May 21, 2012 (PLANSPONSOR.com) – A group of accountants has suggested the Internal Revenue Service change its rules for the reporting of income from foreign retirement accounts held by people in the U.S.
The New York State Society of Certified Public Accountants first addressed the recognition of income from Canadian Registered Retirement Savings Plans (RRSPs) in a comment letter to the IRS . The U.S.-Canada Tax Treaty allows U.S. individuals with funds in an RRSP to make an election to defer recognition of income from the RRSP until the funds are distributed.
However the Society contends individuals and many tax professionals do not know about their reporting requirements and fail to make an election. To make a late election, they must get a private letter ruling from the IRS, which is very costly. The group recommends the IRS treat all relevant taxpayers as if they had made the election to defer income reporting, and give them a choice to opt out. Otherwise, the Society suggests the IRS introduce a more streamlined method of filing a late election.