FATCA and FBAR Compliance

For a US citizen or green-card holder who lives in Canada, the hard part of US tax compliance is usually not the tax — it is the paperwork. Because the United States taxes its citizens and lawful permanent residents on their worldwide income no matter where they live, a person who has built an entirely Canadian life still carries two parallel US disclosure regimes beyond the income tax return itself: the FBAR (FinCEN Form 114) for foreign financial accounts, and Form 8938 (the FATCA statement) for specified foreign financial assets. The penalties attached to those information returns are what make the topic dangerous. They are assessed for failing to file the form, not for owing tax, so an ordinary Canadian — a teacher with an RRSP and a chequing account — can accumulate exposure that dwarfs any underlying liability. This page explains how the two regimes work, how the same Canadian accounts are treated on each side of the border, where the common traps sit, and how a cross-border tax lawyer approaches bringing a non-compliant filer current.

Citizenship-based taxation: why the obligation follows the person

The United States is one of very few countries that taxes on the basis of citizenship rather than residence. A US citizen who has not set foot in the country since infancy, and a green-card holder who has not crossed the border in years, are both — by default — US tax filers. For most residents of a high-tax country like Canada, the foreign earned income exclusion (Internal Revenue Code section 911) and the foreign tax credit (section 901) eliminate the actual US cash tax in most years. But the credits and exclusions only work if you claim them, and you claim them by filing. The filing obligation continues regardless of whether any tax is owed, and it is the unfiled information returns — not the income tax return — that carry the punishing penalty schedules.

A green-card holder should also understand that the card does not stop creating US tax obligations simply because the person moved away or let it lapse. Until lawful permanent resident status is formally abandoned (or administratively or judicially revoked), the holder is generally still a US tax resident — which is why "I let my green card expire" is not, by itself, an answer to the filing question.

The filings most US persons in Canada need

A complete annual US package for a US person resident in Canada usually involves four moving parts, often more:

• Form 1040 — the US individual income tax return. Filed annually, reporting worldwide income, with foreign tax credits and the foreign earned income exclusion used to relieve double taxation. US persons living abroad receive an automatic extension to June 15 (interest still runs from April 15 on any balance), with a further extension available to October 15.
• FBAR (FinCEN Form 114). Required when the aggregate maximum value of all foreign financial accounts exceeded US$10,000 at any point during the calendar year. The threshold is an aggregate across every account, so several small accounts that each sit below US$10,000 can still trip it together. It is filed electronically with the Treasury's Financial Crimes Enforcement Network, separately from the tax return, and is automatically extended to October 15.
• Form 8938 (the FATCA statement). Filed with Form 1040 when specified foreign financial assets exceed the applicable threshold. As of the 2025 and 2026 tax years, a single filer living abroad files when the assets exceed US$200,000 on the last day of the year or US$300,000 at any time during the year; a married couple filing jointly abroad uses US$400,000 / US$600,000. Thresholds for filers living in the United States are far lower (US$50,000 / US$75,000 single), which matters in the year someone moves.
• Form 8621 (PFIC reporting). Required for each passive foreign investment company the US person holds. Most Canadian mutual funds and many Canadian-listed ETFs are PFICs, and each one is generally a separate Form 8621.

FBAR and Form 8938 overlap heavily but are not the same form, are not filed in the same place, and have different thresholds and definitions — so a person frequently has to file both, reporting many of the same accounts twice. Form 8938 also reaches assets the FBAR does not, such as an interest in a foreign entity or certain financial instruments held outside a custodial account. Filing one does not satisfy the other.

FBAR penalties after Bittner

The FBAR penalty regime is what gives this area its reputation, and the penalties are inflation-adjusted each year. As of 2026, a non-willful violation carries a civil penalty of up to roughly US$16,500 per year, and a willful violation can reach the greater of roughly US$165,000 or 50% of the account balance, with a parallel risk of criminal exposure in egregious cases. The line between non-willful and willful is therefore the most consequential fact in most files, turning on whether the failure was inadvertent or a voluntary, intentional disregard of a known duty.

