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  1. Let me just say that I have seen this done already. You are not alone.

    I will do a full write up tonight. First, Treasury. Then dinner with brother- and sister-in-law. Then blog. 🙂

  2. Phil,

    Just pass this to IRS. I will opt-out from OVDI if RRSP is included in lieu penalty.

    FBAR/f8891 on RRSP should be considered as technical error and should not be subjected penalty the same as tax non-compliance.

  3. I am walking to lunch after back to back meetings at the IRS. Office of Associate Chief Counsel (International) then Nina Olsen.

    I am going to The Treasury Department after lunch. I will blog tonight.

    Hint. I am going to make a call for war stories for people with RRSPs and IRS problems. I will do it here and at IBS. Get ready.

  4. Phil,

    Are you at liberty to share the outcome of your meeting with your readers?

  5. I will make a note to chat with them about the problem of Americans in Canada — if the opportunity arises.

    The problem is not unique to Canada of course. Americans in Australia face similar problems with superannuations.

    U.S. international tax laws today are heavily dependent on the 1954 version of the Internal Revenue Code. The Chairman of the House Ways & Means Committee at the time had an intellectual background rooted in a different era.

    How different? His father was a Confederate Army colonel. His idea of international commerce is vastly different from today’s world. Steamships and telegraph were the cutting edge tech of his day. Is it any wonder that the tax system struggles to keep up with reality?

  6. @ Phil Hodgen –

    It’d be great if you could weave into your interaction with IRS (if you don’t already plan to do so) an important nuance to the US taxation of RRSPs that is usually overlooked.

    The nuance is this: for US citizens the 2007 Protocol allows: a) a deduction for contributions to an RRSP; and b) deferral of income generated by an RRSP ONLY IF the RRSP is a Qualifying Retirement Plan (Article XVIII(13)). An RRSP is not a Qualifying Retirement Plan if it is an individual plan (Article XVIII(15)(b)).

    Thus only employer sponsored (or employer “involved”) RRSPs are afforded deferral for US citizens resident in Canada.

    Just my $0.02… Query, would the $0.02 be rounded down to $0.00 now that Canada has gotten rid of the penny?

  7. Phil,

    I have a new post at IBS very relevant to you RRSP project. For those who don’t think we have enough informations sharing between CRA and IRS.

    On RRSP alone IRS gets:

    RRSP – Periodic payments

    RRSP – Refund of premiums

    RRSP – Refund of excess amounts

    Deferred profit-sharing plans – Lump-sum payments

    RRSP – Deemed receipt on deregistration

    RRSP – Deemed receipt on death

  8. I think the current govt in the US is trying to push all of this off until after the next election just like their doing with the Keystone pipeline. Additionally despite the non partisan nature of IRS Commissioner it just happens to be he is leaving in November too. Its already May I have the feeling if they were going to do something this year they would have shown signs of starting to.

    In terms of the Government of Canada I have a stack of letters from angry MPs in Ottawa going back months now that I am starting to show to people involved in pushing for this legislation in the US. I have the initial feeling there is a bit of shock Canada and FBAR would at all be related.

  9. Yes we look at the immigration issues. And I am definitely not an expert at immigration so we work with other lawyers any time it is needed.

  10. Do you also work with immigration attorneys to address the potential immigration issues related to your customers. A lot of people in this situation are either visa or green card holders.
    Are we all doomed and risking deportation for having foreign tax issues that can be considered crimes of moral turpitude?

  11. These two points almost always go together. And the scary problem is always the FBAR.

    This is a point I will be discussing in Washington DC on Monday with the IRS.

    This is a toxic problem for the IRS. If they want to impose huge penalties on retirement savings accounts that have paperwork faults — and are GUARANTEED to be taxed upon distribution — this would be a spectacular act of anti-marketing by the government.

    Yet the Commisioner’s policies have promoted the profile of being a bully in offshore account cases and the IRS cannot afford to do anything that relaxes the world’s perception. Otherwise three years of beating up taxpayers goes for naught.

    And don’t forget how the government of Canada will react.

    I think the government knows they’ve painted themselves in a corner.

  12. Hi,

    May I bring up a point that may or may not be related:
    Phil, from your experience, out of the people who contacted you for not having filed form 8891, how many also did not declare their RRSP in a FBAR form?
    Are these 2 compliance issues often related?
    If so, could the problems with the Voluntary Disclosure Program be brought up at the meeting as well? This thing MUST be fixed for people who are not tax evaders.


  13. @G(gee),

    Yes I know that there are all of those other accounts in Canada. And other countries have their equivalents of RRSPs, TFSAs, etc. I would LOVE for these things to be sorted out.

    When I’m at the meeting next week at the IRS I will ask about these. But I’m guessing that it is a “one at a time” game here. First let’s see if we can solve RRSPs. Then on to the next one. And then the next.


  14. Ok, sorry, I AM a bonehead. The 2007 protocol to the US Canada tax treaty added this:

    “7. A natural person who is a citizen or resident of a Contracting State and a beneficiary of a trust, company, organization or other arrangement that is a resident of the other Contracting State, generally exempt from income taxation in that other State and operated exclusively to provide pension or employee benefits may elect to defer taxation in the first-mentioned State, subject to rules established by the competent authority of that State, with respect to any income accrued in the plan but not distributed by the plan, until such time as and to the extent that a distribution is made from the plan or any plan substituted therefor.”

