Are you a U.S. Citizen? Make Sure you File this Important Form
If you’ve got money in a Canadian bank, you need to file a Report of Foreign Bank and Financial Accounts Report (FBAR)
If you’re from down south but living up here with us in the Great White North, you might need to file more than just your tax return to keep the IRS (Internal Revenue Service) happy. U.S. citizens and green card holders also need to file a form called the Report of Foreign Bank and Financial Accounts Report (FBAR) for every year that they meet the requirements.
I’m an American with a Canadian bank account. Do I need to file an FBAR?
Whether or not you need to file an FBAR depends mostly on your bank account balances. If you’re a U.S. citizen and have more than $10,000 in financial holdings outside of the U.S. at any point during the calendar year, you have to file an FBAR. But we aren’t just looking at your chequing account here… FBARs need to include any tax-deferred or tax-exempt accounts in Canada, too.
So, when you’re doing your math, make sure to include any GICs and RRSPs along with your bank account balance. If that total value is more than $10,000 during the year, the IRS is going to want you to file an FBAR. Other holdings and accounts that need be included on your FBAR are any RESPs, TFSAs, RRIFs, RDSPs, pension plans, and any life insurance policies that have cash surrender values.
Looks like I’ll be filing an FBAR. Where do I start & when is it due?
The FBAR is filed electronically, and can be accessed through the Department of the Treasury’s website. The form is due April 15 and if you are not able to meet this deadline, there is an automatic extension to October 15. You can’t file a paper FBAR form, it must be done online.
I didn’t file my FBAR. What’s the big deal?
Not filing your FBAR can bring substantial penalties, and the fines keep going up if you’re found to be not reporting any accounts on purpose. The IRS is no joke, and these fines can be financially devastating. They start around $10,000, but can actually range into the millions of dollars depending on your unreported amounts and number of violations. If you had to choose between filing an FBAR or living behind bars, you would probably pick the form, right? It’d be a good call, because skipping your FBAR can lead to jail time.
My money is in a Canadian account, so won’t it be hard for them to find?
Not anymore. The Foreign Account Tax Compliance Act (FATCA) took effect on July 1, 2014 and major Canadian financial institutions outside of America are now required to report accounts held by U.S. citizens and residents. Banks that don’t play along with FATCA would also face penalties for not reporting the information.
But wait, isn’t my bank info private?
It might sound like the IRS is asking your bank to overshare, but to make sure they don’t break any Canadian privacy laws, financial institutions will forward the information to the Canada Revenue Agency (CRA) before it’s passed to the IRS. The CRA started sharing this info with the IRS in 2015, and it means the IRS will have another tool to track down U.S. citizens living abroad.
I’m going to renounce my U.S. Citizenship this year. Am I off the hook?
Even if you want to renounce your American citizenship, you still need to be compliant on your tax paperwork before it’s approved. The good news? There are programs available to help U.S. citizens living abroad to catch up on their U.S. filings, and it’s way easier to do this if you start the process, instead of waiting until the IRS contacts you.
We know FBARs are additional work, but the IRS can lay down some substantial fines, so it just makes sense to get your paperwork done.