Stacie's Tax Stuff

WASHINGTON ― The Internal Revenue Service today made it easier for taxpayers who hold interests in either of two popular Canadian retirement plans to get favorable U.S. tax treatment and took additional steps to simplify procedures for U.S. taxpayers with these plans.

As part of this, the IRS provided retroactive relief to eligible taxpayers who failed to properly choose this benefit in the past. In addition, the IRS is eliminating a special annual reporting requirement that has long applied to taxpayers with these retirement plans.

Under this change, many Americans and Canadians with registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) now automatically qualify for tax deferral similar to that available to participants in U.S. individual retirement accounts (IRAs) and 401(k) plans. In general, U.S. citizens and resident aliens qualify for this special treatment as long as they filed and continue to file U.S. returns for any year they held an interest in an RRSP or RRIF and include any distributions as income on their U.S. returns.

The change relates to a longstanding provision in the U.S.-Canada tax treaty that enables U.S. citizens and resident aliens to defer tax on income accruing in their RRSP or RRIF until it is distributed. Otherwise, U.S. tax is due each year on this income, even if it is not distributed.

In the past, however, taxpayers generally would get tax deferral by attaching Form 8891 to their return and choosing this tax treaty benefit, something many eligible taxpayers failed to do. Before today’s change, a primary way to correct this omission and retroactively obtain the treaty benefit was to request a private letter ruling from the IRS, a costly and often time-consuming process.

Many taxpayers also failed to comply with another requirement; namely that they file Form 8891 each year reporting details about each RRSP and RRIF, including contributions made, income earned and distributions made. This requirement applied regardless of whether they chose the special tax treatment. The IRS is eliminating Form 8891, and taxpayers are no longer required to file this form for any year, past or present.

The revenue procedure does not modify any other U.S. reporting requirements that may apply under the Bank Secrecy Act (BSA) and section 6038D. See FinCEN Form 114 due by June 30 of each year, and Form 8938 attached to a U.S. income tax return for more information about the reporting requirements under the BSA and section 6038D. Different reporting thresholds and special rules apply to each of these forms.

Further details on today’s change can be found in Revenue Procedure 2014-55, posted on IRS.gov.

IRS Special Edition Tax Tip 2014-19, October 7, 2014
If you’re a farmer or rancher and drought forced you to sell your livestock, special IRS tax relief may help you.
The IRS has extended the time to replace livestock that farmers were forced to sell due to drought. If you’re eligible, this may help you defer tax on any gains you received from the forced sales. The relief applies to all or part of 30 states affected by drought. Here are several points you should know about this relief:
If the drought caused you to sell more livestock than usual, you may be able to defer tax on the extra gains from those sales.

You generally must replace the livestock within a four-year period. The IRS has the authority to extend the period if the drought continues. For this reason, the IRS has added one more year to the replacement period in 30 states.

The one-year extension of time generally applies to certain sales due to drought.

If you are eligible, your gains on sales of livestock that you held for draft, dairy or breeding purposes apply.

Sales of other livestock, such as those you raised for slaughter or held for sporting purposes and poultry, are not eligible.

The IRS relief applies to farms in areas suffering exceptional, extreme or severe drought conditions. The National Drought Mitigation Center has listed all or parts of 30 states that qualify for relief. Any county that is contiguous to a county that is on the NDMC’s list also qualifies.

This extension immediately impacts drought sales that occurred during 2010.

However, the IRS has granted previous extensions that affect some of these localities. This means that some drought sales before 2010 are also affected. The IRS will grant additional extensions if severe drought conditions persist.
Get more on this relief in Notice 2014-60 on IRS.gov. This includes a list of states and counties where the IRS relief applies. For more on these tax rules see Publication 225, Farmer’s Tax Guide on IRS.gov. You can get a copy of it by calling 800-TAX-FORM (800-829-3676).
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