yet another rrsp ?

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diane1
Posts: 16
Joined: Thu Jul 20, 2006 1:17 pm

yet another rrsp ?

Post by diane1 » Tue Jan 06, 2009 10:11 am

I know that the RRSP deferral issue has been vastly covered and I have tried to read and understand it. My inability to do so is just another indication of my total financial illiteracy. Here is another example...I moved to the US in 1998 and have been here ever since. I have an RRSP (CIBC GIC) with probably less than $5,000. I have never reported it in any form to the IRS. I would likely have gone on ignoring it for 10 more years but I want to cash it out. I understand that doing so will trigger something with the IRS unless I take some action. I understand sending in the 8891 for the last 6 years (yet have no idea where to get the information to fill it out since I retained no statements) to elect to defer taxation on accounts for which they have no record. Do I need to send in amended 1040s? Is this a redeemable situation? I would just as soon crawl back into my hole of denial of the issue but I could use the money right now. I need a rope.

nelsona
Posts: 16544
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Jan 06, 2009 10:17 am

Your understanding is correct.

6 years of 8891 by ammending each return. Then in the year you collapse it, you report the entire withdrawal as gross annuity income (16a on 1040) and the growth since 1998 as taxable income (16b).

You need to determine as best possible thte value (in 1998 US dollars) of your RRSP when you moved to US. The entire proceeds minus this number will be what you owe US tax on.

You can then use the Cdn tax you pay (25% -- or less if you make the 217 election) as either a deduction on schedule A, or use that ammoun to calculate a foreign tax credit on Form 1116.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

eortlund
Posts: 272
Joined: Tue Aug 07, 2007 12:18 pm

Post by eortlund » Tue Jan 06, 2009 10:52 am

Hey Diane, if you find it too intimidating, remember there are people you can hire to do it for you. Depending on whether it's cost-effective and worth it to you.

diane1
Posts: 16
Joined: Thu Jul 20, 2006 1:17 pm

Post by diane1 » Tue Jan 06, 2009 12:26 pm

Thanks for the tip but if I had the money to spend on professional services, I wouldn't need to cash out. Besides, after reading his immigration related posts for 10 years, I'd rather get Nelson's spin on it first. And back to that...I do a 1040x with 8891 for each of the six years and I should be good to go? Have you heard of any cases where the IRS did not forgive and forget? I found a statement from 1998 and the GIC was worth $2200. I doubt its worth much more now so I am not sure cashing out is worth the hassle but I should catch up on the paperwork anyway.

nelsona
Posts: 16544
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Jan 06, 2009 12:35 pm

1040-X for each year.

$2200 was about $1700US back then.

As to the hassles, your RRSP is too small to keep, quite frankly, as the hassles of keeping it are more than thoise of cashing it in.

Should jhve done this 9 years ago.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

diane1
Posts: 16
Joined: Thu Jul 20, 2006 1:17 pm

Post by diane1 » Tue Jan 06, 2009 12:37 pm

I'll go with the better late than never theory then and carry on. Thanks.

nelsona
Posts: 16544
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Jan 06, 2009 1:18 pm

amen
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

diane1
Posts: 16
Joined: Thu Jul 20, 2006 1:17 pm

p.s.

Post by diane1 » Tue Jan 06, 2009 1:51 pm

As it turns out, I contacted CIBC and learned that this is a non-redeemable GIC that cannot be cashed until Feb 2010!! So much for solving my financial woes.

nelsona
Posts: 16544
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona » Tue Jan 06, 2009 1:55 pm

Chin up. If $1500 was going to 'solve your fianancial woes', you are better off than most.
Nelsona Non grata. Non pro. Search previous posts. Happy Browsing :D

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