The Internal Revenue Service (IRS) requires citizens and residents of the United States to report all income and wages. This includes income from foreign sources such as investments and retirement accounts. If you have a Canadian Registered Retirement Savings Plan (RRSP), proceeds into and payment from your RRSP may count as income on your U.S. tax return. To protect the retirement savings in your RRSP, you may invoke certain rights available in the Canada-U.S. Tax Treaty. IRS Publication 597 explains the tax implications of reporting RSSP income on a U.S. tax return.
Gather all your information slips from their Canadian sources as well as information slips regarding your RRSP. Information slips from Canadian income sources help you complete IRS Form 1040 or 1040A. In addition, these slips will help you determine the appropriate amount of income tax when you file your U.S. income tax return. According to the IRS, income that accrues in your RRSP is subject to U.S. income tax even if you did not withdraw income from it. However, U.S. citizens or residents can take advantage of the U.S.-Canada Tax Treaty to shelter accrued RRSP income from U.S. income taxes until you withdraw money from it. Similarly, the U.S.-Canada Treaty helps you avoid double taxation if you are also liable for Canadian income tax.
Complete IRS Form 8891 in addition to Form 1040 or 1040A. Form 8891 may help you defer taxation on accrued income until you withdraw money from your RRSP. When you fill out this form, check the box in item 6c to claim this exception to taxation. In addition, Form 8891 may be used to disclose your contributions to report earnings and distributions from your RRSP. According to the IRS, if both you and your spouse contribute to an RRSP, you will each have to file a separate Form 8891 to defer taxation on both of your income accruals.
File your income taxes. Complete Form 1040 or 1040A as usual and attach a copy of your completed Form 8891. If your spouse also contributes to an RRSP, you will file two IRS Forms 8891 along with your 1040. Ensure that you check box 6c to defer taxation on income accruals in your RRSP.
Filing through the Internet using income tax preparation software is generally the quickest way to file and receive a tax refund. However, there may be a filing fee assessed for doing so. You may file by mail, which is generally slower than Internet filing. Depending on which part of the country you live in, the IRS address to mail your return will differ. The last page in the instruction booklet for Forms 1040 and 1040A has a listing of all the regional IRS mailing addresses authorized to receive your return.
- Internal Revenue Service: Form 8891 and Instructions (PDF)
- Internal Revenue Service: Publication 597 (PDF)
- Government of Canada. "Contribution Year." Accessed July 6, 2020.
- Statistics Canada. "National Balance Sheet and Financial Flow Accounts, First Quarter 2020." Accessed July 6, 2020.
- Government of Canada. "How to Repay the Funds Withdrawn From RRSP(s) Under the Home Buyers' Plan (HBP)." Accessed July 6, 2020.
Gilberto Fuentes draws on his experience in financial services to develop copy for websites in the United States, United Kingdom and Latin America. His work has been published in the online editions of the "San Francisco Chronicle" and the "Houston Chronicle." Fuentes lives in New York and holds a dual Bachelor of Arts in English and economics.