Renouncing US Citizenship From Canada: Catch Up First

Catch up on the US filings first, then renounce. Form 8854 asks you to certify under penalty of perjury that you met your US federal tax obligations for the five tax years before you expatriate, and IRC 877(a)(2)(C) makes a failure to certify one of the three tests that turn you into a covered expatriate, whatever your net worth. How the exit tax itself works is in our main guide to renouncing US citizenship, the exit tax and Form 8854. This page is the Canadian version: the order of steps, your Canadian accounts, and what Canada does after.

Do I have to catch up on US taxes before I renounce?

If you want to stay out of covered-expatriate status, yes. Form 8854 carries a certification that you met your US federal tax obligations for the five tax years before the year you expatriate, and IRC 877(a)(2)(C) counts a failure to certify as a test in its own right. The IRS says tax compliance isn’t a pre-condition to renouncing, so nothing stops a renunciation before the filings are done.

“U.S. citizens who renounce or otherwise relinquish their citizenship must comply with Federal tax requirements for the year of expatriation and for the five tax years prior to their expatriation” (IRS, Relief Procedures for Certain Former Citizens).

The certification covers more than 1040s. Notice 2009-85 reads it as reaching “obligations to file income tax, employment tax, gift tax, and information returns, if applicable, and obligations to pay all relevant tax liabilities, interest, and penalties.” On a Canadian file that usually pulls in the FBARs and the TFSA and mutual-fund forms too.

Then there’s the arithmetic. The catch-up route most Canadians use is the Streamlined Foreign Offshore Procedures, and the IRS asks there for returns “for each of the most recent 3 years for which the U.S. tax return due date (or properly applied for extended due date) has passed” plus six years of FBARs (IRS, U.S. Taxpayers Residing Outside the United States). The certification runs five. Three and five don’t line up, so a streamlined submission getting accepted doesn’t by itself put five certified years behind you. Which years stay open turns on when you file and when you expatriate, which is why the sequence gets built backwards from the expatriation date you want.

A narrower IRS route exists for this exact situation, and by its own terms it’s for citizens. The Relief Procedures for Certain Former Citizens are “only available to U.S. citizens with a net worth of less than $2 million” and an aggregate tax liability of “$25,000 or less for the taxable year of expatriation and the five prior years.” Meet every criterion and you “will not be ‘covered expatriates’ under IRC 877A.”

What makes someone a covered expatriate?

Meeting any one of three tests in IRC 877(a)(2), measured as of the expatriation date. Two are size tests: your average annual net income tax for the five years ending before you expatriate, and your net worth on the day itself. The third is the certification. One is enough to make you covered, and the certification test doesn’t care what the other two say about you.

Test	What it measures	Where the line sits (US dollars)	Does the figure move?
Average annual net income tax for the 5 years ending before the expatriation date (IRC 877(a)(2)(A))	US income tax owed, not income earned	More than $211,000 for 2026 (Rev. Proc. 2025-32, sec. 4.37); more than $206,000 for 2025 (IRS)	Yes, indexed yearly from a $124,000 statutory base
Net worth on the expatriation date (IRC 877(a)(2)(B))	Everything you own, worldwide	$2,000,000 or more	No, the statute doesn’t index it
Certification of 5 years of US tax compliance on Form 8854 (IRC 877(a)(2)(C))	Whether you filed and paid	Failing to certify makes you covered whatever your net worth and income are	No figure attached

One exception matters a great deal in Canada, and it leaves the third test standing. Under IRC 877A(g)(1)(B), someone who “became at birth a citizen of the United States and a citizen of another country”, still holds that other citizenship, is taxed as a resident there, and has been a US resident for not more than 10 of the 15 taxable years ending with the expatriation year is not treated as meeting the income-tax or net-worth test. The Form 8854 instructions spell out what survives:

“these individuals will still be treated as covered expatriates unless they file Form 8854 and certify that they have complied with all federal tax obligations for the 5 tax years preceding the date of expatriation” (IRS, Instructions for Form 8854).

So for someone born in Canada to a US-citizen parent, holding both passports since birth and filing Canadian returns as a resident, the money tests can fall away by statute and the certification becomes the whole question.

How does the exit tax treat RRSPs, TFSAs and a home?

Each goes through a different door. Your Canadian home and non-registered investments are ordinary property, so they’re deemed sold at fair market value the day before you expatriate under IRC 877A(a), with the exclusion ($910,000 for 2026, Rev. Proc. 2025-32) taken off the total gain. Retirement plans are pulled out of the deemed sale and taxed under their own rules.

