U.S. Citizens living in Canada – IRS “Streamlined” Program – U.S. Income Tax filing
Many U.S. citizens permanently living in Canada were not aware of their requirements to file annual income tax returns and FBAR forms. For instance, a U.S. citizen might have moved to Canada as a child with their family and never returned to the U.S. The person is now an adult and permanently residing in Canada on a full-time basis.
The IRS realizes that U.S. citizens who permanently departed the US, or Canadians who acquired U.S. citizenship from their parents, may not have been aware of their U.S. income tax filing obligations. On June 26, 2012 the IRS introduced the “Streamlined” program to enable taxpayers, who meet the qualifications of the program, to become current with their U.S. filings. This program requires latest 3 years of U.S. income taxes, and 6 years of FBAR disclosures. Previously, U.S. citizens were required to go back as far as they had records, which was a very daunting task for most people, particularly with the complexity of interpreting U.S. and Canadian tax rules and regulations (not to mention locating paperwork).
The “Streamlined Program” which became effective September 1, 2012 was expanded and modified by the IRS on June 26, 2014 to accommodate a broader group of taxpayers. The revised 2014 streamlined program is similar to the 2012 streamlined program in that the latest 3 years of income tax returns and 6 years of FBAR disclosures are required. However, the 2014 revised program has the following key changes;
- IRS eliminated the “low compliance risk” assessment for taxpayers who owe less than $1,500 or less in taxes for each of the reporting years. Instead, tax returns filed under the IRS streamlined program, now face the same potential audit risk and penalties which are associated with all U.S. income tax returns filed.
- FBARs for the latest 6 years must be electronically filed using the BSA / FinCEN internet portal. Previously, under the 2012 streamlined program, FBARs were paper filed.
- The streamlined procedures are available to both U.S. individual taxpayers residing outside the United States (the “Streamlined Foreign Offshore Procedures”) and U.S. individual taxpayers residing in the United States (the “Streamlined Domestic Offshore Procedures”). U.S. citizens living in Canada would typically be included in the Streamlined Foreign Offshore program.
- Taxpayers using either the Streamlined Foreign Offshore Procedures or the Streamlined Domestic Offshore Procedures will be required to certify, in accordance with the specific instructions, that the failure to report all income, pay all tax, and submit all required information returns, including FBARs (FinCEN Form 114, previously Form TD F 90-22.1), was due to non-willful conduct.
Taxpayers who are concerned that their failure to report income, pay tax, and submit required information returns was due to willful conduct and who therefore seek assurances that they will not be subject to criminal liability and/or substantial monetary penalties, should consider participating in the Offshore Voluntary Disclosure Program (OVDP) and should consult with their professional tax or legal advisers.
After a taxpayer has completed the streamlined filing compliance procedures, he or she will be expected to comply with U.S. law for all future years and file returns according to regular filing procedures.
Taxpayers using the IRS streamlined programs will be required to file delinquent tax returns (1040, 2555, 1116, etc) along with appropriate related information returns for the past three years, and to electronically file delinquent FBARs for the past six years. The delinquent tax returns should be completed separately for each year, using the forms applicable to each of those taxation years and submitted to the required IRS taxation centre.
Keep in mind that the IRS has really ramped up their offshore compliance programs, and with FACTA, essentially forces Canadian banks to share information with the IRS regarding U.S. citizens. My office has helped many clients through the streamlined program – all qualified, and aside from a few follow up queries from the IRS, all were accepted, and are now current with their U.S. income filings.
If you require further assistance, please contact my office to schedule an appointment.If you require further assistance, please contact my office to schedule an appointment. I don’t mind talking to you for a minute or so as an introduction. If you prefer to have a tax consultation prior to engaging my services, there is a fee for this service. The fee for a 1 hour consultation is $300 + HST during which time I will provide an in-depth review your situation, and provide specific tax guidance. I would greatly appreciate the consultation fee being paid at the time the meeting via personal cheque, credit / debit card, or e-interact. Thank you very much – I look forward to hearing from you and supporting you with your income tax filings.
For further Canadian personal income tax information for U.S. citizens living in Canada, please contact:
Gary Schein, CPA, CGA, MBA
IRS Registered Paid Tax Preparer and IRS Certified Acceptance Agent
Edelkoort Smethurst Schein Chartered Professional Accountants LLP
4903 Thomas Alton Boulevard, Suite 207
Burlington, Ontario, Canada L7M 0W8
Edelkoort Smethurst Schein CPA’s LLP, is Fully Registered in Public Practice with the Certified General Accountants of Ontario to provide Corporate and Personal Taxation, and Financial Statement Compilation services to the public, is an authorized Canada Revenue Agency (CRA) e-filer, and is also an Internal Revenue Service (IRS) Registered U.S. Paid income Tax Preparer. Gary Schein of Edelkoort Smethurst Schein is an IRS Certified Acceptance Agent. Geoff Smethurst is a Licensed Public Accountant (LPA) – the firm provides review engagement and audit services.
Edelkoort | Smethurst | Schein CPAs LLP is located in Burlington Ontario servicing the Golden Horseshoe and Greater Toronto Area and beyond. The firm is fully licensed with CPA Ontario to provide assurance, tax and accounting services as well as registered as tax preparers with the Canada Revenue Agency (CRA) & Internal Revenue Service (IRS). The firm is also registered as an IRS Certified Acceptance Agent.
All blog posts published on this site are for informational purposes only and do not constitute professional advice. Readers should contact a professional to discuss their individual situation. Neither the author or the accounting firm shall accept any liability for any reliance placed on the information posted.