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ARTICLE · 24 OCTOBER 2014

IRS Simplifies Rules For Participants In Canadian Plans – Or Does It?

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Under the US-Canada Income Tax Treaty, U.S. taxpayers who participate in Canadian registered retirement plans are not required to pay tax on the annual income and investment gains on their accounts.

CanadaTax
Carol Buckmann
Carol Buckmann
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Under the US-Canada Income Tax Treaty, U.S. taxpayers who participate in Canadian registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) (the Canadian Plans) are not required to pay tax on the annual income and investment gains on their accounts. Tax is owed only when distributions are received from the accounts. However, this tax deferral has not been automatic. In order to claim this special tax treatment, participants in Canadian Plans were required to file Form 8891 annually (providing information about contributions, income and distributions) by attaching it to their U.S. federal income tax return.

The Problem: Many taxpayers who should have filed these forms did not do so, and the requirement to provide information about participation in the Canadian Plans applies even if the treaty deferral is not claimed. In order to claim the tax deferral retroactively if timely filings were not made, taxpayers had to obtain a private

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