Lou is a tax-preparation tool, not a tax advisor. This article explains how the US tax system works for Americans in Canada.
Lou is a tax-preparation tool, not a tax advisor. This article explains how the US tax system works for Americans in Canada. For advice on your specific situation, work with a qualified tax professional.
If you're a US citizen or green card holder, a US tax filing obligation exists regardless of where you live. Moving to Canada does not change that.
This surprises a lot of people. Filing Canadian taxes makes sense. What is less obvious is that the US runs a parallel system: citizenship-based taxation.
How citizenship-based taxation works#
Most countries tax residents. The US taxes citizens.
A US citizen living in Toronto, Vancouver, or Calgary files a Form 1040 each year. All income, including income earned in Canada and reported on a T4, goes on that return. Even when no US tax is owed.
The US-Canada tax treaty is what prevents double taxation. Canadian taxes paid offset any US liability through the foreign tax credit. For most Americans in Canada with employment income, the US tax bill after credits works out to zero or close to it.
But a zero-tax return is still a return.
What goes on a US return#
Canadian income needs to be converted from CAD to USD at the IRS annual average exchange rate for that tax year. Not the current rate. Not the rate you used at your bank. The IRS publishes the annual average rate each year.
Employment income from a T4 goes on Form 1040. Investment income from T3 and T5 slips goes on Schedule B. Capital gains from T5008 go on Schedule D and Form 8949. Foreign taxes paid go on Form 1116, the foreign tax credit form.
Canadian accounts and US disclosure requirements#
Accounts held in Canada may trigger US disclosure requirements separate from the tax return.
The FBAR (FinCEN 114) covers foreign financial accounts that exceeded $10,000 USD in aggregate at any point during the year. Form 8938 covers higher thresholds under FATCA.
RRSPs can be deferred under the US-Canada treaty with a Form 8833 election. TFSAs are treated as foreign grantor trusts and reported on Form 3520 and Form 3520-A. Canadian mutual funds and ETFs held outside registered accounts may be PFICs (Passive Foreign Investment Companies) and reported on Form 8621.
Lou handles all of these.
What about people who have never filed#
Many Americans in Canada discover this obligation late. That is not unusual.
The IRS has a formal catch-up path: the Streamlined Foreign Offshore Procedures. Non-willful non-filers can submit three years of returns and six years of FBARs, with penalties waived.
Lou covers the forms this process requires. One payment covers all three years and the six years of FBARs.
Where Lou fits#
Lou takes your Canadian documents (T1 General, T4, T3, T5, and other slips), extracts the data locally in your browser, converts everything to USD at the correct IRS exchange rate, and fills in your US forms.
No manual entry. No server uploads. You can confirm that in your browser's network panel.
You review every line. You sign and file. Lou handles the preparation.
Free to use. You pay to download the completed forms. 15-day refund if it does not work for your situation.
Lou is a tax-preparation tool, not a tax advisor.
https://lou.bigtimedesign.ca