RRSP with ovdi 2011

tsanah · Post by **tsanah** » Tue Mar 29, 2011 5:50 pm

as most of my friends do not know f8891/fbar filing obligation for their RRSP, i just wonder if IRS will treat RRSP violation differently. The fact is most people would assume RRSP is like IRA (it is need for the same reason) and they never show up on their Tax return. How would people know there are two forms f8891 and fbar if over 10k.

[/b]

tsanah · Post by **tsanah** » Tue Mar 29, 2011 5:56 pm

Also, it should be a default of choice to defer tax on RRSP for those fail to make an election as most taxpayers would select this choice. It seems to me like a trap to make people fall into this trouble. For 13 years, I have never heard of f8891 (of course, being stupid not to find out) until recently.. then i asked 5 of my friends who own RRSP, only one knows such a thing.

JGCA · Post by **JGCA** » Tue Mar 29, 2011 6:35 pm

Believe me even before this form came into play I was filing 1040 tax returns with a disclosure letter under Procedure 2002-23 so trust me when you read on this site that it is a MUST, you have to file the form

ikeaidea · Post by **ikeaidea** » Wed Mar 30, 2011 1:26 am

Nesolna for sure no private ruling letter is needed for 6 years 8891.

I have the same problem. But don't try VDP. My understanding is if fix 6 years 8891 works as Nelsona said, we don't owe IRS tax because all income deferred. In it was true, VDP doesn't applicable for us. See Q&A of IRS. It said if didn't underpay tax, file the deliquent TDF regular way and with explaination, no penalty.

Why VDP? RRSP is not serious enough to criminal charge I believe. VDP is exchange the criminal charge with 25% penalty.

Don't know whether my understanding is correct or not. However, need and must try.

tsanah · Post by **tsanah** » Wed Mar 30, 2011 7:13 am

My RRSP was more than 6 years old, it was 14 years ago! Never thought it was tax related (by default), never cash out a penny and never bother to look at the value. it is now well over 10K. So the violation on FBAR and f8891 for so many years.

ikeaidea · Post by **ikeaidea** » Wed Mar 30, 2011 2:06 pm

Both 1040 and TDF 's statue of limitaion is 6 years. No need worry about for more than 6 years.

in fact, 1040 is 3 years limitation. If IRS found more than 25% or more underreport tax, 3 more years. So total 6 years.

TD F is also 6 years, see the Q&A on IRS website for VDP.

tsanah · Post by **tsanah** » Wed Mar 30, 2011 2:45 pm

I guess I just assume my RRSP has not been in compliance with US tax law (real earning or not is irrelevant here). I just can't take it granted for approval of f8891 extension. I only hope IRS will treat this kind violation differently, so 25% may not apply.

Your approach is based on assumption that IRS will always grant f8891 extension. If so, IRS should really change the default as for tax deferral.

Anyway, good luck! I hope they will be easy on my RRSP as well.

tsanah · Post by **tsanah** » Wed Mar 30, 2011 2:57 pm

I just wonder do the election year, and the value of the RRSP of that year matter to IRS ? I mean in the future when the money is cashed out, the value of the RRSP at the time of election matters to IRS in terms of taxation ?

ikeaidea · Post by **ikeaidea** » Wed Mar 30, 2011 2:58 pm

Nelsona is the expert on 8891 back filing. He has met a lot of such cases. Trust him is our only hope.

However, explaination is necessary I believe both for 8891 and TD-F.

Good Luck for us!

ikeaidea · Post by **ikeaidea** » Wed Mar 30, 2011 3:20 pm

For the taxable amount for cash out RRSP, you need do the research on this forum. Nelsona has a lot of post. However, do the election in 2004 and fix the previous 6 years filing is the first thing to do now.

tsanah · Post by **tsanah** » Wed Mar 30, 2011 3:21 pm

Thanks ikeaidea, Nelsona is our hope.

It is because of this hope, I will take RRSP to OVDI and ask them for extension of f8891 and waive the 25/15% penalty.

It does not hurt if ovdi will treat RRSP differently. It will let me to do back filing on 8891 to 2003 (more than 6 years) in case the year and value of the RRSP matter to IRS.

ikeaidea · Post by **ikeaidea** » Wed Mar 30, 2011 3:33 pm

Don't do that. IRS person is not one person. The person handle the OVDI will not consider the 8891 back filing. They are stupid. Believe me.

Back filing 8891 using amend 1040 for 6 years.

Then regular file the TD-f for 6 years to Detroit (us treasury) as normal way with explaination. Not IRS.

If you go through OVDI, I am afraid the simple issue will be more complicated and you will be hurt.

Please see the Q&A of IRS, if you don't owe tax, no OVDI. But if you OVDI, you need amend 1040 with payment for underpaid tax. How you do that?

tsanah · Post by **tsanah** » Wed Mar 30, 2011 3:45 pm

Thanks Ikeaidea,

In OVDI, I may look like angel among those rich guys who are hiding money off shore -:)

I have already sent my request to OVDI. Just want make it clean with certainty. I will share my exp with you folks....

After all, I just have to trust fair justice based on policy not on person. Even if they want to take 25%, it will be my tuition for such simple mind of "fair justice"

hymalaya · Post by **hymalaya** » Wed Mar 30, 2011 4:18 pm

1. I called IRS at 1-800-829-1040 and asked about form 8891.
I was told as an owner of RRSP, I am the Annuitant. An Annuitant only files form 8891 when receiving a distribution. So there is no need for the annuitant to files 8891 when there is no distribution because of the automatic exemption given by the USA-Canada tax treaty. A beneficiary has to file 8891 if one effectively becomes a beneficiary, i.e. annuitant dies

2. I called 1-800-800-2877 about file TD F 90-22.1
I was told Canadian RRSP accounts over are no longer required to file TD F 90-22.1 form as it is retirement funds recognized by US. One needs to file TD F 90-22.1 for financial accounts over $10,000 other than RRSP.

Hope it helps to answer your questions.

tsanah · Post by **tsanah** » Wed Mar 30, 2011 4:30 pm

Hymalaya, Many and many thanks! It is just too good to be true. I am the owner of RRSP (i mean it is under my name). So it is by default as tax deferal ?

As for distribution, there is two kinds. The fund will distribute money and will be reinvested inside the plan. Of course, when you cash out money, it is also distribution. I don't know if f8891 is clear enough.

Anyway, too good to be true and I do hope this is the case.