The IRS has made it easier for U.S. individuals that hold interests in Registered Retirement Savings Plans (RRSPs) or Registered Retirement Income Funds (RRIFs) to defer the income earned within the plan until it is distributed.
The IRS is eliminating the annual reporting requirement that has applied to U.S. individuals holding these plans and in addition, the IRS is providing retroactive relief to eligible taxpayers who failed to properly file the appropriate forms in the past.
As a result of this new change, many U.S. individuals with RRSPs or RRIFs will now automatically qualify for tax deferral similar to those available in U.S. Individual Retirement Accounts (IRAs) and 401(k) plans. Generally, U.S. individuals will now qualify for this tax deferral as long as they file and continue to file U.S. income tax returns.
Previously, U.S. individuals who held interests in RRSPs or RRIFs were required to annually file Form 8891 with their U.S. tax return to defer tax on income accruing in these retirement accounts until it is distributed. If the form(s) were not properly filed with the taxpayers annual U.S. income tax return, income earned in their RRSP or RRIF could have been taxable, even if it was not distributed.
The IRS found that many individuals failed to properly prepare and file Form 8891 each year and report details about each of their RRSPs and/or RRIFs including contributions made, income earned, distributions received and the year end balance. The IRS has now eliminated Form 8891, and U.S. taxpayers are no longer required to file this form for any year, past or present.