U.S Internal Revenue code does not give any special status to RRSP, TFSA, RESP, RPP or DSPS plans.
If an employer contributes to a registered pension plan or a deferred profit-sharing plan you are only taxed on these funds when you receive them.
On the other hand the amounts contributed by your employer in U.S are treated as employment benefit and are taxable. You cannot exclude these amounts from foreign earned income.
Income occurring in your RRIF, RRSP or any other Canadian retirement plan is taxable in the U.S. However, you can elect to defer the taxation of accruing income under Canada-US tax treaty. You can use Form 8891 to report RRSP contributions, distributions and investments.
Income earned in your TFSA and RESP plans is taxable in the United States.
If Canadians will contribute to a regular IRA (US Individual Retirement Account) you cannot deduct these contributions on your Canadian tax. Income accruing in an IRA is not taxed by Canada. When you withdraw funds form an IRA, Canada will generally tax the same amount that you would have had to include in your income under U.S laws if you were a resident of the U.S at the time of withdrawal.
You can transfer payments received from IRA account to RRSP. The amounts transferred will be subject to U.S tax.
If a U.S employer contributes to U.S deferred income plan these may be taxable in Canada.
Employees temporarily transferred from Canada to U.S (For no more than 60 months in the preceding 120 months) can continue to contribute to their Canadian qualified plan and claim a deduction on their U.S tax return provided they were resident in Canada and participating in the Canadian plan before they began performing services in the U.S. The same rules apply to U.S who are temporarily transferred to Canada.
If you are a U.S citizen residing and working in Canada and contribute to a Canadian qualified plan you can claim a deduction on your U.S tax return.
Non qualified deferred compensation plans in the U.S can have serious tax implications. There are very strict distribution requirements for deferred plans for allowing recognition of income to be deferred.
U.S Citizens who are employed by Canadians have to be extra cautious because their employers may not be designing their deferred compensation plans with the U.S tax rules in mind.
References:
www.jct.gov/publications.html
KPMG Tax Planning for you and your family 2014
U.S Taxation of International Transactions by Robert J. Misey, Michael S. Schadewald
Introduction to United states International Taxation by Paul R. McDaniel, Hugh j. Ault and James R. Repetti
International Taxation by Joseph Isenbergh
Mansoor Suhail (Mani)
Accountant
MS TAX – BSBA – EA – ICIA – RA
Tax for Canada and U.S.A
Web: www.theaccountingandtax.com and www.taxservicesguru.com
Blog: http://taxservicesguru.blogspot.ca
416 – 283 – 8774