RESP (again)

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CCF
Posts: 2
Joined: Mon Mar 19, 2018 6:45 pm

RESP (again)

Post by CCF »

I am a Canadian citizen living in USA on H1B. My daughter, who is also a Canadian citizen, still lives and studies in Canada. She has an H4.
Before I left Canada in 2016 I withdrew my contributions to the RESP and left just the EAPs. In 2017 my daughter received the first EAP. I assume that she will have to report that income on her taxes for 2017 with CRA.
What are the tax reporting requirements for me and for her in USA?
Thanks!
MaggieA
Posts: 150
Joined: Sun Oct 31, 2004 4:06 pm

Post by MaggieA »

Are you still the owner (subscriber) of the RESP? If so, I believe according to conservative interpretations, you should have been filing a 3520 about it every year with the IRS, and paying US tax on any gains in the account. The EAP withdrawal may be taxable in your hands by the IRS and your daughter's hands by CRA. But I'm not a tax expert so please don't take this as authoritative.

What I did on moving to the USA (for the benefit of other readers; it won't help CCF) was get my mother (a Canadian citizen and resident, not US person) to open a family RESP with my kid and her cousins as beneficiaries, transferred the RESP of which I was subscriber into my mother's one, and closed mine. Somewhat unexpectedly, due to our move back to Canada many years later, we were actually able to withdraw the residue in the account as EAP to help with daughter's grad school. The EAP was paid out to her grandmother, who subsequently wrote a cheque to daughter. According to our accountant, while daughter received a T slip and has to include the EAP in her 2017 income for CRA, as far as IRS is concerned, the RESP and payment belonged to her grandmother, who's not a US person. So nobody is including this amount on an IRS return. Works for me.
MaggieA
Posts: 150
Joined: Sun Oct 31, 2004 4:06 pm

Post by MaggieA »

Addendum to previous post: Our family became US citizens during our time in US. Hence we all have to file income tax in both Canada and US. If we weren't US citizens there wouldn't be any reason to think about reporting an RESP withdrawal to the IRS.
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

poster's daughter *might* be relying on the student article of the treaty to avoid becoming Cdn tax resident. If she isn't though, and files as a Cdn resident, then, yes, there really wouldn't be any need for her to report this income, since she would be a non-resident.
Poster can still claim her as a dependent for exemption if she otherwise qualifies, even if she is a Cdn resident.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
nelsona
Posts: 18314
Joined: Wed Oct 27, 2004 2:33 pm
Location: Nowhere, man

Post by nelsona »

...there really wouldn't be any need for her to report this income IN US, since she would be a non-resident OF US.
nelsona non grata. Non pro. Please Search previous posts, no situation is unique as you might think. Happy Browsing :D
CCF
Posts: 2
Joined: Mon Mar 19, 2018 6:45 pm

Post by CCF »

Thank you MaggieA and nelsona for your responses.
MaggieA, unfortunately I do not have any older relatives in Canada, so I cannot transfer my RESP.

Because I withdrew all my contributions in 2016, the RESP account has only the grants and the income on the grants and on the principal left. In 2017 my daughter received the first EAP. There are two more to come, one this year and another one next year.

Since my daughter is a Canadian resident my interpretation is that she will have to report the EAP on her return. She actually received a T4A for that.

I am not so sure in my case , as a US resident.
1) I understand that I have to file Form 3520. Is that all?
2) The RESP is managed by Heritage Education Funds who told me that they cannot provide any statements to show the gains in 2017. The only statement I have is from December 2016, after I withdrew my contribution.
Thanks again.
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