    I guess that the key phrase is “may elect to defer taxation”. My bad.

    The US/UK tax treaty (the one that I have tattoed inside my eyelids, or at least it feels like it), has no such language. It explicitly states that

    “income earned by the pension scheme may be taxed as income of that individual only when….it is paid to, or for the benefit of, that
    individual from the pension scheme”.

  15. Isn’t there another “get out of jail free” paragraph just above the one that you quoted, Phil? 301.6114-1 (c)(1) lists the the exemptions from reporting, with the preamble:

    “(c) Reporting requirement waived. (1) Pursuant to the authority contained in section 6114 (b), reporting is waived under this section with respect to any of the following return positions taken by the taxpayer:”

    The fourth item on the list is:

    “(iv) That a treaty reduces or modifies the taxation of income derived from dependent personal services, pensions, annuities, social security and other public pensions, or income derived by artistes, athletes, students, trainees or teachers;”

    The IRS web site at,,id=96438,00.html rephrases this, and your point above, in plain language:


    You do not have to file Form 8833 for any of the following situations:

    You claim a reduced rate of withholding tax under a treaty on interest, dividends, rent, royalties, or other fixed or determinable annual or periodic income ordinarily subject to the 30% rate.
    You claim a treaty exemption that reduces or modifies the taxation of income from dependent personal services, pensions, annuities, social security and other public pensions, or income of artists, athletes, students, trainees, or teachers. This includes taxable scholarship and fellowship grants.
    You claim a reduction or modification of taxation of income under an International Social Security Agreement or a Diplomatic or Consular Agreement.
    You are a partner in a partnership or a beneficiary of an estate or trust and the partnership, estate, or trust reports the required information on its return.
    The payments or items of income that are otherwise required to be disclosed total no more than $10,000.”

    I’m not familiar with Canada (well, I know where it is :-)), so I don’t know if an RRSP has to be treated differently because of the nuances of the RRSP itself and/or the US/Canada tax treaty. I see that the treaty has relatively “weak” pension provisions (e.g. accumulation of value isn’t addressed) versus a treaty like the one for the US/UK, which has very strong (possibly the strongest) pension provisions.

    Apologies if this is boneheaded and I’m missing something obvious. I know that there’s a lot of chat on the various expat forums about accountants filing Form 8833 to claim treaty benefits on pensions, when the law and the IRS are unusually clear that you don’t need to do this. It makes sense: why force millions of people to send in a form to claim a benefit when, as you say, it’s really hard to evade taxes using a pension plan!

  16. Phil,
    Hi Phil,

    As you no doubt are aware, a similar situation exists for other such accounts of US persons/citizens living in Canada; RESP’s & TFSA’s. Do you have any
    plans to approach the IRS with such well developed proposed solutions now or in the future?

    These are equally crucial issues for those who were not aware
    of how the IRS regards the status of these accounts coupled with the onerous filing requirements, not to mention the massive penalities now set in place for not having filed the required paperwork.


  17. @AGN,

    If this policy can be confirmed with the IRS at Associate Chief Counsel (International) Branch 1, this is good news indeed. If only I knew someone who could ask them . . . .

    WAIT! I will be there next Monday! I will ask them about this and see what they say.

    I agree, however, that the PLR process is unnecessary overkill. Unfortunately it appears to be the officially mandated policy, unless I can verify the informal procedure you’ve described. Which I hope will turn out to be true.

    I wrestled with _two_ such situations this morning. One for a dormant, small balance RRSP (under $1,000), and another where the balance is $11,000. PLRs in situations like that are just a very bad idea.

  18. I have been advising quiet disclosure and back-filing of 8891 ever since Rev proc 2002-23 allowed it, without issue.

    PLR is a money grab, and not required for 8891.

  19. @Michael,

    These PLR requests are (I’m guessing) boring busy work for Associate Chief Counsel (International) Branch 1. And they apparently have a lot of them on the table right now.

    As you say, it would be a win for the lawyers at Branch 1 to get them off the brain-dead 9100 relief PLRs and on to more important stuff. And a win for taxpayers, too. Branch 1 would be solving problems that need solving.

  20. The IRS may or may not care about all the needless trauma they’re causing taxpayers, but they probably DO care about all the PLR requests they receive. Perhaps that will influence them. Good luck!

  21. @Anon,

    I will be meeting with the IRS in early May and will talk to Those Who Know. Perhaps this will work for people from other countries as well to mitigate a bit of the damage.


  22. If we had an IRS that any semblance of “service” in it they would have worked all of this out for themselves pro-actively. Instead they need somebody from the private sector to arrive and beat them over the head with some common-sense. Good luck with that. I hope you are billing them for your time.

    Does the “$10,000 of income in a year” include capital gains? If so, it seems that a log more retirement plans might be in scope than might be thought at first. Can any of these solutions also apply to non-Canadian plans? Over time these accrue vastly worse issues than RRSPs.

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.