the highest aggregate balance of the year

[nelsona]

US residents with off-shore accounts, typically pay low or no tax (even Cdn accounts) on their interests, etc.

THAT is the big difference, not where the accounts are. Its where the taxpayer is, since US tax on foreign interest and gains is almost always higher than what was paid to the foreign country.

[tsanaha]

in China, it is flat tax 20% on bank interest. if no state tax is involved, it is higher for those who pay 15% federal tax.

[nelsona]

I said almost always.

[tsanaha]

Canada withhold tax (before 5th protocol)

Interest - 10%

Dividends - 15%

Government Interest - 0%

Canada Pension Plan - 0%

Old Age Security - 0%

Company Pension - 15%

Periodic RRIF/LIF Withdrawals - 15%

Rental Income - 25%

[nelsona]

Yup. Interst ZERO> cap gains ZERO>

Thanks for making my point.

[calgary-alberta]

Hi tsanaha,

I got acceptance letter for ovdi. It requires me to send documents listed under FAQ#25. My understanding is that mutual funds is Passive Foreign Investment Company (PFIC). FAQ#10 is about how to handle PFIC. I have RRSP and non RRSP mutual fund, should I follow FAQ#10 for both RRSP and non RRSP? Also, I am still very confused after reading FAQ #10. Is there any forms I need to fill for PFIC?

Thanks!

[tsanaha]

for your RRSP, you should just leave it for now (make tax deferral election) if you have never cashed out. I think/hope IRS will grant thsi rather late election.

for non-RRSP mutual fund, you can do MTM calculation for each year -- and MTM gain will be taxed on 20%. Because it is dealt differently, it is not used for Schedule D.

Mutual fund div should be reported in Schedule B.

[calgary-alberta]

Thanks. do you mean use MTM in form 8621 for non RRSP?

[tsanaha]

I don't know about 8821. I thought for OVDI. it has its own rule of filling -- that is 20% tax on MTM plus 7% for the first year of MTM tax

I did not use form 8821. All I did was to calculate MTM for each of these years (using xsl) and sent all these as part of package.

As for div gain, I just added it as normal div into Schedule B.

IRS will do the accuracy audit anyway.

[calgary-alberta]

thanks tsanaha. did your tax calculation (20% or 7%) goes to 1040x or other form?

[tsanaha]

mtm 20% tax and penalty does not go to 1040X as it is taxed on 20% rate regardless the income level.

[tsanaha]

update:

Just called OVDI hotline and was told that my package was complete and ready for processing.

If I read this as a good news that means I did my PFIC right

also that I did not report any RRSP income (undistrubted) in my f1040x, and I hope that IRS consider this as complete even without RRSP income --so f8891 tax deferral election was accepted.

Could be my wishful thinking --- but glad it is one step closer to F906

[calgary-alberta]

Thanks tsanaha for sharing your ovdi with us.

1. did you fill the form "Foreign account or Asset Statement" for your RRSP account?

2. should the 12.5% or 25% ovdi penalty be included in the payment at submission of the whole package?

[tsanaha]

Calgary,

I included all (RRSP). But I did not put RRSP as base for penalty, neither I reported any undistributed earning from RRSP as I assumed IRS would let me to make this late election.

I did send a check with all covered.. but you do not have to. In fact, you are only required to send a check for tax due plus accuracy penalty --but not interest if you have hard time to figure it out..

[calgary-alberta]

tsanaha,

when using MTM for taxation of mutual fund, is any dividend (which is reinvested in the fund and contribute to the value of MTM calculation) reported in schedule B?

Thanks!