One development narrowed the non-willful exposure. In Bittner v. United States (2023), a leading case on FBAR penalties, the US Supreme Court held that the non-willful penalty applies per annual report, not per account. Before that decision the IRS treated each unreported account in each year as a separate violation, so a filer with a dozen accounts over several years could face a cascade of penalties. After Bittner the non-willful penalty is capped at one amount per year regardless of how many accounts went unreported — a meaningful difference for ordinary Canadians with a handful of everyday accounts. Willful penalties, by contrast, are still generally assessed per account per year, which is part of why the characterization carries so much weight.

The Canadian-account traps

The accounts that catch US persons in Canada are, ironically, the very ones the Canadian system rewards. A Canadian tax-advantaged account is frequently a US tax problem, because the IRS does not recognize the shelter and may treat the account as something far more burdensome than a savings vehicle. The recurring offenders:

• TFSAs. The Canada Revenue Agency treats a Tax-Free Savings Account as tax-sheltered; the IRS does not. Income earned inside a TFSA is generally fully US-taxable to a US person in the year it accrues, eliminating the account's whole point from a US perspective. Worse, depending on how it is structured (in particular self-directed brokerage TFSAs that hold a trust), it can be characterized as a foreign trust, raising the prospect of Forms 3520 and 3520-A — a reason for a US person to weigh the US cost before contributing.
• RESPs and RDSPs. A Registered Education Savings Plan and a Registered Disability Savings Plan are similarly unsheltered for US purposes and have historically raised foreign-trust reporting concerns. Revenue Procedure 2020-17 provided welcome relief: eligible tax-favored foreign retirement and certain non-retirement savings trusts — RESPs and RDSPs prominent among them — are exempt from Forms 3520 and 3520-A, provided the account meets the procedure's conditions. The relief is from the trust reporting forms only; it does not change the underlying US taxation of the income, and the government grants (such as the Canada Education Savings Grant) remain US-taxable. The relief is narrower for non-retirement savings trusts, which is why TFSAs frequently do not qualify while RESPs and RDSPs frequently do.
• Canadian mutual funds and ETFs (PFICs). A pooled Canadian fund is almost always a passive foreign investment company. Left unaddressed, PFIC income is taxed under a punitive "excess distribution" regime with an interest charge that can claw back much of the gain. A Qualified Electing Fund (QEF) election or a mark-to-market election can produce a far better result, but each PFIC requires its own Form 8621 and the QEF election depends on the fund providing US tax information that many Canadian funds do not. The practical lesson many US persons in Canada reach is to hold individual securities or US-domiciled funds rather than Canadian pooled products.
• RRSPs and RRIFs. These are the good news. Tax deferral on income accruing inside an RRSP or RRIF is automatic for US purposes under Article XVIII of the Canada-US tax treaty and Revenue Procedure 2014-55 — the old Form 8891 annual election was eliminated, so no special election is required to defer. Distributions, however, remain US-taxable in the year received, with a foreign tax credit for the Canadian non-resident withholding tax generally relieving the double tax. The account still appears on the FBAR and, where thresholds are met, on Form 8938. We cover the mechanics in our guide on RRSP withdrawals for US residents.

FATCA, the banks, and how non-filers get found

FATCA is not only a reporting obligation on individuals; it is also the regime that pushes financial institutions to identify and report US account holders. Under the Canada-US intergovernmental agreement implementing FATCA, Canadian banks and brokerages identify accounts held by US persons and report them, through the Canada Revenue Agency, to the IRS. This is why a person who has quietly carried a US passport or birthplace for decades may suddenly receive a letter from their Canadian bank asking them to certify their US status, a Social Security number, or a Form W-9. That request is frequently the moment a long-dormant filing problem surfaces — and it means the old assumption that the IRS will not notice a Canadian resident is no longer realistic, because the data flows automatically. The compliant response is to get current, which is exactly what the IRS's catch-up programs permit.

Coming into compliance: the Streamlined Foreign Offshore Procedures

For US persons in Canada who have not been filing — by far the most common posture among new clients in this area — the IRS's Streamlined Foreign Offshore Procedures provide a structured path back to compliance. As of 2026 the program remains available, and its mechanics are unchanged: the taxpayer files (or amends) the most recent three years of income tax returns, files six years of delinquent FBARs, and signs a certification (Form 14653) attesting that the failure resulted from non-willful conduct. For a qualifying filer who meets the foreign-residence requirement, the offshore penalty is zero — the filer pays any back tax and interest, but no FBAR or information-return penalty. That is a far better outcome than being assessed under the penalty schedules above, and it is generally available only while the conduct can honestly be certified as non-willful and before the IRS has initiated contact.

