FATCA and CRS: Foreign Account Reporting Between Canada and the US

The US and Canada both require their taxpayers to report foreign financial accounts, and both require their financial institutions to report foreign account holders to the other country’s tax authority. These are two separate reporting regimes that overlap. FATCA (Foreign Account Tax Compliance Act) is the US-driven system that forces non-US financial institutions to report US account holders to the IRS. CRS (Common Reporting Standard) is the OECD-driven system that Canada adopted, under which Canadian financial institutions report non-resident account holders (including US persons) to the CRA, which then exchanges the data with other countries. On top of these institutional reporting obligations, individual taxpayers have their own filing obligations: FBAR and Form 8938 for US persons, Form T1135 for Canadian residents.

What is FATCA and how does it work?

FATCA (IRC 6038D for individual reporting, IRC 1471-1474 for institutional reporting) was enacted in 2010 to combat offshore tax evasion by US persons. It operates on two levels:

Institutional level: FATCA requires foreign financial institutions (FFIs) to identify their US account holders and report their account information to the IRS. FFIs that do not comply face a 30% withholding tax on US-source payments (dividends, interest, gross proceeds from US securities). To avoid this withholding, most FFIs worldwide have registered with the IRS and agreed to report.

Canada implemented FATCA through an Intergovernmental Agreement (IGA) signed in 2014. Under the IGA, Canadian financial institutions report US account holders to the CRA (not directly to the IRS), and the CRA exchanges the data with the IRS under the treaty’s information exchange provisions. This approach avoids the legal conflict between FATCA’s reporting requirements and Canadian privacy laws.

What Canadian banks report about US account holders: the account holder’s name, address, US taxpayer identification number (SSN or ITIN), account number, account balance or value at year-end, and the total amount of interest, dividends, and other income credited to the account during the year.

Individual level: US persons (citizens, residents, green card holders) who hold foreign financial assets above certain thresholds must report those assets on Form 8938 (Statement of Specified Foreign Financial Assets), filed with their annual tax return. This is the individual’s own reporting obligation, separate from and in addition to the FBAR.

What is the FBAR?

The FBAR (Report of Foreign Bank and Financial Accounts, FinCEN Form 114) is a separate filing under the Bank Secrecy Act, not the Internal Revenue Code. It is filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS, though the IRS enforces it.

Who files: Any US person (citizen, resident, green card holder) who has a financial interest in or signature authority over one or more foreign financial accounts, if the aggregate value of all foreign accounts exceeds $10,000 at any time during the calendar year.

What accounts are reported: Bank accounts, brokerage accounts, mutual funds, and other financial accounts held at foreign financial institutions. For a US person in Canada, this includes Canadian bank accounts (chequing, savings), investment accounts, RRSPs (the IRS treats RRSPs as foreign financial accounts for FBAR purposes), RRIFs, and TFSAs.

What is not reported: Foreign real estate held directly (not through an entity), foreign stocks held in a US brokerage account (the account is domestic, even if the stocks are foreign), and foreign currency held physically.

Threshold: $10,000 aggregate. This is cumulative across all foreign accounts. If you have three Canadian accounts with peak balances of $4,000, $3,000, and $4,000 at any point during the year, the aggregate is $11,000, and all three accounts must be reported.

Due date: April 15, with an automatic extension to October 15 (no form needed for the extension).

Penalties: Willful failure to file: up to $100,000 or 50% of the account balance per violation. Non-willful failure: up to $10,000 per violation. The penalties are per account, per year. Criminal penalties for willful violations can include fines up to $500,000 and imprisonment. If you have unfiled FBARs, the delinquent FBAR filing procedures or the Streamlined Filing Compliance Procedures may reduce or eliminate these penalties.

How does Form 8938 differ from the FBAR?

Form 8938 and the FBAR overlap significantly but are separate obligations with different rules:

• Filing authority: FBAR goes to FinCEN (Treasury). Form 8938 goes to the IRS with the tax return.
• Threshold (taxpayers living abroad, filing single): FBAR: $10,000 aggregate at any time. Form 8938: $200,000 at year-end or $300,000 at any time.
• Threshold (taxpayers living in the US, filing single): FBAR: $10,000 aggregate at any time. Form 8938: $50,000 at year-end or $75,000 at any time.
• Assets covered: FBAR: financial accounts at foreign financial institutions. Form 8938: financial accounts plus other specified foreign financial assets (foreign stock and securities not held in a financial account, foreign partnership interests, foreign mutual funds, certain foreign hedge funds, and foreign issued life insurance or annuity contracts with cash value).
• Penalties: FBAR: up to $100,000 per willful violation. Form 8938: $10,000 for failure to file, plus $10,000 for each 30 days of non-compliance after IRS notice, up to $50,000. Plus a 40% penalty on underpayments related to undisclosed assets.

A US person with Canadian accounts above $10,000 but below the Form 8938 threshold files only the FBAR. A US person above both thresholds files both. Filing one does not satisfy the other. Our guide on FBAR vs. Form 8938 walks through the comparison in detail.

What is Form T1135?

Form T1135 (Foreign Income Verification Statement) is Canada’s equivalent for Canadian residents. It requires reporting of “specified foreign property” if the total cost exceeds $100,000 CAD at any time during the year.

Who files: Canadian residents (individuals, corporations, trusts, partnerships) who own specified foreign property with a total cost of more than $100,000 CAD.

What is specified foreign property: Funds held outside Canada (US bank accounts, US brokerage accounts), shares of non-resident corporations (US stocks held in a Canadian brokerage count), foreign debt (US bonds, US promissory notes), real property outside Canada (US rental property), and interests in foreign trusts.

