Hi,
Here's my situation:
April 2013: Moved to USA from CANADA
March 2014: Filed first US taxes for 2013 year
I used Turbo Tax to file, and didn't understand the need to disclose my Canadian accounts (first it asks you "do you have foreign accounts with more than $10K? Yes -- you may need to file FBAR", very next question "Do your foreign financial assets total $50K at year end or $75K at any point? No -- based on what you've told us you do not need to report your foreign financial assets to the IRS.")
I misunderstood the need to file FBAR is independent of the 2nd question.
So i'm planning to amend 2013 and file an FBAR for 2013, in addition to one for 2014.
I'm getting hung up on my TFSA (mutual fund based) account
My accounts
2013:
RRSP: $6K
TFSA: $3.4K
2014:
RRSP: $6K
TFSA: $100
I have made no deposits to my TFSA since moving to the US, however there was interest generated.
I moved most of the money out of my TFSA in 2014 and deposited it into a regular Canadian savings account (this was prior to knowing the nightmare reporting scenario that this entails, otherwise I would have just closed it -- which I plan to soon).
It sounds like I need to file a 3520 for the TFSA, but what I'm unsure about is how to treat a) the interest b) the $3.3k that I transferred out of the account in 2014. Would I be listing that as a "distribution" on the 3520?
Searching through the forums there is some helpful information, but a lot of debate. Does anyone have any definitive answers with how to deal with this type of situation at this point?
Any help is appreciated!!!
Canadian TFSA nightmare
Moderator: Mark T Serbinski CA CPA
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nycanadian
- Posts: 3
- Joined: Sun Mar 22, 2015 3:55 pm
The amounts you list for your 'foreign offshore' accounts total less then $10,000 for both 2013 & 2014 which is the threshold for filing FBAR and 3520a/3520. An important question would be: Did the total of those 2 accounts at any time surpass $10K in either 2013 or 2014 even though the final amounts are what you list above?
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nycanadian
- Posts: 3
- Joined: Sun Mar 22, 2015 3:55 pm
I am not an expert, but here's my take:
The RRSPs are now treated differently from TFSAs and require less onerous reporting and are not subject to the same onerous penalties as other accounts (usually) considered as trusts such as TFSAs & RESPs. There are threads on the subject on this forum.
It is my understanding that TFSAs are usually considered to be trusts- again, there are a number a threads here on the subject. Likewise, reporting the interest & distributions for TSFAs are referred to in these threads. I believe that you do have a 'distribution' situation with your TFSA.
It appears that you are delinquent with FBARs for 2013, the 3520a and 3520 forms for 2013 and, now, the 3520a form for 2014 (which was due Mar 15). The 3520a and 3520 forms are 2 distinct forms due at different times. (The 3520a is usually due Mar 15; the 3520 form usually April 15.)
You may be aware that failure to file these forms can potentially result in some pretty large penalties ($10K per form). The good news is that the IRS has been treating a U.S. citizen who is a Canadian resident who is delinquent with these forms more easily than U.S. resident counterparts. You should check out the new (as of 2012) Streamlined Program for Non-U.S. Residents:
http://www.irs.gov/Individuals/Internat ... ted-States
The program can look rather complicated on at first glance, but it isn't really once you read up on it a bit. That said, finding an experienced accountant on the subject would be a good idea. You mentioned simply filing the back-due forms, but if you go that route, you can never be sure that you won't hear from the IRS in the future. The Streamlined program removes that concern and btw, there isn't the 5% penalty that is exacted by the Streamlined program for U.S. residents.
If you find all of this to be a bit of a shock (given the title of your thread), the fact is that the Streamlined program gives you a relatively easy out. The only real challenge is dealing with filling out the 3520a/3520 forms (FBARs are relatively easy). There are threads here for filling them out for TFSAs, but again, you should likely consider getting an experienced accountant. Everyone's mileage varies on this subject.
The RRSPs are now treated differently from TFSAs and require less onerous reporting and are not subject to the same onerous penalties as other accounts (usually) considered as trusts such as TFSAs & RESPs. There are threads on the subject on this forum.
It is my understanding that TFSAs are usually considered to be trusts- again, there are a number a threads here on the subject. Likewise, reporting the interest & distributions for TSFAs are referred to in these threads. I believe that you do have a 'distribution' situation with your TFSA.
It appears that you are delinquent with FBARs for 2013, the 3520a and 3520 forms for 2013 and, now, the 3520a form for 2014 (which was due Mar 15). The 3520a and 3520 forms are 2 distinct forms due at different times. (The 3520a is usually due Mar 15; the 3520 form usually April 15.)
You may be aware that failure to file these forms can potentially result in some pretty large penalties ($10K per form). The good news is that the IRS has been treating a U.S. citizen who is a Canadian resident who is delinquent with these forms more easily than U.S. resident counterparts. You should check out the new (as of 2012) Streamlined Program for Non-U.S. Residents:
http://www.irs.gov/Individuals/Internat ... ted-States
The program can look rather complicated on at first glance, but it isn't really once you read up on it a bit. That said, finding an experienced accountant on the subject would be a good idea. You mentioned simply filing the back-due forms, but if you go that route, you can never be sure that you won't hear from the IRS in the future. The Streamlined program removes that concern and btw, there isn't the 5% penalty that is exacted by the Streamlined program for U.S. residents.
If you find all of this to be a bit of a shock (given the title of your thread), the fact is that the Streamlined program gives you a relatively easy out. The only real challenge is dealing with filling out the 3520a/3520 forms (FBARs are relatively easy). There are threads here for filling them out for TFSAs, but again, you should likely consider getting an experienced accountant. Everyone's mileage varies on this subject.