Canadian Tax for US Citizens Living in Canada
US citizens living in Canada must file both a Canadian T1 with the CRA and a Form 1040 with the IRS every year — plus FBAR and FATCA reporting for Canadian financial accounts. TYM manages the full dual-filing obligation, RRSP treaty elections, and Streamlined Filing for those who have fallen behind.
The United States is one of only two countries in the world that taxes on the basis of citizenship rather than residency. This means that moving to Canada does not end your US tax obligations — it creates a permanent dual-filing requirement that most Canadian accountants are not equipped to handle.
What US Citizens in Canada Must File Every Year
The annual compliance burden for a US citizen living in Canada is significantly higher than for a Canadian resident without US ties. Each obligation has separate deadlines, separate forms, and separate penalties for non-compliance.
IRS Form 1040 — Annual US Income Tax Return
Annual · April 15 (June 15 for overseas filers)US citizens must file Form 1040 with the IRS every year, reporting worldwide income — including Canadian employment income, business income, rental income, and investment income. The Foreign Earned Income Exclusion (Form 2555) excludes up to $126,500 (2024) of foreign earned income; the Foreign Tax Credit (Form 1116) credits Canadian taxes paid against US tax owed.
CRA T1 — Canadian Income Tax Return
Annual · April 30 (June 15 for self-employed)Canadian residents file T1 with the CRA, reporting worldwide income. US citizens living in Canada are Canadian residents for tax purposes and must file T1. Canadian tax rates are generally higher than US rates, so the Foreign Tax Credit typically eliminates most or all US tax owed — but the filing obligation remains regardless.
FBAR — FinCEN Form 114
Annual · April 15 (auto-extension to October 15)US persons with foreign financial accounts exceeding $10,000 aggregate at any point during the year must file the FBAR (Report of Foreign Bank and Financial Accounts) with FinCEN. For US citizens in Canada, this includes Canadian chequing accounts, savings accounts, RRSPs, TFSAs, RESPs, and investment accounts. Non-willful FBAR penalties reach $10,000 per violation; willful penalties can reach the greater of $100,000 or 50% of the account balance.
FATCA — Form 8938
Annual · Filed with Form 1040Form 8938 (Statement of Specified Foreign Financial Assets) is filed with Form 1040 when specified foreign financial assets exceed $200,000 at year-end (or $300,000 at any point during the year) for single filers living abroad. Thresholds are lower for US-based filers. The FATCA penalty for failure to file is $10,000, increasing to $50,000 if the failure continues after IRS notice.
RRSP — Registered Retirement Savings Plan
Election required · Form 8833The US-Canada Tax Treaty allows US citizens in Canada to defer US tax on RRSP income until withdrawal — but only if a treaty election is made on Form 8891 (now reported on Form 8833). Without the election, RRSP income is taxable in the US as it accrues. TYM ensures the RRSP treaty election is made correctly and that RRSP withdrawals are reported properly on both T1 and Form 1040.
TFSA — Tax-Free Savings Account
Annual · Taxable in USTFSAs are not recognized as tax-exempt by the IRS. Income earned inside a TFSA is taxable in the US in the year it is earned, even though it is tax-free in Canada. US citizens holding TFSAs may also have Form 3520 reporting obligations if the TFSA is classified as a foreign grantor trust. TYM advises US citizens in Canada on TFSA strategy and reporting.
FBAR Penalty Structure
Penalties under 31 U.S.C. §5321 for failure to file FinCEN Form 114. Amounts are per violation (per account, per year).
| Violation Type | Penalty | Remedy |
|---|---|---|
| Non-willful failure to file | Up to $10,000 per violation | Streamlined Filing Procedures |
| Willful failure to file | Greater of $100,000 or 50% of account balance per violation | Voluntary Disclosure Program |
| Negligent violation | Up to $500 per violation | Delinquent FBAR Submission |
| Pattern of negligent violations | Up to $50,000 | Voluntary Disclosure Program |
Source: 31 U.S.C. §5321; IRS FBAR Reference Guide. Penalty amounts are adjusted for inflation. The IRS has discretion to impose penalties below the maximum. The Supreme Court held in Bittner v. United States (2023) that non-willful FBAR penalties apply per report (per year), not per account.
Streamlined Filing Compliance Procedures
The IRS Streamlined Filing Compliance Procedures allow US citizens who have non-willfully failed to file US returns or FBARs to come into compliance with significantly reduced penalties. TYM has guided many US citizens in Canada through this process.
Streamlined Offshore Procedures
For US persons residing outside the US (including US citizens in Canada). File 3 years of delinquent Form 1040s, 6 years of FBARs, and pay a 5% miscellaneous offshore penalty on the highest aggregate balance of unreported foreign financial assets.
Streamlined Domestic Procedures
For US persons residing in the US. File 3 years of delinquent returns and 6 years of FBARs. No miscellaneous offshore penalty — but subject to accuracy-related penalties on unpaid tax.
