NU Online News Service, Dec. 1, 2003, 11:08 a.m. EST – The Treasury Department and the Internal Revenue Service recently announced simplified reporting requirements for U.S. taxpayers who hold interests in Canadian registered retirement savings plans and registered retirement income funds.[@@]
The new reporting rules “represent a substantial reduction in paperwork burden for U.S. citizens and residents who hold interests in these plans,” according to officials at the Treasury Department.
An RRSP is a retirement program available to Canadians which encourages savings by offering tax deductible contributions and tax deferred growth of the account assets. Upon retirement, a RRSP can be converted to an RRIF, which will then distribute the account assets to the retiree while continuing to defer taxes on additional growth in account assets.
The new reporting rules will be effective for tax years beginning after Dec. 31, 2002. Under the old rules, plan participants had to follow the rules stated in Section 6048 of the Internal Revenue Code. Those rules required taxpayers to file Form 3520, the annual return for reporting transactions with foreign trusts and receipt of certain foreign gifts. Affected taxpayers also had to file Form 3520-A, the annual information return for a foreign trust with a U.S. owner.
The simplified rules now let U.S. residents file a single new form that can be completed with information that is much more readily available to taxpayers, Treasury officials say.
The IRS is still developing the new form. Until the IRS releases the form, beneficiaries and annuitants of registered Canadian retirement plans must follow the interim reporting rules described in Notice 2003-75.
The Treasury Department has posted a press release that explains the change at http://www.treas.gov/press/releases/js1026.htm and a copy of the notice at http://www.treas.gov/press/releases/reports/n200375.pdf