Canada RPP - Back Filing of Rev. Proc. 2002-23 Statement

xbordercommuter · Post by **xbordercommuter** » Wed Mar 27, 2013 9:41 pm

I am a US citizen who commutes to work daily to Canada. For the past 3 years my employer has contributed to a RPP (Registered Pension Plan - defined contribution). I contribute nothing. There seems to be some controversy about whether a Rev. Proc 2002-23 Statement needs to be filed - and I have not filed it so far. But I'm getting nervous with all the RRSP crackdown chatter. . .

I know that Form 8891 (only used for RRSPs and RRIFs) can no longer be backfiled. What about "backfiling" the Rev. Proc 2002-23 Statement?

The other alternative is to simply start the Rev. Proc. Statement this year. The RPP had a small loss in 2011 and a small gain in 2010 (but these are net and it's impossible to sort out the exact income/loss from my statements so I don't even know how to "amend" my 1040). 2012 would be covered by my "statement".

I don't think it's worth getting a Private Letter Ruling since my entire RPP is under 20K .

Question 2: Would I need to use the 5th protocol US Canada tax treaty to take out my employers RPP contributions from income? Do I need to file 8833 for this?

I would really appreciate your thoughts.

nelsona · Post by **nelsona** » Thu Mar 28, 2013 9:37 am

I have always taken the position that RPP's (especailly active ones over which the employee has no control) are not reportable in any fashion. To my knowledge only expatriation process requires an accounting for pension plans.

RP 02-23 as essentially been replaced by future notices with the result being that 8891 for RRSP/RRIF (and LIRAs, LIFS, etc) is the only requiremnt in the Cdn pension world.

There really hasn't been an RRSP crackdown. There has been a foreign account crack-down, of which RRSP are the least vulnerable due to treaty protection, and which RPPs don't even enter the discussion.

nelsona · Post by **nelsona** » Thu Mar 28, 2013 10:00 am

Your employers RPP contribution do not appear in your income. That would not be an employer contribution if it was.

xbordercommuter · Post by **xbordercommuter** » Thu Mar 28, 2013 10:09 am

Thanks Nelsona

You words provide some reassurance to me. I'm probably going to do the Rev Proc "statement" just in case going forward.

I know the RPP contributions aren't included in my Canadian income but I wondered if the US might consider the employer contribution "income" and it would then need exclusion on the 8833 form (based on the 5th protocol). I'm not sure if I need to bother with this.

I wish there was some clear guidance from the IRS on this. I have a feeling that this wish is unlikely to ever be granted --

Thanks again,
XBC

nelsona · Post by **nelsona** » Thu Mar 28, 2013 10:15 am

I do not recommend filing rp 02-23 for company pensions. Period. sets a bad precedent, and has no benefit for you.

Employer contributions have never been taxable. Period. its not even a choice you have.

Any particular reason your aren't simply excluding your wages using 2555, then you have nothing to worry about.

xbordercommuter · Post by **xbordercommuter** » Thu Mar 28, 2013 10:48 am

Form 2555 doesn't apply to me - I am a US resident and commute to Canada daily (I use 1116 instead).

As far as the RP 2002-23 - I did find some evidence of it still being used for RPPs see Page 4, paragraph 1 of this link:

http://www.irs.gov/pub/irs-wd/1242004.pdf

This was a PLR for both RRSPs AND RPPs. They advised RP 02-23 be filed out for the RPP. I admit that I couldn't find a similar letter where only an RPP was involved.

XBC

nelsona · Post by **nelsona** » Thu Mar 28, 2013 11:22 am

The problem is, there is no income to defer in a pension plan, so why use a deferral election.

Also, one has to look at the history of this , RP 02-23 doesn't address foreign trust, which is why for one year we all had to file 3520 for our RRSPs, but not for our RPPs. and that is why 8891 was created, to cover the 02-23 and 3520. IRS could easily have stated that 8891 covers both, but they did not.

So, despite what an over-zealous Cdn CPA decided to ask the IRS (and charge a lot of money to his client) I would still not file an 02-3 statement for RPPs.

NO ONE has gotten into any trouble in 8 years for not doing this.

nelsona · Post by **nelsona** » Thu Mar 28, 2013 11:22 am

... and oops about 2555, forgot your commute status.

Francis · Post by **Francis** » Mon Nov 11, 2013 6:25 pm

Hi Nelsona,

Could you please provide me with a source when you say Canadian employer contribution to RPP is not taxable in the US?

I am reading 2013 KPMG Tax Planning for You and Your Family

and it says as follows:

"Employer contributions to a registered pension plan or a deferred profit-sharing plan are exempt from immediate Canadian tax.....For U.S. tax purposes, there is no such exemption. The amount contributed by your (Canadian) employer is treated as an employment benefit and is taxed, once the contributions have vested (that is, you are entitled to them even if you leave your employment)

Now normally, RPP vests for many employees after few years of employment. Doesn't this mean that afterwards, the employer's contribution to Canadian RPP is taxed in the US?

Second question - To defer US tax on growth within Canadian RPP, does the US taxpayer have to file form 8833 each year?

nelsona · Post by **nelsona** » Wed Nov 13, 2013 9:14 am

This is covered under the treaty:Articles XVIII.7 and XV111.8.

RPPs are not included in 8891 filing, nor, in my opinion, need they be addressed by the rev proc. An 8833 would be a good idea.