So Long Form 8891- Been Good to Know You!

On October 7, 2014 the IRS issued Revenue Procedure 2014-55 (http://www.irs.gov/pub/irs-drop/rp-14-55.pdf ), which eases the reporting for RRSP’s and RRIF’s on U.S. personal income tax returns (1040’s).

For an IRS overview see: http://www.irs.gov/uac/Newsroom/IRS-Simplifies-Procedures-for-Favorable-Tax-Treatment-on-Canadian-Retirement-Plans-and-Annual-Reporting-Requirements .

This new guidance provides that Americans with 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 (IRAs) and 401(k) plans).

In general, U.S. citizens and resident aliens qualify for this special treatment as long as they file and continue to file U.S. returns for any year they hold an interest in an RRSP or RRIF, and report any distributions as income on their U.S. returns.

This change relates to a longstanding provision in the U.S. - Canada tax treaty that enables U.S. citizens and resident aliens to defer tax on income accruing in their RRSP or RRIF until it is distributed. Without this treaty section, U.S. tax would be due each year on this income, even if it is not distributed.

In the past, however, taxpayers generally would get a tax deferral on the RRSP/RRIF growth by attaching Form 8891 to their 1040 return and claiming this tax treaty benefit, something many eligible taxpayers failed to do. Before this change, correcting this omission was a difficult and often time-consuming process.

Many taxpayers also failed to comply with another requirement; namely that they file Form 8891 each year reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether they chose the special tax treatment.

Now the good news: the IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present. Form 8891 is obsolete as of December 31, 2014.


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Extracts from Revenue Procedure 2014-55

.... Subject to any future guidance that may be issued by the Treasury Department and the IRS, beneficiaries (regardless of whether they are “eligible individuals” within the meaning of section 4.01 of this revenue procedure) and annuitants are not required to report contributions to, distributions from, and ownership of a Canadian retirement plan under the simplified reporting regime established by Notice 2003-75 (Form 8891) or pursuant to the reporting obligations imposed by section 6048 (Form 3520)….

This revenue procedure does not, however, affect any reporting obligations that a beneficiary or annuitant of a Canadian retirement plan may have under section 6038D or under any other provision of U.S. law, including the requirement to file FinCEN Form 114, Report of Foreign Bank and Financial Accounts (FBAR)...

... This revenue procedure obsoletes Form 8891 as of December 31, 2014. Beneficiaries who have a valid extension in effect under section 6081 for taxable year 2013 and who have not filed a U.S. income tax return for taxable year 2013 by the date this revenue procedure is published in the Internal Revenue Bulletin may wish to attach Form 8891 to such return in order to satisfy the requirements of Treas. Reg. § 1.6038D-7T(a)(1).

... Even though such beneficiaries are not required to file Form 8891 pursuant to the relief set forth in section 5.01, they may do so in order to report on Form 8938 that they have filed Form 8891 with respect to an RRSP or RRIF.

... Distributions received by any beneficiary or annuitant from a Canadian retirement plan ... must be included in gross income by the beneficiary or annuitant …

... Revenue Procedure 2002-23, 2002-1 C.B. 744, and Notice 2003-75, 2003-2 C.B. 1204, are superseded. Form 8891 is obsolete as of December 31, 2014.


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