TFSA still held by Canadian working in the US: What to do?

csk_17 · Post by **csk_17** » Wed Jan 08, 2014 8:13 pm

My girlfriend is a Canadian citizen who moved to the US on May 26th, 2012, on a TN Visa. She has been living and working the US ever since. She has not yet filed her 2012 tax return, in Canada or the US. For 2012, she only worked 1 month (January) in Canada, then had no income until she moved to the US in late May. We're just now getting her taxes in order for that filing year. She also has a TFSA in Canada that she hasn't closed (she wasn't aware she should have), with about $14k in it.

I know the first step is to file her Canadian departure return. Then she can work on the US return (she should have US refund due, before factoring the TFSA).

What steps does she need to take to get everything filed properly and what are her options for the TFSA?

Also, she is planning on closing it ASAP, what are the 2013 tax implications of that doing that?

Thanks!

nelsona · Post by **nelsona** » Thu Jan 09, 2014 2:15 am

since it is now 2014, she has the same filing issues for THREE years, by waiting so long.

She needs to report any internal income from the TFSA on her 2012, 2013, and 2014 US returns. She must also file a 3520 form for that account, and include it on her FBAR reports for all three years.

csk_17 · Post by **csk_17** » Thu Jan 09, 2014 12:20 pm

Thanks nelsona. I've read a lot about penalties for late FBAR filings, without "reasonable cause". I would hope the combination of her being new to the US (and therefore not aware of the TFSA issues), the fact that her TFSA constitutes her full savings and that her income is in the 45-50k/yr range, would count as reasonable cause. What are your thoughts?

nelsona · Post by **nelsona** » Thu Jan 09, 2014 12:34 pm

The ammount in her TFSA and her income are NOT reasonable cause for late filing af FBAR. The fact that she hasn't filed her first return for 2012, is a better one.

let's hope that the tax that was withheld from her job was sufficient to cover her tax liability (never mind the TFSA stuff), or she will have penalties and interst to pay.

Not the best way to start her relationship with IRS.

And she needs to take care of her CRA departure return as well!