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 has been expanded and modified by the IRS on several occasions, but remains in place as of July 2017. 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. The key filing requirements of the program are as follows;
- Form 1040 U.S. income tax returns for the most recent 3 taxation years.
- Financial disclosures of all financial accounts for the latest 6 years. These are reported on FBARs which must be electronically filed using the BSA / FinCEN internet portal.
- Form 14653 certification 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 along with an explanation of the situation for late filing.
- Form 14653 certification that the taxpayer was physically outside of the U.S. for at least 330 full days in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed, and you must not have had a U.S. abode. .
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:
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. Derek Edelkoort of ESS CPAs LLP is an IRS Certified Acceptance Agent. Geoff Smethurst is a Licensed Public Accountant (LPA) – the firm provides review engagement and audit services.