What is excluded: Personal-use property (a vacation home used exclusively by the taxpayer), property in registered plans (RRSPs, TFSAs, RRIFs holding US investments are not T1135-reportable because the registered plan is the owner), and property used in an active business carried on in Canada.

Threshold: $100,000 CAD total cost at any time. Cost means the adjusted cost base, not fair market value. If you purchased US stocks for $105,000 CAD and they fell to $60,000 CAD in value, you still file because the cost exceeded $100,000.

Simplified reporting: If the total cost is between $100,000 and $250,000 CAD, you can use the simplified reporting method (check boxes for categories of foreign property). Above $250,000, you must provide detailed reporting (each property listed with country, cost, income, and gain/loss).

Penalties: $25 per day for late filing, minimum $100, maximum $2,500. If the CRA sends a demand and the return is still not filed within 100 days, the penalty increases to $1,000 per month, up to $24,000 per year. Gross negligence can trigger a penalty equal to 5% of the cost of the unreported property. Late filers can use CRA’s Voluntary Disclosure Program or correct the omission through T1135 late filing procedures.

What is CRS and how does it affect Canadians?

The Common Reporting Standard (CRS) is an OECD initiative that Canada adopted in 2017. Under CRS, Canadian financial institutions identify account holders who are tax residents of other participating jurisdictions and report their account information to the CRA. The CRA then exchanges the data with the account holder’s country of tax residence.

For a Canadian resident, CRS primarily matters if they hold accounts in other countries (the foreign institution will report them to that country’s authority, which will share with the CRA). For a non-resident holding Canadian accounts, CRS ensures the CRA reports to their home country.

CRS is broader than FATCA in geographic scope (over 100 participating jurisdictions) but narrower in some technical respects (it does not apply to US-based financial institutions, because the US does not participate in CRS, relying instead on FATCA for its own information exchange). The practical effect for Canada-US cross-border situations: FATCA handles the US-to-Canada information flow (Canadian institutions reporting US persons to the CRA, which shares with the IRS), while CRS handles the Canada-to-everywhere-else flow (including some redundancy with FATCA for the Canada-US corridor).

What about Canadian registered plans (RRSP, TFSA, RESP)?

Canadian registered plans create unique reporting issues for US persons:

RRSP/RRIF: The US treats RRSPs as foreign trusts, but the treaty (Article XVIII(7)) allows deferral of US tax on income accruing in the RRSP. Under Rev. Proc. 2014-55, the deferral election is deemed automatic for most taxpayers, eliminating the need to file Form 3520 and 3520-A for the RRSP. The RRSP is still reportable on the FBAR and Form 8938.

TFSA: The US does not recognize the TFSA as a tax-advantaged account. The IRS treats it as a foreign trust. A US person who holds a TFSA may need to file Form 3520 (Annual Return to Report Transactions With Foreign Trusts) and Form 3520-A (Annual Information Return of Foreign Trust With a US Owner). The TFSA income (interest, dividends, capital gains) is taxable on the US return in the year it is earned. Penalties for failure to file Form 3520 and 3520-A can be $10,000 or more per form per year.

RESP: Similar to the TFSA, the US treats the RESP as a foreign trust. Form 3520/3520-A may be required. The income in the RESP may be currently taxable to the US person.

The practical advice for US citizens or residents with Canadian registered plans: keep the RRSP (treaty-protected deferral), withdraw and close the TFSA (the US reporting burden and current taxation of earnings makes it not worth holding), and evaluate the RESP on a case-by-case basis.

What are the common mistakes?

1. Assuming the FBAR threshold is per-account. It is aggregate across all foreign accounts. Three accounts with $4,000 each trigger the filing.

2. Forgetting signature authority accounts. A US person who has signature authority over a business bank account in Canada must report that account, even if they have no financial interest in it.

3. Overlooking the TFSA. Many US citizens in Canada open TFSAs not realizing the US reporting obligations. The TFSA becomes a compliance liability, not a tax shelter.

4. Filing T1135 based on market value instead of cost. The $100,000 threshold is based on cost, not current value. Stocks purchased for $110,000 that are now worth $70,000 still trigger the filing.

5. Confusing FBAR and Form 8938. They are separate filings with different thresholds, different due dates (FBAR: April 15/October 15; Form 8938: with the tax return, including extensions), and different penalties. Filing one does not satisfy the other.

6. Ignoring the institutional reporting. Some taxpayers believe that because their bank reports under FATCA or CRS, they do not need to file personally. The institutional reporting and the personal reporting are completely separate obligations. The bank’s report to the CRA/IRS does not replace the FBAR, Form 8938, or T1135. Accidental Americans whose Canadian bank accounts have been closed under FATCA still face the same individual filing obligations.

Related guides:

• FBAR filing requirements covers who must file, what accounts are reported, and the $10,000 aggregate threshold in detail
• Form 8938 filing requirements and thresholds walks through the individual FATCA filing, including the different thresholds for domestic vs. abroad filers
• FBAR vs. Form 8938: do I file both? compares the two forms side by side and explains when you need one, both, or neither
• T1135 late filing and the VDP covers what to do if you missed prior-year T1135 filings, including the Voluntary Disclosure path
• FATCA explained provides the institutional-side overview of FATCA, including the IGA framework and what banks actually report
• Streamlined Foreign Offshore Procedures explains the IRS catch-up program for non-willful filers who missed FBARs, Form 8938, or other international returns
• Is a TFSA a foreign trust? covers the US trust classification of TFSAs and the Form 3520/3520-A obligations
• Cross-border tax filing deadlines lists every due date for US and Canadian international forms, including the FBAR and T1135

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.