In a piece of good news, the IRS announced today that US taxpayers will automatically be treated as deferring income from Canadian Registered Retirement Savings Plans (RRSPs) and Canadian Registered Retirement Income Funds (RRIFs). In other words, the treatment will be exactly like 401(k)s are treated for Americans. Such individuals will no longer have to make annual filings of Form 8891 to note their holdings for RRSPs or RRIfs.
The noncompliance with this provision was legion, so the new Revenue Procedure 2014-55 is good news. Individuals who were not in compliance had to file a request for a Private Letter Ruling in order to “get out of jail free” (so to speak). The Revenue Procedure includes retroactive relief.
However, such individuals will still need to note these accounts on their FBARs (Report of Foreign Bank and Financial Accounts, Form 114). Note also that at least one state (California) does not recognize deferral or RRSP income, so holders of RRSPs who are required to file California tax returns must report their income on their state tax returns.
