Help - Tax information needed regarding RRSP withdrawal from Canada - living in the U.S. TDF 90 - 8891 - david ingram expert US

Dave,

This kept being rejected by centa.com when I sent it
from my account , so I asked a
friend to send it from his account.  

Here it is:

Yes, the general requirements for a person to use
Schedule B are listed at the top of the instructions,
but, as with most tax rules, there are exceptions.
This exception is shown at the BOTTOM of the
instruction page
(http://www.irs.gov/pub/irs-pdf/i1040sa.pdf below the
final TIP box) and it says to answer NO to the
question of whether the filer has a foreign bank
account if "the combined value of the accounts was
$10,000 or less during the whole year."
 
I think what you have written is that, in effect, a
person who has only $10 in a Canadian bank would have
to file Form B and answer yes to question 7a, but that
is contrary to the IRS instructions. 
 
The H&R Block "Tax Cut" program does not select
Schedule B or check the YES box unless the $10,000
threshold is reached. (I tried it out to see, by
answering YES to foreign account, but NO to $10,000 or
more.) 
 
Doing a Google search on "SCHEDULE B" "FOREIGN
ACCOUNT" "7a", I find many articles stating that 7a
only applies to accounts of $10,000 or more.
 
Examples:
 
http://bankrate.com:
 
"Line 7a is straightforward. Basically, if you had a
foreign account, check "Yes" here. Even if you did
have such an account, the IRS says you can check "No"
if the average balance in the account was less than
$10,000 during the whole year." 

http://www.rpifs.com/AICPA/form1040b.htm:
 
"...the answer to question 7a only applies where the
total of all foreign accounts exceeds $10,000 at any
time in the taxable year."
 
Do you still say that ALL persons who have to file
U.S. taxes and have a Canadian account have to file
Schedule B and check YES to question 7a? 
 
Regards,
 
Fxxxxxxx


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david ingram replies:

I NEVER EVER SAID THAT!

I challenge you to show me where I said that a person with 'any' foreign account had to check off yes to question 7a.  You only have to say yes to 7(a) if the combined totals of all foreign financial accounts was over $10,000 US at ANY ONE TIME in 2007.  Because of the change in the exchange rate in 2007, if you had $9,500 Canadian in the account at the end of 2007 when the rate was 1.10 Cdn to a US dollar, you would have to say yes. even if the rate dropped back to 99 cents.

What I said and still say is that you have to file Schedule B if you have a foreign account whether it is in England, Spain, Iraq or Switzerland.   In other words, if you have foreign accounts and they were always less than a total of $10,000 US in 2007, you have to answer "NO" to question 7a on Schedule B but YOU HAVE TO FILE SCHEDULE B..

Of course, if you have $10.00, 100, 1,000, 10,000 or 100,000 in an RRSP, you have to answer "yes" to question 8 and fill in the 8891. 
 
And, if you had $10,000 in an RRSP, you would also be answering yes to 7(a).

And, if you are the contributor to a child's RESP, that adds to the amount for $10,000 and requires the filing of a 3520 because RESP accounts are NOT covered by the form 8891.

If you did not have 'any' other accounts but had put $1,000 into a grandson's RESP which you were the signing authority over, you would check NO to question 7a, leave 7b blank and say yes to question 8 and then fill in form 3520.

Your own question answers your own question. 

The top says file the form if you have a foreign account or were the grantor of a foreign trust - the bottom says answer no if the total is less than  $10,000.  Tell me where it says you do not have to file the form if the answer is 'no'.  You have missed the point that the IRS WANT S the 'no' answer in writing IF you have a foreign account.  I was also told by the Treasury rep that there is a  penalty for not filing Schedule B if you have a foreign account  by the way but I do not know where it is or how much it is and don't care.

For those who don't have schedule B handy, you can find it at: http://www.irs.gov/pub/irs-pdf/f1040sab.pdf

-----------------------------------------------------

The older bit is here.

Date: Mon, 11 Feb 2008 00:44:49 -0800
From: [email protected]
Subject: Schedule B if you have a foreign account
To: fxxxxxxxxxxxxxxx


XXXXXXX wrote: 

[email protected]>

David,
 
In case you find this amongst the spam, I have a
comment about reporting interest on Schedule B. 
 
You state: 

"AND, they also made the point that everyone with
foreign accounts MUST file schedule B, even if there
is no earnings form the accounts."

But...the Schedule B instructions state that it is not
necessary to answer YES on Schedule B if an account is
less than $10,000.  So, when you tell people to file
Schedule B, shouldn't you add "if any of your accounts
have been worth at least $10,000 anytime during the
year"?  
 
Schedule B, part III instructions are here: 
 
http://www.irs.gov/pub/irs-pdf/i1040sa.pdf 
 

-----------------------------------
david ingram replies:

The instructions for who must file a Schedule B (top
right hand side of page B-1) that you sent clearly
state that Schedule B must be filed if you have a
foreign account.


• You had over $1,500 of taxable interest.
• Any of the Special Rules listed in the instructions
for line 1 apply to you.
• You are claiming the exclusion of interest from
series EE or I U.S. savings bonds issued after 1989.
• You had over $1,500 of ordinary dividends. 
• You received ordinary dividends as a nominee.
• You had a foreign account or you received a
distribution from, or were a grantor of, or transferor
to, a foreign trust. 
   Part III of the schedule has questions about
foreign accounts and trusts. 


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