IRS Simplifies Reporting for RRSP’s & RRIF’s

by Dean Paley on November 17, 2014

On October 7, 2014, the Internal Revenue Service (IRS) announced that is was making the reporting rules for Canadian registered retirement savings plans, RRSP’s and RRIF’s much easier.

Background

The United States tax code does not recognize the tax-deferred status of Canadian registered retirement plans and requires that the income be reported on a tax return annually. However, the tax treaty between the two countries permits a deferral. In the past, an American citizen with the RRSP or RRIF was required to file a form 8891 for each account to claim the deferral as well as report the balance at the end of each year.

If the taxpayer had failed to request the deferral in the past, the only way to correct the issue was through a costly private letter ruling or as part of an offshore voluntary disclosure.

The New Process Simplifies Matters Dramatically

The IRS released Revenue procedures 2014-55 which simplifies the procedure.

  • For those who had never filed the election in the past, the new procedures consider them to have made the election in the first year they were entitled to do so,
  • The procedures automatically apply to defer income inside of RRSP’s and RRIF’s, and
  • Any withdrawals or distributions must be included on the taxpayers return.

Certain individual may not be subject to the new procedures and other reporting requirements may apply.

Be Aware

It should also be noted that these procedures do not change the Foreign Bank Account Reporting requirements (FBAR) or any reporting of specified foreign financial assets on form 8938 which do cover the RRSP and RRIF.

Further, the revenue procedures do not cover the Tax Free Savings Account (TFSA) and as such the income generated in the TFSA is taxable and reportable to the IRS.

For more information, you can view the revenue procedure here.

Complying With U.S. Tax Filing

Our firm provides convenient and efficient U.S. income tax filing for U.S. persons residing in Canada as well as filing for persons with rental income in the U.S. We can navigate the complexities of U.S. tax and the impact on your Canadian returns quickly and accurately.

If you have not filed your U.S. returns, we can help you bring your tax situation up-to-date as well.

Give us a call today a 289-288-1206 to arrange filing of your returns. You can download our tax organizer here.

 

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