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Tax Blawg

Tax Talk for Tax Pros

Introduction

Welcome to TaxBlawg, a resource for news and analysis of current legal issues facing tax practitioners. Although blawg.com identifies nearly 1,400 active “blawgs,” including 20+ blawgs related to taxation and estate planning, the needs of tax professionals have received surprisingly little attention. The Wall Street Journal's Tax Blog gives “tips and advice for filers,” and Paul Caron’s legendary TaxProf Blog is an excellent clearinghouse for academic and policy-oriented news. Yet, tax practitioners still lack a dedicated resource to call their own. For those intrepid souls, we offer TaxBlawg, a forum of tax talk for tax pros.

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When Bygones Aren't Bygones: Exploring Tax Solutions for U.S. Persons with Undeclared Canadian Retirement Plans and Accounts

Many Canadians migrate south each year and become U.S. residents or citizens.  Along with the cold weather, they may also leave behind local retirement account, such as a Canadian registered retirement savings plan ("RRSP") or a Canadian registered retirement income fund (“RRIF”).  Preserving this Canadian nest egg is generally a good thing.  Indeed, it is hard to find fault with financial planning for the golden years.  This egg could turn a little rotten, though, if the person fails to appreciate the relevant U.S. tax obligations.  Unfortunately, due to the disparate treatment of these Canadian retirement plans by the IRS and the Canadian Revenue Agency, coupled with the obscurity of various international tax requirements, many of our neighbors from the north lack the necessary appreciation.  In other words, they are under the common, yet mistaken, belief that bygones are bygones, at least when it comes to their retirement plans back home.  The potential consequences of this unawareness or misunderstanding include back taxes, penalties, and interest of such magnitude that many new arrivals may curse their decision to relocate to the land of the free and the home of the brave.

The good news is that it is not too late to avert the problem.  The bad news is that trying to resolve the situation in an improper manner could trigger even greater troubles.  The attached article, called "When Bygones Aren't Bygones:  Exploring Tax Solutions for U.S. Persons with Undeclared Canadian Retirement Plans and Accounts," follows the evolving tax treatment of Canadian RRSPs and RRIFs, identifies the relevant U.S. tax requirements and the penalties for non-compliance, illustrates the problem by describing a typical scenario, and explores two major solutions, focusing on the pros and cons of each.  The article was published in the International Tax Journal.

Categories: International
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    Hale is a partner in the Tax Controversy Section, Chair of the International Tax Group, and Member of the Executive Committee. He helps individuals and businesses with tax disputes and compliance projects ...