Understanding RRSP Tax and Reporting for US Taxpayers


The Registered Retirement Savings Plan (RRSP) is a popular savings vehicle for Canadians, but it comes with specific considerations (Read: Headaches) for U.S. taxpayers. Here's a simplified overview of how RRSPs are treated for U.S. tax and international reporting purposes.

U.S. Federal Tax Considerations for RRSPs

For U.S. federal tax purposes, the income accrued within an RRSP is generally not taxed until distributions are received. This deferral aligns with the treatment under the United States/Canada Tax Treaty, allowing U.S. taxpayers to avoid immediate taxation on earnings within their RRSP. Notably, the requirement to report RRSP ownership annually on Form 8891 has been eliminated by the IRS since Revenue Procedure 2014-55, simplifying the process for taxpayers.

State-Level Tax Implications for RRSPs

It's important to remember that state tax treatment of RRSPs can vary, as there's no uniform rules across all the states. Some states may tax the accrued income within an RRSP even before distributions are made, differing from federal tax treatment. Taxpayers should consult with a tax professional to understand the specific rules applicable in their state. Cheat Sheet: AL, AR, CA, CT, HI, MD, MS NJ, ND and PA.

Reporting RRSPs on FBAR

RRSPs are considered foreign financial accounts and must be reported on the FBAR (FinCEN Form 114) if the aggregate value of the taxpayer's foreign financial accounts exceeds $10,000 at any point during the calendar year. This requirement ensures compliance with U.S. laws aimed at financial transparency.

FATCA Reporting: Form 8938 and RRSPs

Similar to the FBAR, Form 8938 (FATCA) requires U.S. taxpayers to report their foreign financial assets, including RRSPs, if the total value exceeds the reporting threshold. This form is filed with the IRS and is part of the effort to prevent tax evasion involving offshore accounts.

Exemption from Form 3520 Reporting for RRSPs

Thanks to Revenue Procedure 2014-55, RRSPs are exempt from being reported as a foreign trust on Form 3520, which has more comprehensive reporting requirements than the FBAR and Form 8938. This exemption simplifies the reporting process for RRSP holders, focusing their reporting obligations on other forms like the FBAR and Form 8938.

Elimination of Form 8891 for RRSP Reporting

Previously, Form 8891 was required for U.S. citizens or residents with RRSPs to report their accounts annually. However, this form is no longer required, streamlining the reporting process for taxpayers.

Mitigating Penalties through Compliance Programs

For those who have missed filing their FBAR or other international information reporting forms, the IRS offers various amnesty programs to help taxpayers come into compliance. These programs can potentially reduce or eliminate penalties for late reporting, providing a pathway for taxpayers to rectify their filing status.


**Usual Disclaimer: What is written here is not formal tax advice. I’m not your CPA. It’s possible, or dare I say even probable, that the comments and opinions expressed here contain material errors, are out of date, or that important stuff has been left out. Don’t use this info to make tax decisions. Hire a pro to help you.