form. IS this correct?
Cathy:
Why would you write a statement? The IRS knows what an RRSP is or is not.
Form 8891 does not say, "Add a ststement telling us how you came up with your numbers", does it.
Forget the statement. Send in the form.
GeeK:
I would just send it all together, no cover letter.
<i>nelsona non grata... and non pro</i>
Why would you write a statement? The IRS knows what an RRSP is or is not.
Form 8891 does not say, "Add a ststement telling us how you came up with your numbers", does it.
Forget the statement. Send in the form.
GeeK:
I would just send it all together, no cover letter.
<i>nelsona non grata... and non pro</i>
Thanks Nelsona,
Statement is not for 8891. It is for 1040. I took an extension for 1040 because of the confusion in RRSP.
When I called IRS they said you should show how you came up with income for 16b on 1040. I thought I might have to write a statement & attach to 1040 to show how I came up with such a small gain compared to the cost. Is it a bad idea to expose details? Friend said her CPA told her more infor you give to IRS it will avoid IRS auditing you. Is this true ?
I am in Texas, I don't know these Texans in district IRS understand anything about Canada. They usually don't know anything outside Texas!
Statement is not for 8891. It is for 1040. I took an extension for 1040 because of the confusion in RRSP.
When I called IRS they said you should show how you came up with income for 16b on 1040. I thought I might have to write a statement & attach to 1040 to show how I came up with such a small gain compared to the cost. Is it a bad idea to expose details? Friend said her CPA told her more infor you give to IRS it will avoid IRS auditing you. Is this true ?
I am in Texas, I don't know these Texans in district IRS understand anything about Canada. They usually don't know anything outside Texas!
Generally, when you file a 1040-X and make a change to a line in the 1040, you do indeed have to offer more proof than you otherwise would.
Personally, my explanation would simply be that you were now following the instructions on 8891. The change in 16b comes right off that form.
The only explanation you need to show how you changed 16b is by filling out 8891.
But if you do add the statement, I would further clarify it by stating the book value in Cdn $ (and the exchange rate used to cvome up with the USD value on that day) and the final proceeds in Cdn $ (and the exchange rate used to come up with the US value on that date)
This will show that you took the time to figure out the exchange rates which were in effect on those different times, as they varied widely.
If you going to start to explain, you might as well finish it.
<i>nelsona non grata... and non pro</i>
Personally, my explanation would simply be that you were now following the instructions on 8891. The change in 16b comes right off that form.
The only explanation you need to show how you changed 16b is by filling out 8891.
But if you do add the statement, I would further clarify it by stating the book value in Cdn $ (and the exchange rate used to cvome up with the USD value on that day) and the final proceeds in Cdn $ (and the exchange rate used to come up with the US value on that date)
This will show that you took the time to figure out the exchange rates which were in effect on those different times, as they varied widely.
If you going to start to explain, you might as well finish it.
<i>nelsona non grata... and non pro</i>
Another twist to the whole thing is I had some company pension plan money rolled over to that RRSP before I collaped the RRSP. I collaped the this RRSP in early last year and rolled over happened in Dec 2003.
Do I have to report the whole amount of company pension plan money as income on line 16b?
There is no way to establish cost basis for that since I don't know the amount of company pension plan at my entry
Do I have to report the whole amount of company pension plan money as income on line 16b?
There is no way to establish cost basis for that since I don't know the amount of company pension plan at my entry