The certification is the crux. It is signed under penalty of perjury, and the "non-willful" standard is a legal one, not a feeling. A person who knew about the filing obligation and chose to ignore it, or who took deliberate steps to conceal accounts, generally does not qualify and may instead need a different route — historically the IRS Criminal Investigation voluntary disclosure practice — which trades certainty against a defined penalty. Choosing the right lane, and supporting the characterization with the actual facts, is the most important decision in the engagement. Where there are delinquent information returns but no unreported income (for instance, missed Forms 8938 with the tax already paid), the Delinquent International Information Return Submission Procedures may fit better. We walk through a worked example in our guide on the Streamlined Filing Procedures for Canadian US persons, and the dedicated Streamlined Filing Procedures service page covers eligibility in detail.

Common traps that turn a small problem into a large one

• Treating FBAR and Form 8938 as interchangeable. They are not — different agency, different thresholds, different asset definitions. Filing one and assuming the other is covered leaves a gap.
• Forgetting the accounts you do not control. The FBAR reaches accounts over which you have signature authority even without an ownership interest — a parent's account you can sign on, an employer or corporate account, a joint account with a spouse — and these are routinely overlooked.
• Quiet disclosure. Mailing in back returns or amending without a designated procedure ("going quiet") forfeits the penalty protection the programs offer and can look like an attempt to evade scrutiny. The programs exist precisely so that getting current does not invite a penalty.
• Mischaracterizing willfulness. Overstating non-willfulness to fit the cheaper program, or understating it out of caution, both create risk — the first invites a perjury problem, the second forecloses relief the filer was entitled to.
• Ignoring PFICs. Skipping Form 8621 on Canadian funds does not make the punitive excess-distribution regime go away; it leaves the worst default treatment in place and the statute of limitations open.
• Assuming renunciation or surrendering a green card ends the obligation cleanly. Expatriation has its own US tax consequences and does not erase past non-compliance; the prior years still have to be in order.
• Confusing the US and Canadian sides. A US person in Canada also has Canadian foreign-reporting duties — Form T1135 is required when the cost of specified foreign property (including US-situated assets) exceeds C$100,000. The two systems run in parallel; satisfying one says nothing about the other.

How Barrett Tax Law approaches FATCA and FBAR compliance

The cross-border practice at Barrett Tax Law is led by Simone Barrett, who is admitted in Ontario and in Florida, so a file can be analyzed under both Canadian and US rules within one engagement rather than handed back and forth between unconnected advisors. Most engagements begin with a triage: which returns and information forms were missed, the maximum account values in each year, the nature of the accounts (TFSA, RESP, RRSP, PFICs, foreign trusts), and an honest assessment of whether the non-filing was non-willful. That assessment determines which compliance path is open.

From there we prepare the package — typically the Streamlined years of Form 1040, six years of FBARs, the Form 14653 certification, and any necessary PFIC mark-to-market or QEF elections — and submit it. Where the facts do not support a non-willful certification, we discuss the alternatives candidly rather than steering a client into a program they do not qualify for. Once the back years are resolved, future-year compliance is maintained on an annual cycle, and we coordinate the Canadian side — including any T1135 reporting — at the same time. If you have received a FATCA letter from your bank, are years behind on US filings, or simply want to understand your exposure, Barrett Tax Law offers a free initial consultation to map the facts and the options.

For the wider picture, see our cross-border tax overview, the annual US filing guide for US citizens living in Canada, and related service pages on US estate tax for Canadians and the departure tax that applies when leaving Canada. Planning where one spouse is American is addressed in our guide on cross-border estate planning for mixed-citizenship couples.

This page is general information, not legal advice. Cross-border tax depends on the specific facts and on the rules of both Canada and the United States, and the figures and procedures described here can change. You should obtain advice on your own situation before acting.