U.S. tax services across the Canadian border

Bottom line Yes — the return is required even when the foreign tax credit brings the U.S. tax to zero, which in Canada it often does.

U.S. citizens and green card holders must generally file a U.S. return on worldwide income wherever they live. Because Canadian tax rates are usually higher, foreign tax credits often reduce the U.S. tax to zero. The return, the FBAR and related disclosures are still required, and some Canadian accounts can create U.S. tax even when none is expected — a TFSA earns no Canadian tax to credit, and Canadian funds can fall under the PFIC rules. The filing is rarely the expensive part; the accounts inside it are where the work is.

Bottom line Generally yes — the U.S. does not recognise the TFSA’s tax-free status, and the funds inside it are often PFICs.

The U.S. does not recognise the tax-free status of a TFSA, so its income is generally taxable on your U.S. return, and the account itself is reportable. Depending on its holdings, PFIC reporting may apply to the funds inside it, which brings annual Form 8621 filings. Because Canada charges no tax on the account, there is no foreign tax credit to offset the U.S. bill. Many Americans in Canada reconsider how they hold these savings once they understand the U.S. treatment.

Bottom line No election is needed. Article XVIII(7) of the treaty defers RRSP and RRIF growth until you withdraw.

The RRSP is the one registered account the treaty handles cleanly. Under Article XVIII(7), growth inside an RRSP or RRIF is deferred for U.S. purposes until money comes out, and since 2014 that deferral is automatic — the old Form 8891 election is no longer filed. Withdrawals are U.S.-taxable when they happen, and Canadian withholding on them is generally creditable. The account remains reportable on the FBAR and, where the thresholds are met, on Form 8938.

Bottom line Form 1040-NR each year, usually with a net-basis election, plus FIRPTA withholding when you sell.

A non-resident with U.S. rental income generally files Form 1040-NR each year, and most owners elect to be taxed on a net basis rather than face 30% withholding on gross rents. When you sell, FIRPTA withholding applies at closing on the gross price unless it is reduced by certificate in advance on Form 8288-B. An ITIN is usually the first step, and we handle each of these filings.

Bottom line Before the move — several months ahead. Almost everything worth doing here has to be done before residency starts.

Residency start dates, the timing of gains, RRSP and TFSA decisions, and entity elections are far more useful as planning than as after-the-fact repair. Canada’s departure tax deems most property sold on the day you leave, which can create a Canadian bill with no matching U.S. event — the two systems need to be looked at together before the date is set. A pre-move consultation often saves more than it costs.

Bottom line No — we handle the U.S. side, and coordinate with your Canadian accountant so the two returns agree.

Our practice is the U.S. side of the border. We regularly coordinate with Canadian accountants, whether yours or ones we work with, so the two returns are prepared consistently rather than in isolation. Where a position on one return depends on the other — foreign tax credits above all — we make sure the numbers are reconciled rather than assumed.