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Press Release

IRS Needs to Provide Guidance on Foreign Retirement Account Filings

Lois Whitehead, Public Relations Manager
Published Date:
May 18, 2012
NEW YORK, NY, May 18, 2012 – The New York State Society of Certified Public Accountants is calling on the IRS to provide not only a simplified method of electing deferral of U.S. taxation on Canadian RRSP’s, but it is also requesting additional guidance on the taxation of foreign retirement and pension plans due to consumer confusion over the filing procedures required by such programs.
As noted in a comment letter sent to the IRS on May 3, the IRS must consider mechanisms and policies for addressing potential inequities associated with foreign retirement plans.
“It is not the taxpayers’ intent to avoid taxation,” said the NYSSCPA International Taxation Committee Chair Melissa Gillespie. “One of the biggest issues we are seeing is a general lack of familiarity with foreign pensions and retirement plans and the related U.S. taxation.”
As noted in the Society’s comment letter, U.S. taxpayers with retirement or pension plans in Canada and other countries are genuinely surprised to discover that these plans, which they often cannot access and are meant to be invested and growing tax free, could be subject to U.S. tax and U.S. tax reporting. 
The NYSSCPA is asking the IRS to simplify the election mechanism that saves US taxpayers from current U.S. taxation as the Canadian retirement savings plan derives income. The NYSSCPA also asked the IRS to address how to more equitably treat retirement savings plans from countries that do not have tax treaties similar to the U.S. – Canada agreement. 
Currently, those who fail to timely file the election with respect to a Canadian retirement savings plan are either taxed on the retirement plan’s income or must apply for a private letter ruling from the IRS to make a late election. According to the comment letter, private letter rulings can be prohibitively expensive.
In order to address this issue, , the NYSSCPA suggests the IRS either treat all relevant taxpayers as having made the election, unless the taxpayer opts out, or create a streamlined process to facilitate late elections rather than requiring a full private letter ruling from the IRS.
For those with retirement savings accounts in countries that do not currently have specific tax treaties with the U.S., the NYSSCPA is asking the IRS to put forth legislation that would provide for the deferral of tax on foreign retirement plans which had compulsory participation required by the foreign country.
“Many taxpayers and tax-return preparers are unaware of the election mechanism and requirements,” said International Taxation Committee member Ryan Dudley. “To have no practical way to correct this oversight, when the result is accelerated tax on retirement savings, would be unjust.”
About the NYSSCPA 
Representing more than 28,000 CPAs, the NYSSCPA was the first state accounting organization in the nation. Incorporated in 1897, the Society is a not-for-profit organization that seeks to establish and maintain high standards of integrity, honor, and character among certified public accountants.
The New York State Society of CPAs is located at 3 Park Avenue in New York City. To learn more about the Society, call 800-633-6320 or visit the Society’s website at