Notice 2003-75 - Latest Rules re Canadian RRSP's

U.S. Citizens and others who are subject to filing U.S. income tax returns as a result of residence in the United States are now potentially liable to file additional paperwork each year to report holdings of and transactions with their Canadian RRSP accounts.

Under Notice 2003-75, for years after December 31, 2002, taxpayers who have an interest in Canadian RRSP's or RRIF's will be required to file a new simplified form 8891 in lieu of filing forms 3520, 3520A, or elections under Revenue Procedure 2002-23.

Under the authority of section 6001 of the Internal Revenue Code, Treasury and the IRS are designing a new form that a U.S. citizen or resident alien who holds an interest in an RRSP or RRIF must complete and attach to his or her Form 1040. The new form also will coordinate the reporting rules with the procedure set forth in section 4 of Revenue Procedure 2002-23, 2002-1 C.B. 744, for making the election under Article XVIII(7) of the U.S.-Canada income tax convention to defer U.S. income taxation of income accrued in the RRSP or RRIF.

A U.S. citizen or resident alien who has received any distributions during the taxable year from an RRSP or RRIF must report the total amount of distributions received during the taxable year from all such RRSPs and RRIFs on line 16a of the Form 1040 and the taxable amount of all such distributions (as determined under section 72) on line 16b of the Form 1040.

Here is a link to the new DRAFT form. Do not use this form at this time, since it has not been approved

Internal Revenue Code Section 72 exempts a portion of distributions received from an RRSP from taxation in the U.S. However, some strict rules must be met:

1. The payments must be in the form of an annuity, and not a lump sum;
2. The contributions which gave rise to the RRSP would not be eligible for exclusion if they were never taxed in the U.S. and Canada (because they were contributed to an RRSP by a non resident alien.

However, if a U.S. citizen made RRSP contributions while in Canada, then a portion of the distributions could be exempt from tax, to the extent that the contributions were required to be reported on a U:.S. tax return in the year of contribution.

Transitional Rules:

An election under Rev. Proc. 2002-23 must be made for 2003 and 2004 in the normal manner until the new form 8891 becomes available.

If you Have Not Filed the Election Under Rev Proc 2002-23? in Prior Years?

If you have not filed elections under Rev. Proc. 2002-23, or have not disclosed transactions with your RRSP on forms TDF 90.22.1, 3520, 3520A or 8833 in prior years, please contact us as soon as possible. We will evaluate your situation to determine what filings need to be made.

Existing clients of this firm do not need to take any further action at this time.

Mark T. Serbinski Certified Public Accountants and Serbinski Partners PC, Chartered Accountants specialize in situations involving the taxation of U.S. citizens living abroad and Canadians living or working in the United States.  Please contact us for a complimentary initial review of your particular situation on a confidential basis. 

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