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Sent: Wednesday, August 27, 2003 8:42 PM
To: [email protected]
Subject: RRSP for Canadians living in the U.S.
Hello!
I'm glad I found your website. A friend of mine told me about you.
I am a Canadian citizen, married to U.S. citizen who also has Canadian citizenship. We moved from Canada to the U.S. in 1999.
For the taxation year 1999, we each filed a Canadian tax return for the income earned in Canada, and a U.S. return for the income earned in the U.S. Since then, we have a filed a joint return in the U.S. and no return to Revenue Canada. We did not fill out any paperwork to "officially" leave Canada.
When we left Canada, I had some mutual funds in a money market account. I reported the income earned on my tax return. The year after we moved here (2000), I withdrew all those funds and closed that account.
I still have a chequing (not checking!) account in Canada, with perhaps $120.00 in it. My husband has a savings account and U.S. dollar savings account in Canada.
I have RRSPs in mutual funds totaling approximately $27,000.00. My husband has RRSPs in daily interest savings accounts and a stock-indexed GIC totaling approximately $6,000.00. I do not think either of us are paid any dividends or distributions on any of these RRSPs.
(Information above is Canadian dollar values.)
My friend told me I need to report my RRSPs to the IRS using a form 3520, and the deadline to do so has been extended to October 15 of this year. Another friend told me I don't need to worry about it since I'm not earning any income in the form of distributions.
We are now living in the U.S., and probably will do so for the forseeable future. It is possible we could return to live in Canada some day, but for the time being our residence is here. I am a permanent resident (with a "green card") and plan to apply for U.S. citizenship in the next year or so, provided I can keep my Canadian citizenship. We own a house here. I plan to leave my RRSPs in Canada until I retire and use them as income, hopefully by which time tax laws between the two countries will have changed so I don't have to pay any penalties if I am still living in the U.S.
So, my questions are:
1. Do I need to report any of our RRSPs to the IRS? YES
2. Do I need to fill out any paperwork to tell Revenue Canada I have left Canada. (They have had my U.S. mailing address on file since 1999 and have contacted me with corrections to Tax Returns for the year 2000.) YES
3. Do I need to report the money I brought into the U.S. in 1999 and 2000 (the cash in my pockets and the money I took out of the money market fund)? NOT to the USA
4. How much do you charge for consultation services? (i.e. to answer my questions above) I have answered these free and made it part of the newsletter. However you should set up a phone consultation which is $350 Cdn for all or part of an hour.
Thank you very much. I look forward to hearing from you. I am reading some of the articles on your website, but just want to make sure I understand correctly.
LXXXX.
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david ingram replies.
When you left Canada, you should have filed a departing Canadain return which would have put your date of departure on the op of page one of the Canadian Tax return. This would have meant that tyour exemption amountsa would have been pro-rated.
When you did your US returns, the returns should have been "dual status" returns, a box you will find by the top on page 2 of the 1040. The dual status means that you cannot claim the standard deduction but have to claim itemized deductions.
On your Canadian return, you should have reported your mutual funds as a "deemed sale" at the value they had as you crossed the border and reported any profits or losses on the 1999 return.
That was for 1999.
Now we have to turn to the Canadian Accounts. A Resident Alien (green card holder) of the US has to report foreign accounts to the US Department of the Treasury on form TDF-90. http://www.irs.gov/pub/irs-fill/f9022-1.pdf Failure to file these forms can result in a US fine of up to $500,000 plus five years in jail. The only two poeple I knew fined under this were a 105 year old woman who was fined $10,000 and a 68 year old woman who was fined $60,000.
In addition, the internal earnings of the RRSP must be reported to the IRS. In 1999 and 2000, these were governed by REV.PROC 89-45. The 2001 and 2002 returns are governed by the rules in REV.PROC 2002-23. In 2003, another NOTICE, 2003-25 came along which pointed out that Canadian RRSP withdrawals were no longer exempt from the rules for filing the forms 3520 and 3520-A.
You can find these details at www.centa.com - click on newsletters, click on 2003, click on August and you will find them.
If you wish us to look after the reporting for you (I recommend it) we will charge you $300 CDN for the first RRSP and $100 per extra RRSP. To do this, we need you to fax us the Dec 31, 2001 Balance and the Dec 31, 2002 Balance for each RRSP plus a complete copy of your 1040 tax return.
David Ingram of the CEN-TA REALTY Group
US / Canada / Mexico tax and working Visa Specialists
US / Canada Real Estate Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 980-0321 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
Disclaimer: This question has been answered without detailed information or consultation and is to be regarded only as general comment. Nothing in this message is or should be construed as advice in any particular circumstances. No contract exists between the reader and the author and any and all non-contractual duties are expressly denied. All readers should obtain formal advice from a competent and appropriately qualified legal practitioner or tax specialist in connection with personal or business affairs such as at www.centa.com. If you forward this message, this disclaimer must be included."
Be ALERT, the world needs more "lerts"
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