What does Form 8891 do?

Form 8891 allows you to elect deferral of US tax on income accrued inside a Canadian RRSP or RRIF, similar to how a US IRA defers tax until distribution. Without the election, the US taxes RRSP/RRIF income annually as it is earned. The election is made once and continues until revoked or the plan is distributed.

Do I still report RRSP/RRIF on FBAR and Form 8938?

Yes. The Form 8891 election only defers tax on income inside the RRSP/RRIF. You must still report the account on the FBAR if the aggregate balance exceeds $10,000, and on Form 8938 if your total specified foreign financial assets exceed the thresholds. Form 8891 is filed with your tax return and does not replace these other reporting obligations.

What happens when I take distributions from my RRSP/RRIF?

Distributions from a Canadian RRSP or RRIF are taxable in both Canada and the US. Under the Canada-US tax treaty, the country of residence has the primary taxing right on pension income. If you are a US resident, the US taxes the distribution and you can claim a foreign tax credit for Canadian tax withheld. If you are a Canadian resident, Canada taxes the distribution and the US generally provides a foreign tax credit.

Can I make the election on an amended return?

Yes. If you have been reporting RRSP/RRIF income annually and want to switch to deferral, you can file amended returns with Form 8891 for open tax years (generally the last 3 years). For years that are closed, the IRS may allow a late election if you can demonstrate reasonable cause for not making the election timely.

Form 8891: U.S. Information Return for Beneficiaries of Certain Canadian Registered Retirement Savings Plans

Form 8891 is the key to avoiding immediate US taxation on your Canadian RRSP or RRIF. Without this election, the IRS taxes the income inside your Canadian pension plan as it is earned — even if you have not taken any distributions. With the election, you defer US tax until you actually withdraw money, mirroring the tax treatment of US IRAs. For Canadians living in the US or Americans who worked in Canada, this election is essential.

What Is Form 8891?

Form 8891 allows US citizens and residents who are beneficiaries of Canadian RRSPs and RRIFs to elect deferral of US tax on income accrued inside the plan.

Without the Election

Income earned inside the RRSP/RRIF (dividends, interest, capital gains) is taxable in the US in the year it is earned
You report this income on your Form 1040, even though Canada does not tax it until distribution
This creates a mismatch: the US taxes income that Canada considers tax-deferred

With the Election

Income earned inside the RRSP/RRIF is not taxed in the US until distribution
The election is made once and remains in effect for all future years
Distributions are taxed in the US when received, at which point you can claim a foreign tax credit for Canadian tax

Who Must File Form 8891?

You should file Form 8891 if:

You are a US citizen or resident alien
You are the beneficiary of a Canadian RRSP or RRIF
You want to defer US tax on income inside the plan

Who Does NOT Need Form 8891?

Non-resident aliens (you are not subject to US tax on RRSP income)
Canadian residents who are not US citizens or green card holders
US persons who prefer to report RRSP income annually (rare)

How to Make the Election

Step 1: Determine Your RRSP/RRIF Income

Calculate the income earned inside the RRSP/RRIF during the tax year:

Dividends received by the plan
Interest earned
Capital gains realized by the plan
Less: foreign taxes paid by the plan (if any)

Step 2: Complete Form 8891

Part I: Identification

Your name, address, TIN
Name and address of the RRSP/RRIF issuer
Account number

Part II: Election

Check the box to elect deferral under the treaty
The election applies to all RRSPs and RRIFs you own
Once made, it continues automatically

Part III: Income Reported

Enter the total income earned inside the RRSP/RRIF during the year
If you are making the election for the first time, this amount is excluded from your US taxable income
If you previously made the election, enter the income but it is deferred

Step 3: Attach to Your Tax Return

File Form 8891 with your Form 1040 by the due date (April 15, June 15 for expats, or October 15 with extension).

RRSP/RRIF Distributions

Taxation at Distribution

When you take money out of your RRSP or RRIF:

Canada taxes the distribution: Canadian withholding tax applies (typically 15% or 25%, depending on the amount and type)
The US taxes the distribution: The full amount is included in your US gross income
Foreign tax credit: You claim a credit on your US return for Canadian tax paid

Treaty Benefits

Under Article 18 of the Canada-US tax treaty:

Pension income (including RRSP/RRIF distributions) is taxable primarily in the country of residence
If you are a US resident, the US has the primary taxing right
If you are a Canadian resident, Canada has the primary taxing right
The non-resident country must provide a foreign tax credit or exemption to prevent double taxation

Lump-Sum Withdrawals

Special rules apply to lump-sum withdrawals:

Canada may impose a higher withholding rate (up to 25%)
The US taxes the full lump sum as ordinary income in the year of withdrawal
A large lump sum can push you into higher tax brackets
Consider spreading withdrawals over multiple years to manage bracket impact

Reporting Requirements

FBAR (FinCEN Form 114)

You must file an FBAR if:

The aggregate value of all your foreign financial accounts (including RRSP/RRIF) exceeded $10,000 at any time during the year
Report the maximum account value in USD
RRSPs and RRIFs are reportable accounts

Form 8938 (FATCA)

You must file Form 8938 if:

You are a specified individual with specified foreign financial assets exceeding the thresholds
For expats: $200,000 at year-end or $300,000 at any time (single)
RRSPs and RRIFs are specified foreign financial assets

Form 8891

File with your Form 1040 to elect deferral. This does not replace FBAR or Form 8938.

Special Situations

RRSP-to-RRIF Conversion

When you convert your RRSP to a RRIF (typically at age 71 in Canada):

The Form 8891 election continues automatically
No immediate US tax on the conversion
Minimum annual withdrawals from the RRIF are taxable when received

Spousal RRSPs

If you contributed to a spousal RRSP (an RRSP in your spouse's name):

The spouse who owns the RRSP files Form 8891
The contributing spouse does not file Form 8891 for the spousal plan
Attribution rules may apply if withdrawals are made within 3 years of contribution

Locked-In Retirement Accounts (LIRAs)

Canadian LIRAs (locked-in versions of RRSPs from pension plans) are generally treated the same as RRSPs for US tax purposes. File Form 8891 to elect deferral.

Late Election

Amended Returns

If you have not made the election in prior years:

File amended returns (Form 1040-X) for the last 3 open tax years
Attach Form 8891 to each amended return
Claim refunds for US tax paid on RRSP/RRIF income

Reasonable Cause for Late Election

For years that are closed (beyond the 3-year statute of limitations):

You may request a late election from the IRS
You must demonstrate reasonable cause for not filing timely
Common reasons: lack of knowledge, reliance on a professional who missed the requirement
File Form 8891 with a reasonable cause statement

When to Get Help

You should consult a specialist if:

You have a Canadian RRSP or RRIF and have never filed Form 8891
You are unsure whether your Canadian pension qualifies for the election
You are taking distributions and need to optimize the foreign tax credit
You have multiple Canadian pension accounts (RRSP, RRIF, LIRA, pension plan)
You need to file amended returns to make a late election

FileAbroad's Complex Expat Return includes Canadian pension analysis, Form 8891 preparation, and RRSP/RRIF distribution planning. Start your free intake to discuss your situation.