FBAR Filing Requirements for Canada-US Dual-Citizens

Written by Tiffany Woodfield, CRPC®, CIM® Dual-Licensed Financial Advisor
Reviewed by Mia Bent,  CPA, CA, U.S. Tax Advisor mia@miabentcpa.com

Reading Time: 3 minutes 10 seconds.

The complexities of ensuring your cross-border finances are onside with the IRS while also preventing a large tax bill can seem overwhelming. I've worked with many clients who are moving or have already moved across the border. A common issue my Canada-US clients have encountered is finding accurate information that's simple to understand.

When it comes to FBAR filing requirements and reporting, it can get complicated. So choosing to work with a cross-border accountant will likely be your best option.

Also, comprehensive cross-border financial planning is critical when moving across the border. So don't forget to speak with a dual-licensed financial advisor before you move.

This article will provide you with a basic overview of FBAR filing requirements. For more comprehensive information, refer to the IRS Website or speak with a cross-border accountant.

This article is not intended to provide legal or tax advice; it is general in nature. You need to speak to a qualified professional to gain insights into your particular situation.

Background on When Foreign Account Monitoring Increased

The requirement to file FBARs is not new. Since 1970 the Bank Secrecy Act required a US person who owns a foreign account to file an FBAR. However, in 2010 FATCA (Foreign Account Tax Compliance Act) came into law. This act requires all non-US financial institutions (e.g. Canadian financial institutions) to report information on US persons to the IRS. It also requires people to report their non-US financial assets each year to the IRS on form 8938.

Government of Canada Reporting and Sharing of Information

FACTA is in addition to the requirement to report FBARs to (FinCEN) Financial Crimes Enforcement Network on form 114.

When FATCA came into law, it was introduced to prevent US taxpayers from avoiding taxes by keeping their financial assets abroad. 

Some Foreign Accounts Don't Need to Be Reported.

First, you need to understand which accounts need to be reported. If you are a US person and have a bank account, mutual fund, brokerage account or financial interest at a financial institution outside the United States, you may need to file an FBAR. 

If the combined value of these foreign accounts is more than $10,000 at any time during the year, you will be required to file an FBAR. 

Some accounts don't need to be reported. Accounts in an IRA or another retirement plan such as a 401(k) don't need to be reported. To confirm which accounts you need to file, speak to your cross-border accountant.

For more information, go to the IRS Government Website.

IRS FBAR Reference Guide This is an excellent guide on determining account value. It will also help you determine which accounts are considered FBARs and if you have a financial interest in a foreign account.

When Should You File Your FBAR?

Your annual FBAR is due by April 15th. You are entitled to an automatic extension until October 15th if you need more time. Remember to keep your records for five years from the reporting date.

How to Electronically File Your FBAR

You don't file your FBAR with your annual tax return. Instead, you file through the Financial Crimes Enforcement Network system. If you prefer to have your accountant or lawyer file for you, they will need you to fill out a form authorizing them to file your FBARs on your behalf.

Resources:

File Form FinCEN form 114a  |  FBAR Efiling

Are there FBAR Penalties for not Filing?

The penalties for not filing an FBAR (Foreign Bank Account Report) are severe. If you willfully failed to file, the civil penalty can be either 50% of the total balance of the foreign account or $100,000* whichever is greater. A willful violation means you intentionally didn't report your accounts. A non-willful violation is if you didn't realize you had a tax obligation. The penalties for non-willful is $10,000* per year regardless of the number of accounts. (In other words, it is not $10,000 per account.)

*Adjusted each year for inflation in 2021, the current civil maximum penalty for non-willful is $12,921, and for willful, it is $129,210.

The criminal penalties are more severe, with more significant monetary penalties and potentially imprisonment. 

Why It's Important to Work with a Cross-Border Accountant and Financial Advisor

The benefits of having a trusted cross-border accountant and cross-border financial advisor are numerous. They can help you navigate these rules and help you stay onside with the IRS, so you can relax and plan your next adventure.

Trying to understand the rules on one side of the border is difficult. Then when you add the complications of having to file in both countries, it can be overwhelming. Having a team that specializes in this area reduces your stress and helps to simplify things. 

Next Steps

If you’re planning a cross-border move or you’ve already moved from the US to Canada and need help simplifying and optimizing your finances, then please get in touch. At SWAN Wealth we specialize in cross-border financial planning and wealth management. We would be happy to ensure that you’re onside with the IRS while protecting your investments and retirement assets.

More Cross-Border Financial Planning Articles & Guides

If you’re planning a cross-border move, these articles and guides will help you simplify your move and make sure you’ve got everything covered.

Roth IRA Canada - How to Manage Your Investments Across the Border

The Ultimate Financial Planning Resource for Dual Citizens or Green Card Holders Living in Canada

401k in Canada - A Comprehensive Guide to Help You Stay Onside with the IRS and Avoid a Large Tax Bill

Retiring to Canada - A Financial Planning Guide

Financial and Tax Planning for US Citizens Living in Canada

Canadian RRSP Facts for Dual Citizens, Expats and Canadians

About the Author

Tiffany Woodfield is a dual-licensed financial advisor and the co-founder of SWAN Wealth Management, along with her husband, John Woodfield. Tiffany specializes in advising clients who live both in Canada and the United States and need to simplify their cross-border financial plan, move their assets across the border, and optimize their investments so they can minimize their tax burden. Together Tiffany and John Woodfield help their clients simplify their cross-border finances and create long-term revenue streams that will keep their assets safe whether they live in Canada or the US.

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