RRSP and Canadian Savings accounts held by Canadian in USA
QUESTION: I am a Canadian citizen who has been resident in the US for 7 out of the past 10 years.
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> I've never filled out a 1040 Schedule B because I've never had taxable interest or taxable dividends totalling more than $1500. However upon recent closer examination of the form, I think I should have because of Part III Forgeign Accounts and Trusts.
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> I have more than $10K in RRSP's (not collapsed) and more than $10K in a non-interest bearing Canadian savings account.
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> I want to fulfill my reporting obligations to the IRS so do I need to send in an amended tax return for each year I was resident in the US with a Schedule B and Form 8891 attached, or can I simply start the process for the 2006 tax year and all subsequent years?
>
> Similarly, I inadvertently never filled in form TD F 90-22.1 for each year I was resident in the US that I had more than $10K in foreign accounts. If I send in TD F 90-22.1 for the 2006 tax year (by June 30) and all subsequent years, do I need to do anything for the previous years?
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david ingram replies:
You have discovered that you should have been filling in forms TDF 90-22.1 for both accounts and form 8891 for the RRSP.
You do NOT need to file retroactively. Thankfully the 8891 form has a place to start now. Send it in with a 1040X.
The TDF 90-22.1 forms go separately to Detroit.
This older Q & A will likely help
Sent: Sunday, February 11, 2007 4:51 PM
To: Centapede-questions
Subject: RRSP
Can you handle one more question about Canadians residing in the US who hold RRSPs??
Thanks to your info, I have been filing form TDF 90-22.1 and 8891 since 2002. On form 8891, I made the election to defer income in 2002 and have been declaring the current December 31 year-end value on that form every year since 2002. I thought I had it figured out but now I'm reading all the other questions from your other readers and I guess it's tax time so I have to freak out just a little. My RRSPs have gained value since I've been here, but I thought as long as the earnings stay within the RRSP and I am not withdrawing any, all I need to do is declare the year-end value on the 8891 and the TDF 90-22.1 ??
Just double-checking. Thanks. One day I will have to think about how to report and take some of that money as income, but not this year!
Thank you.
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david ingram replies:
The internal undistributed earnings of the RRSP must be reported on the 8891 on line 10 - a - b - c - d - and e
However, the form is poorly written and tells you to put the income on Schedule B. If you stop there, you end up paying tax on the money because the form does not tell you how to take it off. What you do is put it on and deduct it immediately (per line 6 form 8891).
In the last couple of years, the gain has been mostly from exchange rates.
I put the difference between Dec 31 of last year and Dec 31st of the current year on line 10 with the following statement written in the explanation space, "A combination of internal earnings and changes in exchange rates have resulted in a paper profit (or loss) of $XXX,XX
My Turbotax program is not working properly for this as well.
Another method is to put the income on the schedule B and remove it per form 8891 on line 22 of the 1040.
That may be the better way in the long run.
>
> I've never filled out a 1040 Schedule B because I've never had taxable interest or taxable dividends totalling more than $1500. However upon recent closer examination of the form, I think I should have because of Part III Forgeign Accounts and Trusts.
>
> I have more than $10K in RRSP's (not collapsed) and more than $10K in a non-interest bearing Canadian savings account.
>
> I want to fulfill my reporting obligations to the IRS so do I need to send in an amended tax return for each year I was resident in the US with a Schedule B and Form 8891 attached, or can I simply start the process for the 2006 tax year and all subsequent years?
>
> Similarly, I inadvertently never filled in form TD F 90-22.1 for each year I was resident in the US that I had more than $10K in foreign accounts. If I send in TD F 90-22.1 for the 2006 tax year (by June 30) and all subsequent years, do I need to do anything for the previous years?
>
> --------------------------------------------------------------------------
david ingram replies:
You have discovered that you should have been filling in forms TDF 90-22.1 for both accounts and form 8891 for the RRSP.
You do NOT need to file retroactively. Thankfully the 8891 form has a place to start now. Send it in with a 1040X.
The TDF 90-22.1 forms go separately to Detroit.
This older Q & A will likely help
Sent: Sunday, February 11, 2007 4:51 PM
To: Centapede-questions
Subject: RRSP
Can you handle one more question about Canadians residing in the US who hold RRSPs??
Thanks to your info, I have been filing form TDF 90-22.1 and 8891 since 2002. On form 8891, I made the election to defer income in 2002 and have been declaring the current December 31 year-end value on that form every year since 2002. I thought I had it figured out but now I'm reading all the other questions from your other readers and I guess it's tax time so I have to freak out just a little. My RRSPs have gained value since I've been here, but I thought as long as the earnings stay within the RRSP and I am not withdrawing any, all I need to do is declare the year-end value on the 8891 and the TDF 90-22.1 ??
Just double-checking. Thanks. One day I will have to think about how to report and take some of that money as income, but not this year!
Thank you.
------------------------------------------------
david ingram replies:
The internal undistributed earnings of the RRSP must be reported on the 8891 on line 10 - a - b - c - d - and e
However, the form is poorly written and tells you to put the income on Schedule B. If you stop there, you end up paying tax on the money because the form does not tell you how to take it off. What you do is put it on and deduct it immediately (per line 6 form 8891).
In the last couple of years, the gain has been mostly from exchange rates.
I put the difference between Dec 31 of last year and Dec 31st of the current year on line 10 with the following statement written in the explanation space, "A combination of internal earnings and changes in exchange rates have resulted in a paper profit (or loss) of $XXX,XX
My Turbotax program is not working properly for this as well.
Another method is to put the income on the schedule B and remove it per form 8891 on line 22 of the 1040.
That may be the better way in the long run.
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