New Form 8891 forbids "back-filing" the election t

[nelsona]

As expected, with the official release of revised Form 8891 for RRSP reporting, it is no longer permitted to "quietly" back-file these forms for RRSPs for which one has not made an election to defer.

One will have to "seek relief from the IRS" for the failure to file -- most likely by an expensive Private Letter Rulling (PLR).

Otherwise, one can back-file the 8891 and report the internal income from the RRSP, amend one's 1040, and expect to pay interest and penalties.

[nelsona]

http://www.irs.gov/pub/irs-pdf/f8891.pdf

Note, that even if one does not wish to make the election, one must still file this form for every year and for every RRSP (back-file 6 years). Otherwise, one subjects themselves to the penalties for failure to file Form 3520 for a foreign trust, on top of whatever IRS determines one's income tax interst and penalty to be.

[maz57]

Wow! The arrogance of the IRS in thinking it's OK to attempt to tax and penalize the Canadian government registered retirement savings of Canadian residents and citizens is breathtaking. Does that mean that those who qualify for the so called "streamlined procedure" have to include RRSP income in their mandated back-filings?

Personally I am very lucky that 2012 will be my last ever US tax return. Any doubts I had about my decision to relinquish US citizenship and exit the system after filing five years of back returns have now been swept away. Thank God I didn't enter any of their horrible amnesty programs and seem to have "quietly" slipped away.

Ambassador Jacobson's famous "we are not unreasonable-we are not unsympathetic" remark is a cruel joke.

[nelsona]

Does that mean that those who qualify for the so called "streamlined procedure" have to include RRSP income in their mandated back-filings?

Yes. Or, seek relief from failure to make the election.

[testone]

Nelson, I hesitate in suggesting that you may be mistaken. However, I am not sure that the new instructions to the Form 8891 were intended to override the streamlined procedure. The streamlined procedure specifically provides that it will apply to amended tax returns "filed for the sole purpose of submitting late-filed Forms 8891 to seek relief for failure to timely elect deferral of income from certain retirement or savings plans where deferral is permitted by relevant treaty." I would think that this streamlined procedure would still apply.

[nelsona]

I never said anything related to the streamlined procedure. I said that , before december, one did not even have to rely on the stremlined procedure to back-file 8891: one simply could simply "quietly" file them and move on, without any special permission from IRS.

[JohnStevens]

Nelsona

I have questions on two options below:

1. If you didn’t back-file an 8891 far enough (I needed one more year back) can you submit that year, declaring the income on 8891 attached to 1040x with schedule B changes and check mark at the bottom for grantor trust?

I back-filed to 2008 but needed to go back to 2007, which was a dual status tax year for me. I need this to be compliant for 8854 satisfying the 5 years. Everything else is great.

What is the risk of submitting a 1040x with 8891 declaring the income and a cheque attached in excess for tax owed, penalties and interest?

Is there a possibility you will be put into the huge penalties doled out in OVDI
where they decide this is not allowed and tax the whole principal not just accrued earnings for that year? Other risks?

All FBAR’s were filed correctly at the correct time and included the RRSP’s
I did not have to back-file those. All were there by June 30th of each year in question.

2. Also the 2007 instructions did not have that one statement that the 2012 has about no back-filing.
Could I use the option of back-filing and take the deferred election for 2007? Just wondering how I would make the election though since my tax deferred year going forward is 2008 now?
I could just fill it out and put 2008 I guess and file the return for deferral.

[nelsona]

You can always backfile 8891, just not the election.

The problem is that you are then admitting that you BOTH under reported income AND failed to timely report foreign account. This puts you in OVDI space. The only saving grace is the streamline process, which I'll let you look up, that allows for some tax owing before kicking you into fine space.

I have deliberately avoided looking into this, especially when it for the purpose of doing 8854.

There are better resources on this forum than me on these issues.

[JohnStevens]

Nelsona,

Even though the tax owed is less then $1500 of accrued earnings, the fact that I have been filing and was a US resident prevents me from doing the streamlined.

I think (not positive) the streamlined accepts anyone that is just doing the 8891(resident or not, already filed or not) for the deferred election.
I back-filed the other 8891’s so don’t see how I can go into the streamlined for the 8891 for the one year only.

My election wouldn’t be possible with previous elections I think.
Too bad the streamlined didn’t include everyone in and out of the US who had filed as well.

Who would back-filing and declaring be good for then, without risk, if you don’t qualify for the streamlined?

By the way I called the OVDI line to talk about my situation last year on the RRSP’s and he told me I wasn’t a person that should go into OVDI since I did my Fbar’s and included the RRSPS on them each year, declared all income on Schedule B except that income, to just back-file and take the election.

I just missed the one year since I thought I could only 1040x for 3 years.

[nelsona]

I've said what I had to say. I guess it comes down to how desperate you are to expatriate.