How to fix 2009 Form 8891 before October 15, 2010

If you have already filed your 2009 U.S. income tax returns without Form 8891 attached, don’t fret. There is a simple fix if you are within six months of the filing date.

Form 8891: only valid when filed with a timely tax return

Form 8891 must be filed with a timely income tax return.[ref]Revenue Procedure 2002-23, Section 4.01 says that if you would be taxable on your RRSP income, you can make an election under the income tax treaty by attaching a statement to your “timely filed” United States income tax return. Before the days of Form 8891, the contents of that statement were listed in Revenue Procedure 2002-23. Now you can use Form 8891 to make the election to prevent U.S. income taxation of your RRSP.[/ref] It cannot be filed as a stand-alone document, and if it is filed on a late income tax return, it is not valid.[ref]A “timely-filed” return is one where you filed before the filing deadline (e.g., April 15 for Form 1040), or where you received an extension of time to file, and filed your tax return before the extension of time expired.[/ref]

Let’s look at a couple of examples.

Example: Form 1040 filed on time

You filed your 2009 Form 1040 on April 15, 2010. It was a timely filed tax return. You attach Form 8891 to your 2009 Form 1040.

Your Form 8891 is valid because it was attached to a timely-filed tax return.

Example: Form 1040 filed on extension

You were not ready to file your 2009 Form 1040 on the original filing deadline of April 15, 2010. Instead, you filed a timely Form 4868 (Application for Automatic Extension of Time To File U.S. Individual Income Tax Return). This extends the filing deadline for your 2009 Form 1040 to October 15, 2010.

On October 15, 2010 you file your 2009 Form 1040 with Form 8891 attached.

Your Form 8891 is valid because it was attached to a timely-filed tax return.

Automatic waiver until October 15, 2010 to fix 2009’s problems

If you do not file Form 8891 with a timely-filed tax return, it will be rejected unless you have specific approval from the IRS to file late.[ref]Treasury Regulations Sections 301.9100-1 through 301.9100-3 describe the methods for getting that authorization.[/ref] You can still fix your 2009 Form 8891 filing problem if you do so before October 15, 2010.

An automatic extension of 6 months from the due date of a return excluding extensions is granted to make regulatory or statutory elections whose due dates are the due date of the return or the due date of the return including extensions provided the taxpayer timely filed its return for the year the election should have been made and the taxpayer takes corrective action as defined in paragraph (c) of this section within that 6-month extension period. This paragraph (b) does not apply to regulatory or statutory elections that must be made by the due date of the return excluding extensions.[ref]Treasury Regulations Section 301.9100-2(b).[/ref]

This means that you get an automatic extension of 6 months from April 15, 2010: until October 15, 2010. That is your last day for using the automatic waiver of late filing process identified in the Treasury Regulations.

Automatic waiver until December 15, 2010 for people living outside the USA

For those of you living outside the United States on April 15, 2010, the due date for your Form 1040 was June 15, 2010. Since the automatic waiver provisions of Treasury Regulations Section 301.9100-2 tack on six months to the filing deadline, you have until December 15, 2010 to make a remedial Form 8891 filing for calendar year 2009.

Tax geek side conversation

You can ignore this is you are not interested in the geeky side of tax law.

Technical requirement #1: it is a regulatory election

Treasury Regulations Section 301.9100-2 grants the six month automatic extension to taxpayers who want “to make a regulatory or statutory election.”[ref]Treasury Regulations Section 301.9100-2(b).[/ref]

A “regulatory election” is one where the due date for action is set by a “regulation, a revenue ruling, revenue procedure, notice, or announcement.”[ref]Treasury Regulations Section 301.9100-2(b).[/ref]

In the case of your RRSP election, the due date for the election is set by Revenue Procedure 2002-23. Therefore it is a “regulatory election” for the purposes of Treasury Regulations Section 301.9100-2.

Technical requirement #2: election date set to tax return due date

In addition, the six month extension at Treasury Regulations Section 301.9100-2 is only allowed where the due date for the election is tied to either:

  • the due date of the tax return, or
  • the due date of the tax return including extensions.

Revenue Procedure 2002-23 defines the deadline for making the election to treat the RRSP investment earnings as nontaxable under the treaty as being required on a “timely filed (including extensions) United States federal income tax return for the current year.”[ref]Rev. Proc. 2002-23, 2002-15 I.R.B. 744, Section 4.01.[/ref]

Therefore, your treaty election for the RRSP investment earnings is indeed tied to the due date for your timely-filed (including extensions) so the second technical requirement for the Treasury Regulations Section 301.9100-2 is met.

Technical conclusion

Since we meet both technical requirements (the election is one that was created in a Revenue Procedure, and the election due date is required to coincide with the due date of your tax return plus extensions), the automatic waiver of lateness is granted. You have “[a]n automatic extension of 6 months from the due date of a return excluding extensions” to fix the RRSP problem.

Action plan

Your job is to file Form 1040X on or before October 15, 2010,[ref]December 15, 2010 for people who were outside the United States on April 15, 2010.[/ref] attaching a properly-completed Form 8891. Here’s what to do:

  1. Confirm that you’ve already filed a timely Form 1040 for 2009.
  2. Prepare Form 1040X. All of the income and expense items will be the same as before. You are not adding any new income or claiming any new income tax deductions.
  3. On page 1 of Form 1040X, at the top center, write “Filed Pursuant to T. Regs. Section 301.9100-2.”
  4. On page 2 of Form 1040X, there are some lines for you to write in the reason you are filing the amended income tax return. Insert here: “This amended return is filed pursuant to Treasury Regulations Section 301.9100-2 to claim benefits under the U.S./Canada income tax treaty on Form 8891 for a Registered Retirement Savings Plan.”
  5. If necessary, prepare a new Schedule B to correctly answer the questions at the bottom of the page (about whether you have foreign financial accounts).[ref]The amount of interest and dividends you report will be the same, but you will now be completing Part III of Schedule B. I’m saying “if necessary” here because I’m guessing that if you flubbed the Form 8891 filing deadline, you probably flubbed the Form TD F 90-22.1 filing deadline and you will be fixing that problem at the same time. Attach the new Schedule B to Form 1040X.[/ref]
  6. Prepare Form 8891. Attach it to Form 1040X.
  7. Send Form 1040X, with the new Schedule B (if you did one) and the new Form 8891 attached, to the IRS.
  8. Wait to see what happens. If you are lucky you will get a letter from the IRS that is the government equivalent of “Thanks, we got your amended tax returns, everything looks good.”
  9. If necessary, follow the procedures for preparing and filing Form TD F 90-22.1 if you didn’t get that form filed with the Internal Revenue Service on or before June 30, 2010.