Retro filing of Form 8891s for RRSP

[ste14mi]

Am Canadian living as LPR here in Chicago area. Filed election to defer US income tax on accrued RRSP income (and associated paperwork) in my first tax year here in 2001.

(Innocently/stupidly) neglected to file paperwork on RRSPs in subsequent years (although properly filed all other aspects of my 1040s) until 2012 tax year when I realized my error and filed the required Form 8891, indicating on it as required RRSP balance and that I had made original deferral election in 2001. Have made no withdrawals from my RRSP at any time.

So how much trouble is this and how do I extricate myself? Should I file amended forms back to 2002 and include 8891s for the years I missed?

Have read through the many many changes in this tax area in the last 10 years and am confused.

[nelsona]

The problem is that the election you made in 2001 was under the old Rev Proc 89-45(?), and as the 8891 instructions point out that such an election does not 'count'.

You should back-filer the past six years (no point going farther), it is required (with or without the election) to satisfy 3520 reporting requirements. But if you als want to make the election, the trouble is, that -- again, as the instructions indicate -- you can't simply do this without IRS pre-approval. You need to get a Private letter ruling allowing you to retroatively make the election, or you will have to add the RRSP accrued income to your tax returns for the past 6 years and pay interest and penalty.

For the purposes of future taxation however, the value of your RRSP when you arrived in US is still the one you would use (plus any taxable amounts you need to include for the 2006-11 period, if any.

[ste14mi]

Hmm, OK thanks

Does the 2012 OVDP program offer a chance to resolve this? As I read FAQ #54 & 54.1 it seems that there might be hope through this method.

[nelsona]

I have intentionally stayed out on the OVDI mess.

The question is if you are a participant in OVDP 2012. If so, then follow the directions there, I guess.

[CdnAmerican]

Hi ste14mi, one maneuver you could try is to phone the OVDI hotline, even anonymously to start. I did that once (had to leave my name and number, but they phoned back quickly) with success, and got a reasonable/knowledgeable person on the other end who advised not to go the OVDI route. Of course, there's always a risk with poking your head up like that.

I still wonder what happens to people in this spot who don't get a private letter ruling and just backfile quietly with an explanation letter. I know the instruction change for the 8891 last year seems to close that window, but I just wonder what actually happens in that situation. I have not heard of anyone getting nailed when doing that; that doesn't mean they don't get fined, of course, but you'd sort of think you'd hear about it on this forum if they did. nelsona knows his stuff and going this route would also present a risk, but I guess the unknown is the level of risk of getting a penalty.

Tough call. Good luck on this one!

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