1040x for RRSP 8891s

[hungarianpride]

I have a real simple question about the 1040x form. I need to amend a previous year to add a 8891, and NO other changes. Do I only need to complete the 1040x form (2 pages), and add an 8891 and NOTHING ELSE? When I amend the form with TurboTax, it spits out the 1040x, plus the 1040 and all the old schedules, etc.

Thanks in advance.

[nelsona]

Just the 1040-X is fine. Write in the explanation that no income,deduction or credit is being amended.

[hungarianpride]

I have completed 1040x's for 2002-2005, along with the necessary RP-02-23s and 8891s. I will drop them in the mail tomorrow. I would like to e-file my current taxes via TurboTax, which now includes 8891s. The software package prompts me whether or not I previously made an election under Article XVIII(7), and if so, what year. On my 1040x RP-02-23, I made that declaration, so I would think I could just say "yes" and indicate 2002, but will this cause any issue, since the 1040x's won't likely be processed for several weeks (or months)?

[HarveyC]

I did exactly as you have but filed the 1040X's a couple of weeks ahead of e-filing. I did not, however, mention the explanation that no income,deduction or credit is being amended. I just received a response from the IRS rejecting my 1040X's saying that Rev Proc 2002-23 indicates the election to which I was referring must be made on or before the due date of the original return, including extensions. Any thoughts or suggestions?

[nelsona]

Not what HP did , he filed "the necessary RP-02-23s and 8891s". Not just 8891.

[JohnSt]

FWIW, I also backfiled, but just using the now undated 8891s, making the elections to defer (I handwrote in the year at the top). The IRS accepted these for 2002 and 2003. They even sent a letter confirming the 1040X had been "accepted" for these years with no tax changes.

[nelsona]

I sense there was something else wrong with the 8891 that harvey submitted, as I have never heard of a refusal of these back filings.

[HarveyC]

Nelsona - I did file the necessary RP-02-23s and 8891s, not just 8891s. What would happen if I just tried refiling the 1040X's, hoping a different examiner would come up with a more favorable decision?

JohnSt - Did you include a cover letter, or just send in the 1040X's?

[JohnSt]

I put an explanation on the 1040X forms, doing something similar to what nelsona recommended -- just saying what I'm doing, and that there is no change in tax.

I filed several of these in the same envelope. Yes, I did include a short cover letter, explaining what was in the package. I did this mostly for my own records. Near as I can tell, the IRS shuffles these forms off to different agents, so I'm not sure the cover letter makes any difference to them.

Whatever form you're using, you are, after all, simply making an election to defer. Have you tried calling the IRS for an explanation?

[squinck]

I was not aware that I have to file 8891 form for the RRSP until this year when I saw the form in the turbotax. After reading this forum I start understanding that I have to amend my Income tax for the past years (2007 -2002).The question I have is which year I put in 6B (Enter the year the election came into effect) is it 2002 in my case ? and for question 8 do I have to find out the exchange rate for that particular year to convert to US $ or I can use the same amount for all the years.

[nelsona]

Your election should be 2002. You need to put the year-end value for each year in the US dollar value on that date, for each year.

Easily found on bank of Canada webite, and elsewhere.

[carlo]

What is the penalty for not being up to date on past 8891 filings?

[nelsona]

The penalties are two-fold:

First, before 2003, there is simply the back taxes and interest on undeclared income. IRS will almost always forgive those who self-identify their failure to make the election. If IRS finds out about your RRSP on their own however, they will go after you.

More importantly, since 2003, RRSPs are not exempt from trust reporting rules, so, failure to advise IRS of the existence of this trust (and other details normally provided on Form 3520) make you eligible for those penalties which can run into the 100,000's in fines, regardless of the size of your RRSP.

Remember, 8891 is not only a tax reporting form and election mechanism, it is also trust reporting form.

[carlo]

I thought the statute of limitations would apply for filings more than three years old, unless the IRS can prove that you intended fraud. (Very unlikely in this case if you simply failed to report an account that you would have tax-deferred if you had remembered to file.) So I don't see that the IRS would go after back taxes for older filings.

Also, the instructions on the 8891 say "Pursuant to section 6048(d)(4), annuitants and beneficiaries who are required to file Form 8891 will not be required to file Form 3520, and will not be subject to the associated penalities described in seciton 6677 on such RRSPs or RRIFs".

To my reading this says that the regular 3520 reporting penalties don't apply to RRSPs.

[nelsona]

"To my reading this says that the regular 3520 reporting penalties don't apply to RRSPs."

I think you have misinterpreted. It says that those who have RRSP AND file 8891, are exempt from needing to file 3520. Those who don't file 8891 still must file 3520, or be subject to penalty.

This has been discussed over 3 years ago. take a look at the 3520 instructions. Could you make an argument that being 'eligble t ofile 8891' is the same as actaully filing 8891. maybe.

But it would likely cost you more to make the argumant than the time to file 6 1040X's.

Also, many US citizens living in Canada not only fail to report RRSP, but don't even file a US return. The statute is 6 years in those cases, as they have either failed to file or under-reported their income by a sufficient amount to triger the 4-6 year requirement.

Also, the original Rev Proc 2002-23 which started this, allowed for going 6 years back