IR-2014-97, Oct. 7, 2014
WASHINGTON ― The Internal Revenue Service today made it easier for
taxpayers who hold interests in either of two popular Canadian
retirement plans to get favorable U.S. tax treatment and took additional
steps to simplify procedures for U.S. taxpayers with these plans.
As part of this, the IRS provided retroactive relief to eligible
taxpayers who failed to properly choose this benefit in the past. In
addition, the IRS is eliminating a special annual reporting requirement
that has long applied to taxpayers with these retirement plans.
Under this change, many Americans and Canadians with registered
retirement savings plans (RRSPs) and registered retirement income funds
(RRIFs) now automatically qualify for tax deferral similar to that
available to participants in U.S. individual retirement accounts (IRAs)
and 401(k) plans. In general, U.S. citizens and resident aliens qualify
for this special treatment as long as they filed and continue to file
U.S. returns for any year they held an interest in an RRSP or RRIF and
include any distributions as income on their U.S. returns.
The change relates to a longstanding provision in the U.S.-Canada
tax treaty that enables U.S. citizens and resident aliens to defer tax
on income accruing in their RRSP or RRIF until it is distributed.
Otherwise, U.S. tax is due each year on this income, even if it is not
In the past, however, taxpayers generally would get tax deferral by attaching Form 8891
to their return and choosing this tax treaty benefit, something many
eligible taxpayers failed to do. Before today’s change, a primary way to
correct this omission and retroactively obtain the treaty benefit was
to request a private letter ruling from the IRS, a costly and often
Many taxpayers also failed to comply with another requirement; namely
that they file Form 8891 each year reporting details about each RRSP
and RRIF, including contributions made, income earned and distributions
made. This requirement applied regardless of whether they chose the
special tax treatment. The IRS is eliminating Form 8891, and taxpayers
are no longer required to file this form for any year, past or present.
The revenue procedure does not modify any other U.S. reporting
requirements that may apply under the Bank Secrecy Act (BSA) and section
6038D. See FinCEN Form 114 due by June 30 of each year, and Form 8938
attached to a U.S. income tax return for more information about the
reporting requirements under the BSA and section 6038D. Different
reporting thresholds and special rules apply to each of these forms.
Further details on today’s change can be found in Revenue Procedure 2014-55, posted on IRS.gov.