Olivier Custeau, Fiscaliste, B.A.A., M. Fisc., EA

Forms 3520-3520-A: RESP tax relief

American citizen living in Canada  —   —  Share

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The advanced version of Rev. Proc. 2020-17 issued by the Internal Revenue Service (IRS) in 2020 provides an exemption from the information reporting requirements under Section 6048 for certain US citizens and US residents regarding their transactions with foreign trusts providing a tax benefit. This is the case with plans offering retirement, medical, disability and education benefits (such as the RESP), collectively considered foreign trusts for US purposes.

Thus, the relief provided for by Rev. Proc. 2020-17 consists of, in certain cases, no longer requiring the production of Forms 3520 and 3520-A used to postpone your transactions with a foreign trust. To be entitled to this exemption, specific criteria must be met, which vary according to the type of plan (retirement or other). In addition, to access this relief, you must, among other things, be an eligible individual (US citizen or resident) in good standing with your US tax obligations relating to this foreign trust.

The RESP case

The Registered Education Savings Plan (RESP), as a plan offering assistance payments for your children’s post-secondary education, normally meets the criteria of other eligible plans, thus eliminating the need to be declared on the Forms 3520 and 3520-A. However, the income generated inside the RESP remains subject to annual US tax and the accounts must be declared on other potentially applicable forms.

In addition, if penalties have been applied to you in previous years, it is possible to request a refund or an allowance by filling out a special form and describing the facts applicable to your situation.

Do not hesitate to communicate with one of our tax experts; it will be our pleasure to validate whether you are eligible for this tax relief and to complete the reimbursement or abatement request form, if applicable. We specialize in US tax and are able to represent you before the US tax authorities.