Delinquent FBAR Submission Procedures
For US persons who have not filed FBARs but have no unreported income. File delinquent FBARs with a statement explaining the failure. No penalty if there is no unreported income.
Delinquent International Information Return Procedures
For US persons who failed to file Form 8938, Form 5471, Form 3520, or other international information returns. File with a reasonable cause statement. No penalty if reasonable cause is established.
Important: Streamlined Filing is available only for non-willful failures. If the IRS determines that the failure was willful, the Streamlined program is not available and significantly higher penalties apply. TYM assesses willfulness before recommending a compliance approach.
Scope Boundaries
Included
- Form 1040 preparation and filing (federal)
- CRA T1 preparation and filing
- FBAR (FinCEN Form 114) preparation and filing
- FATCA Form 8938 preparation
- Foreign Earned Income Exclusion (Form 2555)
- Foreign Tax Credit (Form 1116)
- RRSP treaty election (Form 8833)
- TFSA reporting analysis and Form 3520 if required
- Streamlined Filing Compliance Procedures (catch-up filings)
- State income tax returns where applicable
Not Included
- Canadian corporate tax returns (T2) — available as a separate engagement
- US business entity returns (Form 1120, 1065) — available separately
- Estate and gift tax returns — available as a separate engagement
- Canadian GST/HST returns
- Bookkeeping or accounting services
FAQ: Canadian Tax for US Citizens
Do US citizens living in Canada have to file US taxes?
Yes. The United States taxes on the basis of citizenship, not residency. US citizens living in Canada must file Form 1040 with the IRS every year, reporting worldwide income, regardless of how long they have lived in Canada. This obligation applies even if all income is Canadian-source and Canadian taxes have been paid in full.
How do US citizens in Canada avoid double taxation?
The primary mechanism is the Foreign Tax Credit (Form 1116), which credits Canadian taxes paid against US tax owed on the same income. Because Canadian tax rates are generally higher than US rates, the Foreign Tax Credit typically eliminates most or all US tax owed — but the filing obligation remains. The Foreign Earned Income Exclusion (Form 2555) can exclude up to $126,500 (2024) of foreign earned income, but it cannot be used simultaneously with the Foreign Tax Credit for the same income.
What is the FBAR and who needs to file it?
The FBAR (FinCEN Form 114, Report of Foreign Bank and Financial Accounts) must be filed by any US person who has a financial interest in, or signature authority over, foreign financial accounts with an aggregate value exceeding $10,000 at any point during the calendar year. For US citizens in Canada, this typically includes Canadian chequing accounts, savings accounts, RRSPs, TFSAs, RESPs, and investment accounts. The FBAR is due April 15 with an automatic extension to October 15.
Is my RRSP taxable in the US?
Without a treaty election, RRSP income is taxable in the US as it accrues — meaning you would owe US tax on RRSP investment gains each year, even though you cannot access the funds without penalty. The US-Canada Tax Treaty allows US citizens to defer US tax on RRSP income until withdrawal, matching the Canadian treatment — but only if the treaty election is made on Form 8833 with the IRS. TYM ensures this election is made and maintained correctly.
What happens if I have not filed US returns for several years?
TYM has extensive experience with the IRS Streamlined Filing Compliance Procedures, which allow non-willful non-filers to catch up on missed US returns with reduced penalties. The Streamlined Offshore Procedures (for US citizens residing outside the US) require filing 3 years of delinquent Form 1040s and 6 years of FBARs, with a 5% miscellaneous offshore penalty. The program is available only for non-willful failures — deliberate non-filing requires a different approach.
What is FATCA and does it affect me as a US citizen in Canada?
FATCA (Foreign Account Tax Compliance Act) requires US persons to report specified foreign financial assets on Form 8938 if they exceed certain thresholds. For US citizens living abroad, the threshold is $200,000 at year-end or $300,000 at any point during the year (for single filers). FATCA also requires Canadian financial institutions to report US account holders to the CRA, which shares the information with the IRS under the Canada-US Intergovernmental Agreement.
US Citizen Tax Services in Toronto & Miami
TYM serves US citizens living in Canada from offices in Toronto and Miami. Toronto's large US expat community — executives, entrepreneurs, and professionals who have relocated from the United States — creates a consistent demand for dual-filing expertise that most Canadian accounting firms are not equipped to provide. TYM's CPAs are licensed in both Canada (CPA Ontario) and the United States (CPA Florida), and TYM is an IRS Certified Acceptance Agent.
Talk to a CPA Who Understands Both Systems
Dual filing is not optional — and the penalties for FBAR non-compliance are severe. Whether you are current on your filings and need annual compliance support, or you have fallen behind and need to use the Streamlined Filing program, TYM can manage the full process.
Schedule a Dual-Filing ConsultationThe content on this page is for informational purposes only and does not constitute professional tax advice. US and Canadian tax obligations for US citizens living in Canada depend on individual facts and circumstances. FBAR and FATCA thresholds are subject to change. Consult a qualified CPA licensed in both Canada and the United States for guidance specific to your situation.
