This is a problem that I have dealt with a couple of times (at least) in the last few months. Sooner or later your contributions (no later than the year you turn 71) must cease. At that point your RRSP (Registered Retirement Savings Plan) savings must be converted to income. A RRIF (Registered Retirement Income Fund) is a popular way to convert that RRSP to income.
Just remember that by creating a RRIF you are opening a new account and will be subject to the FATCA inquisition. U.S. citizenship creates planning problems to be solved!
Below is a CRA confirmation of this.
Numerous immigrants to Canada or those residing in Canada but have worked for say U.S. employers have entitlements to U.S. pensions such as 401K plans and in some circumstances they have U.S. IRAs. The Income Tax Act has provisions to allow transfers including a claim for any U.S. withholding tax or for applicable early withdrawal penalties.
Examination of both the U.S. and Canadian tax provisions should be dealt with before any transfer takes place to ensure the rollover is available in Canada.
TRANSFER OF SWISS PENSION TO AN RRSP Read More
On October 7, 2014, the IRS made it easier for taxpayers who hold interests in certain popular Canadian retirement plans to get favorable U.S. tax treatment. Rev. Proc. 2014-55. As a result of the change, many Americans and Canadians with either registered retirement savings plans (RRSP’s) and registered retirement income funds (RRIF’s) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRA’s) and 401(k) plans. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.
In general, U.S. citizens and resident aliens will qualify for this special treatment as long as they have filed and continue to file U.S. income tax returns for any year they held an Read More
The IRS recently released a new Revenue Procedure regarding U.S. citizens and residents holding Canadian Registered Retirement Savings Plans (RRSP) and Registered Retirement Income Fund (RRIF). The IRS has simplified some of the reporting requirements for these taxpayers.
In the past, filing a 1040 tax return for a taxpayer who held RRSPs required the filing of form 8891 for each and every RRSP and RRIF account owned by the taxpayer. This form reported the December 31st balance of these accounts and claimed treaty benefit, Article XVIII(7), which is enshrined in the U.S.-Canada Income Tax Convention (herein referred to as treaty) whereby a taxpayer could defer taxation on the earnings within these accounts until distribution. This treatment was intended to give similar treatment to RRSP that was Read More
Today’s blog post completes the interview with Willard (Bill) Yates, who recently retired from the Office of Associate Chief Counsel (International), Internal Revenue Service after 31 years of service. During his tenure as a Chief Counsel Attorney, Bill was the recipient of 10 awards, including the Albert Gallatin Award, Treasury’s highest career service award. The Gallatin is awarded only to select federal employees who served twenty or more years in the Department and whose record reflects fidelity to duty. Bill received the Gallatin award for his work throughout his IRS career, including his work on implementation of some of the compliance requirements of the Foreign Account Tax Compliance Act (FATCA).
Most of Bill’s career at IRS focused on offshore compliance, including his participation in a massive overhaul of outdated foreign trust reporting requirements Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner). Bill was the principal drafter of the regulations under section 679, Foreign trusts having one or more United States beneficiaries, Notice 2003-75, RRSP and RRIF Information Reporting and Notice 2009-85, Guidance for Expatriates Under Section 877A.
Our focus for this series will be on Bill’s comments on the American Citizens Abroad working paper titled, RBT, Residence Based Taxation: A Necessary and Urgent Tax Reform (RBT Proposal), which recently was submitted to the International Tax Reform Working Group of the House Ways and Means Committee. Read More