RRSPs and RRIFs. Form 8854 lists “any interest in a foreign pension plan or similar retirement arrangement or program” as a deferred compensation item (Instructions for Form 8854). The statute and Notice 2009-85 don’t name Canadian plans, but the Notice’s Example 19 treats an interest in a foreign pension plan funded through a section 402(b)(4) trust, whose trustee hasn’t elected US-person status, as an “ineligible” item, and for those “an amount equal to the present value of the covered expatriate’s accrued benefit is treated as having been received” the day before the expatriation date. Our read is that an RRSP or RRIF with a Canadian trustee generally lands there. The Notice has the amount reported “other than his investment in the contract,” and our read is that US basis from contributions you couldn’t deduct on your US returns counts toward it.

TFSAs. A TFSA isn’t on any of the carve-out lists on Form 8854 line 1 (deferred compensation, specified tax deferred accounts, nongrantor trusts). Our read is that its holdings go through the deemed sale like a non-registered account. Whether a TFSA is a foreign trust for US reporting is its own question, covered in is a TFSA a foreign trust.

Currency. Form 8854’s balance sheet is in US dollars, so every Canadian-dollar asset gets converted before any test is run.

One relief that matters on the green-card side has no purchase here. IRC 877A(h)(2) floors your basis at fair market value “on the date the individual first became a resident of the United States (within the meaning of section 7701(b))”. A US citizen from birth who never moved to the US has no such date. The green-card version of expatriation is where that rule does its work.

Does renouncing change anything on the Canadian side?

No. Canada charges income tax on residence. Section 2(1) of the Income Tax Act puts the liability on “every person resident in Canada at any time in the year”, and section 3(a) computes that income from sources “inside or outside Canada”. Handing a US passport back moves none of the facts CRA weighs, so a Canadian resident who renounces is still a Canadian taxpayer on worldwide income.

“To determine your residency status, all of the relevant facts in your case must be considered, including residential ties with Canada and the length of time, purpose, intent and continuity of the stay while living inside and outside Canada” (CRA, Determining your residency status).

Citizenship isn’t on that list. Our read: because Canada taxes on residence, giving up a US passport isn’t a Canadian tax event, so your RRSP, RRIF and TFSA carry on under Canadian rules exactly as before and there’s no Canadian deemed disposition. Canada’s departure tax under ITA 128.1(4) is triggered when a taxpayer “ceases to be resident in Canada”, a different event. If you’re also leaving Canada, see our guide on what Canada’s departure tax catches.

What does renouncing cost?

The statute’s route is “making a formal renunciation of nationality before a diplomatic or consular officer of the United States in a foreign state,” under 8 U.S.C. 1481(a)(5). The consular fee for “Administrative Processing of Request for Certificate of Loss of Nationality” is item 8 of the fee schedule in 22 CFR 22.1, and that schedule reads $450. It was $2,350 until a final rule lowered it effective April 13, 2026 (91 FR 12296).

The IRS relief procedures page still says the fee “is $2,350, and the fee cannot be waived.” That sentence is stale; the codified schedule governs. The tax side is a separate cost, covered in how much expatriation tax advice costs.

The two processes don’t check each other: “Compliance with all U.S. income tax filings or obtaining a Social Security number is not a pre-condition to relinquishing citizenship under the Immigration and Nationality Act” (IRS, Relief Procedures). That’s why the ordering trap exists. The IRS also states that “unless a finding of loss of U.S. citizenship is vacated by the Department of State, relinquishing U.S. citizenship is irrevocable.” Questions about the consular process itself go to an immigration lawyer, and whether to renounce is yours to decide.

When is Form 8854 due, and what if I skip it?

It attaches to your return for the year that includes your expatriation date. The instructions say to “attach your initial Form 8854 to your income tax return (Form 1040, 1040-SR, or 1040-NR) for the year that includes your expatriation date, and file your return by the due date of your tax return” (IRS, Instructions for Form 8854). Skipping it costs $10,000 under IRC 6039G(c), with a reasonable-cause defence in the same sentence.

“such individual shall pay a penalty of $10,000 unless it is shown that such failure is due to reasonable cause and not to willful neglect” (IRC 6039G(c)).

The quieter cost is the certification. It lives only on that form, so someone who skips the form has not certified, and IRC 877(a)(2)(C) makes them covered on that basis alone. Covered status then follows you: gifts and bequests you later make to US family can be taxed to them under IRC 2801, which the main renunciation guide covers.

What to do next

Work backwards from the date you’d want on the Certificate of Loss of Nationality. List the five tax years before that year, mark which ones have a filed US return behind them, and you’ll see straight away whether a catch-up has to run first and roughly how long it needs. If you’ve never filed at all, the never-filed guide is the starting point; if the returns went in and only the FBARs were missed, late FBARs on their own are a shorter road. Book the consulate appointment last.

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