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Hi David
There was a flurry of discussion on your site about US residents with Canadian RRSPs filing a form by the middle of August. Lately there has been nothing at all.
Was this a false alarm or are there forms which are still critical to file??
adm
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david ingram replies:
The rules still exist. I apologise for not staying with it. I have had a couple of personal blows in the last couple of months culminating with my wife leaving figuratively on May 21st and literally on June 20th. Because we also work together, I have found it to be emotionally daunting for the last month and have only being reacting to questions like these and failing to act with things that need to be done.
However, I will be setting up a couple of seminars on the subject in the next two weeks and have attached a more recent Globe and Mail story for your perusal.
I did "hope" it would go away. However, although the Globe and Mail Article points out that the IRS acknowledges how few people know about the rules, they still intend to go ahead although the deadline has likely (not yet officially) moved to Oct 15th. Of course, even if they do not move the deadline officially, one can ask for an extension.
The following article by Oliver Bertin in the July 9th Globe and Mail Report on Business on page B14 is a good add on.
REPORT ON BUSINESS
Wednesday, July 9th, 2003, Page B14
The U.S. revenue department could penalize U.S. taxpayers who invest in Canadian registered retirement savings plans yet neglect to file the proper forms before an Aug. 15 deadline.
"The onerous new rules" affect about 250,000 U.S. citizens and a similar number of Canadians who reside in the United States, said Jim Yager, treasurer of the American Chamber of Commerce in Canada and a tax partner with KPMG of Toronto.
The change came last April when the U.S. Internal Revenue Service quietly did away with a number of exemptions affecting Canadian RRSPs, leaving taxpayers liable to heavy penalties, Mr. Yager said.
He said only about 5 per cent of the affected taxpayers are even aware that they have lost their exemptions.
"The fact is people are not aware of these new rules," he said. "Canada's financial institutions are not currently equipped with the information or processes necessary to fulfill these new requirements."
Anthony Burke, a spokesman for the IRS in Washington, said the U.S. revenue department now realizes how few people are aware of the change in regulations.
The original deadline was April 15, 2003. But so many taxpayers were late that the deadline was pushed forward to Aug. 15, with no penalty. The IRS may be willing to stretch the current extension to October if necessary, he said.
Mr. Burke warned that the U.S. tax regulations are very complicated. Some taxpayers may still be exempt from filing the forms and some may be able to apply for a further extension.
Mr. Yager suggested those who have questions should call a tax accountant to clear up any confusion.
He said under the current rules, U.S. taxpayers -- whether residing in the United States or Canada -- must file a complex six-page form, 3520, if they contributed to or cashed a Canadian RRSP or registered retirement income fund (RRIF) in 2002. U.S. taxpayers must also file a form 3520-A if they own a Canadian RRSP or RRIF.
These forms must now be filed by Aug. 15. The penalty for not filing a form 3520 is 35 per cent of the contribution or distribution, and is cumulative over time. The IRS can, however, waive the penalty.
The penalties can become very expensive, Mr. Yager said. He provided the example of a U.S. taxpayer who contributed $10,000 to a Canadian RRSP in early 2002, and planned to withdraw $10,000 in late 2006.
That person would be liable for penalties and taxes of $13,917 if he neglected to file the appropriate forms.
David Ingram of the CEN-TA Group
US / Canada / Mexico tax and working Visa Specialists
US CANADA Real Estate Taxation Specialists
108-100 Park Royal South
West Vancouver, BC, CANADA, V7T 1A2
(604) 913-9133 - Fax 913-9123 [email protected]
www.centa.com www.david-ingram.com
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