Steve_

I find that hard to believe given that they've gone to all the trouble of coming up with a specific form to do it for Canadians, and that is a far more comprehensive tax treaty. I would make sure you do invoke it on a form 8833.

Steve_

But it's not just RRSPs, it's any foreign pension plan recognized under a US tax treaty. Apparently the IRS audits 1.1% of returns every year so if you lived in California your whole life the likelihood of being audited is quite high. Whether they'd pick up on it is anyone's guess.

I have to say it is somewhat academic because it's better to be paying State tax rather than taking it as income and having to pay Federal and State tax on any investment you make on it, but my basic point was that State tax can be an issue and the OP's OH is right. In Florida this discussion would be entirely moot, there would clearly be no tax and no risk from an audit. I was just providing an example.

Steve_

Want to live in a state with no income tax? Make sure you're super rich first | Money | theguardian.com

The problem with this study is that Montana comes out top, but Montana has that tax system because one of the main industries is tourism, they have no sales tax to attract tourists.

Anyway as I was saying, the issue of State taxation is not a minor issue, whatever conclusion you draw, good or bad.

kodokan

Our Big Four tax prep firm told us it wasn't necessary, when they prepared our 2012 return. They did a whole ton of to my mind entirely pointless worksheet and form prep, to prove that we weren't eligible for child and employment tax credits (with a high AGI/ standard deduction combo that was never going to result in credits in a zillion years), so I'm sure they would've added on a simple form like that if it was in any way ambiguous.

Steve_

Having looked into it in some detail, I'm pretty sure the 8833 should be filed in order to defer the tax under the provisions of the tax treaty, moreover the existence of it needs to be reported on 3520 and if there is no US agent, 3520-A also needs to be done to describe the trust to the IRS.

Sometimes the IRS say don't bother for amounts under $100,000 when it comes to 8833, but that's in a different context to do with employment income and anyway $100,000 isn't a lot for a pension.

JAJ

But if "looking into it in some detail" merely involves reading the tax code, forms, etc. that's not enough as it doesn't take into account the culture around how the tax code is actually applied day to day.

For example, you could "look in great detail" at the traffic laws and conclude that driving 1mph over the speed limit means that a penalty should be imposed. Whereas in fact everyone knows there is an additional tolerance around the margin that is accepted. How much will vary from place to place and time to time, but it's always there - and is generally more than 1mph.