Registered Retirement Savings Plans

RRSPs in the USA

Almost every Canadian living in the United States has an RRSP–a Registered Retirement Savings Plan. After moving south across the border, they stopped making contributions to the RRSP, simply leaving the account to grow until taking a distribution at retirement.

The Canadian tax treatment of the RRSP is simple: nothing needs to be done until a distribution is taken. However, as a U.S. resident, the RRSP owner has Federal tax obligations to follow. Doing the right paperwork (Form 8891, specifically) and checking the right boxes means no taxation in the United States until the RRSP distribution is received. Failure makes the RRSP into a taxable account in the United States for income tax purposes. Other paperwork failures (Forms 8938 and TD F 90-22.1, specifically can generate $10,000 fines per account.

Our guess–based on the calls we get–is that a large percentage of Canadians in the United States are unaware of these requirements. The IRS gives only one official way (receive a Private Letter Ruling) to fix past U.S. tax paperwork failures, and it is expensive. It is also an incomplete solution. A Private Letter Ruling letting you file late Form 8891′s does not defeat a possible penalty for failure to file Form 8938 or Form TD F 90-22.1

We help Canadians who need to bring their U.S. tax filings current for their RRSPs. While we are happy to prepare and file Private Letter Ruling requests, we also strive to find other ways that these tax problems can be cleaned up.