RRSP Closed in 2012 how to file with IRS

omac · Post by **omac** » Sun Apr 14, 2013 12:01 pm

Hi,

Great forum, very informative, just wanted to confirm If I am doing this correctly, as it is hard to find knowledgeable tax accountants in Texas dealing with RRSP's.

Moved and became a US resident in 1996, declared the value of my RRSP $ 8200US to IRS, deferred gains year over year since 1996 using 8891.

My RRSP grew to $20kUS, then crashed and has been at about 1.8kUS for the better part of 5 years. I decided to close the RRSP, as the yearly fees would consume everything in the next 5 years.

Received NR4 shows gross distribution of $1.6kUS and withholding of $0.4kUS for Non-resident tax.

How to file with IRS:
1> Fill in 8891 show disbursement of 1.6kUSD, but "0" as taxable since cost basis was $8200 US
2> Enter loss of 8200-1600 = 6600US on line 28 of schedule A
3> Enter Cdn withholding tax of 0.4US on line 8 of schedule A
4> Do I attach my Canadian NR4 to my 1040?? Do I provide any documentation for the cost basis of 8200?

My spouse still has an RRSP, should have No bearing on mine and my closure. I did make trades within my RRSP in the early 2000's, not sure if that has any bearing, I assumed sheltered account and deferring yearly to IRS made this fine, my CDN financial institution knew I was non-resident at the time.

Thanks,
Omac

nelsona · Post by **nelsona** » Mon Apr 15, 2013 11:44 am

1.2.3. Correct. I'll let you figure out the lines. its foreign tax and it is annuity loss.

One caveat. If using the NR tax as a deduction puts you into AMT, I would then just keep the NR tax as a credit, noy usuable this year, and carry it forward for another time. You never know whan you might go for work or training abroad, and then your wages for that period become foreign .

4. No. hold on to any evidence, including NR4 and any documentation for the cost basis.

I keep a separate folder for my Rev procs, 8891, ext related to each RRSP, since you need this far longer than the 6 years you need to keep your 1040's.

sebaz25 · Post by **sebaz25** » Mon Apr 15, 2013 8:46 pm

NelsonA,

You seem very knowledgeable on the cross border taxation. I read one of your posts dealing with Canadians who have RRSP's living as a residents of the United States. You had some very good advice and I was wondering if I could pick your brain regarding my situation?

I cashed out my RRSP in 2012 and was unaware of form 8891 filing requirements. I became a resident in May 2010 and was wondering if I would have to file the ammended 1040X forms along with Form 8891 for the 2010, 2011 tax years(not sure how to proceed with 2012)?

The value at cash out of the RRSP was less than 10,000 dollars. P.s. what information would I need from my Canadian bank to fill out the forms? I have obtained year end statements from 2009, 2010 and 2011 and have the final cashout balance from 2012.

Any information on this would be extremely helpful. Thanks in advance for your time and knowledge.

nelsona · Post by **nelsona** » Mon Apr 15, 2013 9:45 pm

If you have read my posts, then there us nothing to add. especially on april 15.

sebaz25 · Post by **sebaz25** » Mon Apr 15, 2013 10:02 pm

[quote="nelsona"]If you have read my posts, then there us nothing to add. especially on april 15.[/quote]

Nelson,

Thank you for your response. I filed for an extension a few days ago to help me get my forms in order.

I have only read "one" post from you about an American living in Canada with a similar issue. I'm sorry, but I haven't searched for many more posts on the issue.

I am mainly looking for clarification if it is possible to ammend my 1040 for the last couple of years and include form 8891.

nelsona · Post by **nelsona** » Tue Apr 16, 2013 4:47 am

If you have not made the election to defer US taxation on your RRSP, you cannot easily do this. Howeber if it is only to amened 1040 to add 8891 and to add the missing income to your 1040, you do this with a 1040-x form.

sebaz25 · Post by **sebaz25** » Sat Apr 20, 2013 8:58 pm

Nelson,

Thank you for your information. I have a question regarding ammending my 2010 return and adding in the missing income (or loss there of).

I'm guessing I would be using the cost basis of the RRSP from the date I became a resident (May 2010) and not the cost basis from the beginning of the year (2010) correct?

I am in the process of requesting statements from my bank.

P.s. would there be any penalties for filing my ammendments and adding the missing income? I apologize but I am not clear after reading some talk in other posts about "reporting in a timely manner". I would be ammending for the tax years of 2010 and 2011.

Thank you again in advance for your helpful information.

nelsona · Post by **nelsona** » Mon Apr 22, 2013 7:33 am

If you chose to file a full year 1040 in 2010, then your cost basis is from dec 31 o the previous year, not your arrivakl date. Remember, cost basis is not FMV.

nelsona · Post by **nelsona** » Mon Apr 22, 2013 7:34 am

If you under-reported income from 2010, 2011, you will owe tax, interst and paenalties.

sebaz25 · Post by **sebaz25** » Mon Apr 22, 2013 8:59 am

[quote="nelsona"]If you chose to file a full year 1040 in 2010, then your cost basis is from dec 31 o the previous year, not your arrivakl date. Remember, cost basis is not FMV.[/quote]

Thank you for your helpful advice!

I will request my statement from year end 2009, 2010, 2011 and the final amount at distribution to clear up this mess. Making sure to use the ABV(in US dollars) for all entries.

So if I am understanding this correct.

1. For determing the final amount at distribution to aid in calculation of 7a/b 2012 form 8891, I will be using the ABV at distribution - 25% withholding amount at the USD/CND dollar exchange rate for that date correct?

2. The U.S bank fees (during currency exchange) associated with the final amount I receieved wouldn't play a factor I'm guessing in determining the above number?

3. Line 8 for my "plan balance at the end of the year 2012" will be zero since I took the whole distribution in May.

Thanks again,

I'm glad your here to help!

nelsona · Post by **nelsona** » Mon Apr 22, 2013 10:56 am

1. Not sure why you mention the tax, that has nothing to do with 7a or 7b. You book value is the cost basis (not the market value) on year-end 2009, in USD at the time you incurred to cost, which could have been years earlier.
Your 7a distribution amount is the amount you took out from your RRSP in USD on the date you took it out.
2. Nothing else enters into this.

sebaz25 · Post by **sebaz25** » Mon Apr 22, 2013 12:50 pm

Thanks Nelson. That clears up any confusion filling out the form.

Any knowledge of penalty amounts or amount of interest charged etc?

It appears I needed to include about $161 of income for 2010. $74 loss of income in 2011 tax year.

I just received my statements and the adjusted book values were:

year end 2009 - $4821 cnd w/exchange $4581.83 usd

year end 2010 - $4741 cnd w/exchange $4742.89 usd

year end 2011 - $4764 cnd w/exchange $4669.21 usd

Still waiting for 2012 final statement with closeout distribution book value.

Thanks again,

nelsona · Post by **nelsona** » Mon Apr 22, 2013 3:41 pm

as I said, year-end values mean nothing in either computing bbok value, nor in determining taxability. In fact, if you are not electing to defer taxation, then book value only has one use: to calculate any cap gains you made from trades -- even within your account.

You cannot on the one hand want to elect NOT to defer income, and on the other hand, use the simplicity of the fderferral method for determining income.

You must use EACH transaction (sale, swap, dividend, interest) since you entered US in determining what goes on line 10 of form 8891.