IRS has announced that U.S. taxpayers who hold Canadian registered retirement savings plans (RRSPs) or registered retirement income funds (RRIFs) are automatically qualified for tax deferral. Originating from U.S.-Canada tax treaty, this change grants special tax treatment to eligible U.S. citizens and resident aliens as long as they file U.S. returns and include distribution as income. U.S. taxpayers no longer need to file Form 8891 for any year to report their contributions, income and distributions under RRSP and RRIF to defer tax. This change also applies retrospectively to those who were eligible but failed to properly comply with procedural requirements.
See “IRS Simplifies Procedures for Favorable Tax Treatment on Canadian Retirement Plans and Annual Reporting Requirements,” IR-2014-97 (October 7, 2014).
Posted by Jiaqi Wang, Associate Editor, Wealth Strategies Journal