Is it an RRP, or an RRSP? -


QUESTION:

Hello,

I am a US citizen, and was employed by a Canadian university as a professor 1995-2003. I participated in the pension plan there until my return to the US in 2003. When I terminated my employment in Canada, my pension was rolled over into an individual plan (Sun Life's Group Choices Plan), and I ceased contributing to it. It has gone up about 60% in value since then due to investment performance. I will retire in the US. My assumption was that this was like my current US university retirement plan (a 401A plan)and that I would pay US and/or Canadian taxes on it when I started recieving payments about 20 years from now. But, I recently noted that Sun Life calls my current current Canadian account an RRSP, and I am concerned whether I should have been reporting to the IRS in the US on it. Am I in trouble?

Thanks.
________________________________________________________
david ingram replies:

I hate to say it but if you have not been reporting it of forms 8891 and T DF 90-22.1, you are potentially liable for arbitrary fines of up to $500,000 plus 5 years in jail plus 35% of the value of the RRSP plus 5% for each year the RRSP has not been reported.  See the bottom two questions on Schedule B - substitute the much more friendly form 8891 for the 3520 mentioned in the bottom question.  You can print out and read the details of both forms by going to www.irs.gov and clicking on forms and publications.
 
In Canada, it is common to roll an employer Pension plan into a RRSP (usually a locked in plan).

In the USA, it is common to roll an employer 401(K) plans into an IRA.

You have an RRSP and must file an 8891 form each year and assuming it
and any other Canadian accounts you have exceeded $10,000 US, you were required to file form(s) T D F 90-22.1 as well.  See those bottom two questions on schedule B again.

THE GOOD NEWS

Although i have seen and know of many people fined under the T D F 90-22.1 (over 1,000 clients of one tax consultant named Jerome Schneider as one example) no one has been fined yet that I know of for the 8891 forms.

AND, I have never seen anyone fined who came forward and started filing with the current year.  Fill out the 8891 and send it in with a 1040X if you have already filed.

Fill in the TDF 90-22.1 and mail to Detroit.
___________________________________________________
david ingram wrote:
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This is not intended to be definitive but in general I am quoting $800 to $2,800 for a dual country tax return.
 
$800 would be one T4 slip one W2 slip one or two interest slips and you lived in one country only - no self employment or rentals or capital gains - you did not move into or out of the country in this year.
 
$1,000 would be the same with one rental
 
$1,200 would be the same with one business no rental
 
$1,200 would be the minimum with a move in or out of the country. These are complicated because of the back and forth foreign tax credits. - The IRS says a foreign tax credit takes 1 hour and 53 minutes.
 
$1,500 would be the minimum with a rental or two in the country you do not live in or a rental and a business and foreign tax credits  no move in or out

$1,600 would be for two people with income from two countries

$2,800 would be all of the above and you moved in and out of the country.
 
This is just a guideline for US / Canadian returns
 
We will still prepare Canadian only (lives in Canada, no US connection period) with two or three slips and no capital gains, etc. for $150.00 up.
 
With a Rental for $350
 
A Business for $350 - Rental and business likely $450
And an American only (lives in the US with no Canadian income or filing period) with about the same things in the same range with a little bit more if there is a state return.
 
Moving in or out of the country or part year earnings in the US will ALWAYS be $800 and up.
 
TDF 90-22.1 forms are $50 for the first and $25.00 each after that when part of a tax return.
 
8891 forms are generally $50.00 to $100.00 each.
 
18 RRSPs would be $900.00 - (maybe amalgamate a couple)
 
Capital gains *sales)  are likely $50.00 for the first and $20.00 each after that.
 
Just a guideline not etched in stone. 
 
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