TFSA, RRSP, RESP, and which forms

brew99 · Post by **brew99** » Fri Nov 04, 2011 1:31 pm

OK, I thought I knew what i was doing, had done some research on what was required to be reported, but now my tax preparer has thrown a wrench into it for me. i have a question.

1. the tax preparer has done form 8891 for my wife's back tax returns for RRSPs, but has now informed me that i need to do form 3520 for the TFSA and RESP. He has reported the interest earned for the TFSA on the returns. Is this correct? Do i need to do form 3520 or 3520A for RESP (she is joint with me) and TFSA (she has individual)?

I am also doing the FBARs for all accounts she has.

thanks

nelsona · Post by **nelsona** » Fri Nov 04, 2011 2:13 pm

He needs to report any internal income from TFSA and RESP on her return, they are not sheltered from US tax.

You need 3520 for any TFSA or RESP owned by the US citizen. it would be advisable to shift ownership of RESP to non-US citizen, and if possible, fund only the non-US citzen TFSA from now on.

If your TFSA and RESPs own mutual funds, they also need to report as PFICs.

And all Cdn accounts need to be included on FBAR reporting.

brew99 · Post by **brew99** » Fri Nov 04, 2011 3:38 pm

Ok thanks nelsona, I'll pass this info on to him and see what he responds with.

Thanks,

graubart · Post by **graubart** » Thu Dec 15, 2011 6:34 pm

I see the advice given to "fund only the non-US citizen TFSA from now on."

Is there any reason not to just close it and be done with it?

I opened an ING TFSA savings account, just bank account no investment, in 2011 before I was aware of my US tax requirement. I would like to close it in 2011 before the end of the year so I won't have to deal with it for more than one taxation year.

Is there any liability, beyond declaring the interest, for closing the TFSA?

Thank you so much

nelsona · Post by **nelsona** » Thu Dec 15, 2011 10:19 pm

"Is there any reason not to just close it and be done with it? "
For the non-US citizen there is no reason to close TFSA. It is not reportable by the US citizen on their 1040 unless the file jointly.

graubart · Post by **graubart** » Fri Dec 16, 2011 12:18 am

Sorry to be unclear. What I was trying to ask is if there is any reason for a US citizen living in Canada to not close a TFSA.

You had said to fund only the non-US citizen TFSA. I'm asking what should the US citizen do. Is there any IRS liability or requirements associated with closing the TFSA?

Thanks again

nelsona · Post by **nelsona** » Fri Dec 16, 2011 9:50 am

Yeah, your question is unclear, to me anyways.
I'v egive the reasons why a USC should avoid having a TFSA. If none of these reasons are sufficient, then I guess that is a reason to keep TFSA.

The IRS "liabilities" are in the existence of a TFSA. Once you close it, the existence goes away (after that year anyways).

graubart · Post by **graubart** » Sun Dec 18, 2011 10:35 am

I just want to know if I have to pay tax on the balance I withdraw from the TFSA when I close it.

nelsona · Post by **nelsona** » Sun Dec 18, 2011 10:44 am

No, because you have to pay taxes on any income it created all along, jus tlike an ordinary bank account.

You aren't taxed when you simply close an account, because you,ve been supposed to have paid tax along (which you will when you fix your US tax returns).