Navigating FBAR Filing Requirements: A Comprehensive Guide to Avoiding Potential Penalties

It seems that the FBAR filing requirements and reporting always tend to cause more questions than answers. Ensuring you remain compliant with your cross-border finances is one of many topics, when it comes to U.S. citizens residing in Canada. With the help of your dedicated cross-border wealth management team, Plena Wealth Advisors can help navigate FBAR filing requirements and other issues with you.

Table of Contents on FBAR filing and reporting

1. FBAR filing requirements for Canada-U.S. dual citizens
2. Do I need to file an FBAR if I live in Canada?
3. FBAR penalties
4. Do I need to include my Canadian investment accounts for FBAR filing?
5. Summary on FBAR filing and reporting

FBAR filing requirements for Canada-U.S. dual citizens

The requirements for dual citizens on FBAR filing and reporting applies when at least one financial account is located outside of the United States and the aggregate value of these foreign accounts exceeds $10,000 USD at any time during the calendar year. Financial accounts include bank accounts, brokerage accounts, mutual funds or financial interest in a certain type of account (corporations, partnerships, limited liability companies or LLC, trusts and estates). Annual FBAR filing requirements are due by your regular IRS filing deadline of April 15, however, you are allowed an automatic extension to October 15, if you need more time. FBAR records must be retained for a period of five years.

More information can be found on the IRS website.

Do I need to file an FBAR if I live in Canada?

Depending on the type of account as well as the location of the account(s) you hold, there may be FBAR filing and reporting requirements. Some accounts do not need to be reported for FBAR purposes, like IRAs, 401(k)s and even some Raymond James (USA) Ltd. taxable accounts. This is because these accounts continue to be physically held in the U.S. and, therefore, are not considered foreign accounts from an IRS perspective. To confirm which accounts need to be reported and filed, we recommend speaking to your cross-border accountant. 

FBAR penalties

In some cases, failure to file and report FBAR may subject you to severe civil monetary and/or criminal penalties. Someone who fails to properly file may be subject to a civil penalty of an inflation-adjusted $10,000 (2023 penalties for non-willful violations are $15,611). An individual who willfully failed to file, that is, intentionally did not report and file, can carry a penalty of either 50 per cent of the balance in that account at the time of violation or a $100,000 inflation-adjusted penalty (2023 penalties for willful violations are $156,107), whichever is greater. Willful violations may also be subject to criminal penalties and potential imprisonment.

Do I need to include my Canadian investment accounts on an FBAR?

In most cases, you would need to report Canadian-held investment accounts that are in excess of $10,000 USD, including but not limited to Canadian taxable investment account, RRSPs (including locked-in accounts) or RRIFs. The most conservative approach would be to report these accounts if you are a U.S. tax filer, to ensure you remain compliant.

Summary on FBAR filing and reporting

Your dedicated cross-border wealth management team, which consists of dual-licensed financial advisors, financial planners and tax specialists, will help ensure your cross-border complexities are managed in a manner that is in line with your overall objectives and tax situation. We would be happy to set up a call to discuss your specific situation to ensure you are making the right decisions. Contact us today.

Information in this article is from sources believed to be reliable; however, we cannot represent that it is accurate or complete. It is provided as a general source of information and should not be considered personal investment advice or solicitation to buy or sell securities. Raymond James advisors are not tax advisors and we recommend that clients seek independent advice from a professional advisor on tax-related matters. The views are those of Plena Wealth Advisors, and not necessarily those of Raymond James Ltd. Investors considering any investment should consult with their Investment Advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decision. Raymond James Ltd. is a Member Canadian Investor Protection Fund.

Raymond James (USA) Ltd., member FINRA/SIPC. Raymond James (USA) Ltd. (RJLU) advisors may only conduct business with residents of the states and/or jurisdictions for which they are properly registered.