Unlike the Canadian tax system, the U.S. system is based on citizenship and residency. If you are a U.S. citizen living in Canada, you may still be required to file a U.S. tax return even if you haven’t lived in the country for years and haven’t received any U.S. income.
But filing a 1040 return is only one part of your filing requirements. The U.S. requires citizens holding more than $10,000 outside of the U.S. to complete a Report of Foreign Bank and Financial Accounts (FBAR) by June 30 every year.
The $10,000 limit applies to all your accounts at any time during the year. So if you have more than $10,000 in a savings account, GIC and/or investment, you need to report all of the accounts to the Department of Treasury in the U.S.
And a tax-exempt account in Canada does not translate into the same status in the U.S. So Registered Retirement Savings Plans (RRSPs), Registered Education Savings Plans (RESPs) and Tax Free Savings Accounts (TFSAs) need to be part of your $10,000 calculations and reported if you meet the threshold at any point during the year.
There are no options that allow you to avoid disclosing your accounts, and you cannot request an extension. If you are a U.S. citizen and you meet the $10,000 aggregate threshold, you need to file the FBAR on time every year in which you meet the requirements. FBAR non-compliance fines are substantial; failing to file an FBAR can result in civil or criminal penalties including fines that range from $10,000 up to $500,000 and a prison sentence of up to five years.
The FBAR requirements also apply to current and expired green card holders, individuals who meet the substantial presence test even if they file a non-resident return, and an alien who makes the first year election to file as a U.S. tax resident.
If you need to complete a Form TD F 90-22 1, make sure you mail it soon. It has to be in Detroit by June 30, so leave some time for delivery. A postmark of June 30 means it will be filed late. But you can use either FedEx or UPS – approved IRS carriers – and the return is considered filed on the day it is accepted for shipment.