Reconciling Official Exchange Rates

Alex · Post by **Alex** » Fri Mar 01, 2013 3:27 pm

CRA has one exchange for Canadian tax, the IRS has another for US tax, and treasury has a third for FBAR reporting.

For a taxpayer with income in both US and CND dollars should we just use the CND rate for T1, IRS rate for 1040, and treasury rate for FBAR?

Or, should we try to reconcile these three forms by using the same exchange rate for everything? If so, which exchange rate should we employ?

Thanks very much.

lanman2000 · Post by **lanman2000** » Mon Mar 11, 2013 5:14 pm

"The Internal Revenue Service has no official exchange rate. Generally, it accepts any posted exchange rate that is used consistently" (ref: http://www.irs.gov/Individuals/Internat ... ange-Rates)

So for simplicity sake I just use the Bank of Canada annual average (http://www.bankofcanada.ca/rates/exchan ... es-in-pdf/) for both US and Canadian returns which this year is 0.99958 which is fantastic as you can simply round up and get it to 1 to 1 USD to CAD so that simplifies things eh?

As for FBAR there are specific instructions for that that say which exchange rate to use. The instructions state "Convert foreign currency by using the Treasury's Financial Management Service rate (this rate may be found at www.fms.treas.gov) from the last day of the calendar year."

So go to that website and use that.

nelsona · Post by **nelsona** » Mon Mar 11, 2013 5:22 pm

exactly. No need to reconcile anything. What ever the rules are for a particular agency is what you provide.

IRS genearlly requires "daily" exchange on the day of transaction, but will accept a more averaged rate for periodic payments.

Unlike CRA, like lanman just said, there is no official exchange rate.