U.S. tax amnesty for Canadian residents: catching up from Canada.
Canada has more Americans than almost anywhere, and many of them, including dual citizens born in the U.S., have never filed a U.S. return. The Streamlined Foreign Offshore Procedures work well from Canada, where high Canadian taxes usually mean little or no U.S. tax is due. The things to get right are TFSAs, RESPs and Canadian funds.
Sound familiar?
- You've filed with the CRA every year, and never with the IRS.
- You were born in the U.S. and moved to Canada as a child.
- Your bank asked you to fill in a form about U.S. citizenship.
- You have an RRSP, a TFSA or an RESP and aren't sure what the IRS thinks of them.
How does the IRS treat RRSPs, TFSAs and other Canadian accounts?
Every one of these goes on your FBAR. What differs is how the IRS taxes them.
| Account | U.S. treatment | |
|---|---|---|
| RRSP / RRIF | Growth isn't taxed by the U.S. until you withdraw, thanks to the treaty. No election form needed anymore. | Friendly |
| TFSA | Not tax-free for U.S. purposes: income and gains inside are taxable. It could also be treated as a foreign trust, which would add trust reporting. | Watch out |
| RESP | Not recognized by the U.S. Income inside may be taxable, and it could be treated as a foreign trust, which would add trust reporting. | Watch out |
| FHSA | New, and not recognized by the U.S. Income inside may be taxable, and it could also be treated as a foreign trust. | Unclear |
| Canadian mutual funds & ETFs | Usually PFICs: Form 8621 and unfavorable tax rules. Often the most expensive part to fix. | Watch out |
| Selling your home | Canada's principal residence exemption is unlimited; the U.S. excludes only $250,000 of gain ($500,000 for couples). | Plan ahead |
Which Canadian investments are PFICs?
Canadian mutual funds and Canadian-listed ETFs, including the Canadian versions of big U.S. fund brands. For U.S. tax they’re passive foreign investment companies, or PFICs, with their own reporting and harsh default tax rules.
- In an RRSP or RRIF, the treaty covers the plan, so the funds inside generally don’t need their own Form 8621.
- In a TFSA, RESP, FHSA or a regular account, each fund usually needs a Form 8621 every year, and gains can be taxed at the top U.S. rate plus an interest charge, unless an election was made in time.
- Not PFICs: shares of individual Canadian companies, GICs, bonds and bank accounts.
That’s why the same index fund can cost very little to report in an RRSP and a lot in a TFSA. Before moving anything, look at the U.S. and Canadian cost of keeping versus selling.
What does the Canada–U.S. tax treaty actually say?
The treaty dates from 1980 and has been updated by five protocols, most recently in 2007. For Americans living in Canada, these parts matter most:
- The saving clause. The U.S. can tax its citizens as if the treaty didn’t exist, except for the provisions the treaty lists.
- RRSPs and RRIFs (Article XVIII). U.S. tax on the growth can be deferred until you withdraw. Since 2014 that deferral is automatic, with no election form to file.
- U.S. Social Security. Paid to someone living in Canada, it’s taxed only by Canada, even for U.S. citizens.
- Collecting U.S. tax (Article XXVI A). Canada generally won’t help collect U.S. tax from someone who was a Canadian citizen when the tax arose.
- What it doesn’t cover: TFSAs, RESPs and FHSAs. The treaty gives them no special U.S. treatment.
CPP and U.S. Social Security contributions are covered by a separate social security agreement, which generally means you pay into one system, not both. Read the Canada–U.S. tax treaty on IRS.gov.
When are Canadian and U.S. taxes due?
Both tax years run January to December, which makes Canada one of the easier countries to file from. Your Notice of Assessment and your T4 and T5 slips give most of what the U.S. return needs.
| Canada | United States | |
|---|---|---|
| Tax year | January to December | January to December |
| Annual return | April 30, or June 15 if you or your spouse are self-employed | April 15, moved to June 15 automatically when you live abroad, or October 15 with an extension |
| Paying the tax | April 30, even for the self-employed | April 15, even if you file later |
| Foreign accounts | Form T1135, if your foreign property costs more than C$100,000 | The FBAR, due October 15, filed online |
Foreign tax credit or exclusion: which wins in Canada?
Usually the foreign tax credit. Federal and provincial tax together are normally more than the U.S. tax on the same salary, so the credit wipes out the U.S. tax, and the unused credit carries forward for up to 10 years.
- The exclusion covers up to $130,000 of earned income for 2025, but it gives up the refundable child tax credit, and income it doesn’t cover can still be taxed.
- Big capital gains can leave a U.S. bill. Canada taxes only half of most capital gains, so on a large gain, like a cottage or a portfolio sale, Canadian tax may not cover the U.S. tax.
- TFSA income has no Canadian tax to credit, so any U.S. tax on it is paid in full.
We run your returns both ways before choosing. How we compare the exclusion and the credit.
A worked example: an engineer in Ottawa
Casey was born in Vermont, moved to Ottawa as a child and has never filed a U.S. return. Casey earns C$95,000, has C$80,000 in an RRSP and C$45,000 in a TFSA, both invested in Canadian index ETFs.
| Item | How it’s handled |
|---|---|
| Salary | Canadian tax is higher than the U.S. tax on it, so with the foreign tax credit Casey’s U.S. tax on it is $0. |
| RRSP | Growth isn’t taxed by the U.S. until it’s withdrawn, and the ETFs inside generally don’t need Form 8621. It goes on the FBAR, and on Form 8938 if Casey is over its threshold. |
| TFSA | The ETFs are PFICs: a Form 8621 for each, in each year filed, with the income taxed in the U.S. and no Canadian tax to credit. |
| Catching up | Three years of returns and six FBARs under the Streamlined procedures, with no penalty if Casey qualifies. |
How we catch you up
- 1
Free consultation
We confirm you qualify for Streamlined and flag any TFSA, RESP or fund issues.
You: answer 3 quick questions.
- 2
Your Canadian papers
Notices of Assessment, T4s, T5s and year-end account statements.
You: upload from My Account.
- 3
We prepare everything
Three U.S. returns with foreign tax credits, six FBARs, every form, and your certification.
You: review, then print, sign and mail. We e‑file your FBARs.
Catching up from Canada
Most Americans in Canada who fell behind without meaning to can catch up under the Streamlined Foreign Offshore Procedures: three years of returns, six years of FBARs and, if you qualify, no penalties. If only FBARs are missing, or you’ve moved back to the U.S., another route may fit better. See every IRS catch-up option for expats, compared.
Common questions
Is there a U.S. tax amnesty for Canadian residents?
Yes, in practice: the Streamlined Foreign Offshore Procedures. Canadian residents who are U.S. citizens or green card holders and weren't willful can catch up with three years of returns and six FBARs, and no penalties.
I was born in the U.S. but grew up in Canada. Do I really have to file?
Yes, if you're still a U.S. citizen and your income is over the filing threshold. Many people in that position catch up under Streamlined, and some then renounce. Help for accidental Americans.
Will I owe U.S. tax on top of Canadian tax?
Usually not much, if any. Canadian tax rates are generally higher than U.S. rates, so the foreign tax credit tends to cover your U.S. tax on Canadian income.
Do I report my RRSP to the IRS?
Yes, on the FBAR, and on Form 8938 if you're over its threshold. You no longer need a separate election to defer the U.S. tax on its growth: since 2014 it's automatic.
Can the CRA collect U.S. tax from me?
Under the Canada-U.S. treaty, Canada generally won't help collect U.S. tax from someone who was a Canadian citizen when the tax arose. That's a reason not to panic, not a reason to skip filing: FBAR and other penalties, and passport issues, still apply.
Should I close my TFSA?
Don't rush. Closing it doesn't fix past years, and there may be better options. We'll look at the numbers with you.
American in Canada? Let's get you square with the IRS.
Answer 3 quick questions and our tax team will review your situation for free.
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