Introduction
Many U.S. citizens moving to Canada are unaware that they must continue to file a tax return with the IRS, even though they already pay taxes in Canada. This double tax obligation often leads to errors or omissions.
Result: thousands of Americans in Canada are discovering that they never filed their US income tax returns (Form 1040) nor their FBAR reports for their bank accounts. In theory, the penalties can be very material.
Fortunately, the IRS has implemented a regularization procedure called Streamlined Foreign Offshore Procedure (SFOP). This special program allows American expatriates to comply without penalties, as long as they meet certain conditions.
What is the Streamlined Foreign Offshore Procedure?Qu’est-ce que le Streamlined Foreign Offshore Procedure ?
The Streamlined Foreign Offshore Procedure is an IRS program launched in 2012 and expanded in 2014.
It is aimed at American taxpayers living abroad (such as in Canada) who:
- Have not met their US tax obligations,
- Have acted without fraudulent intent.
The objective of the program
- Allowing expatriates to correct their tax situation.
- Avoid the severe penalties normally applicable.
👉 There are two parts:
- Streamlined Foreign Offshore → for non-residents (expats in Canada).
- Streamlined Domestic Offshore → for residents in the United States.
Who is eligible for the Streamlined Foreign Offshore?
To participate, it must be demonstrated that the omission was unintentional.
Main criteria
- Reside outside the United States for at least 330 days during one of the last three years.
- Not having produced through ignorance or negligence, but not by willful fraud.
- Having undeclared income, accounts or assets.
What obligations need to be regularized?
- Three years of US tax returns (Form 1040)
- Six years of FBAR (FinCEN Form 114)
- Other specific forms depending on the case:
- Form 8938 (FATCA)
- Form 3520/3520-A (TFSA, trusts)
What are the advantages of Streamlined?
Without Streamlined
- FBAR Penalty: $10,000 per account, per year.
- FATCA (Form 8938): penalties up to $50,000.
- Risk of additional fines.
- Form 3520/3520-A Penalty: $10,000 per account, per year.
With Streamlined
- No penalty for non-residents.
- Payment of taxes due + interest only.
- Full return to IRS compliance.
Risks and limitations of the program
- Obligation to sign a certification attesting to the fraudulent non-intent.
- Refusal if the IRS detects fraud.
- Possibility that the program may cease in the future.
Concrete example: an American in Montreal
Situation:
- American citizen in Canada for 12 years.
- Bank accounts: CAN$ 150,000.
- RRSP: CAN$ 80 000.
- Never produce a FBAR or 1040.
Result
- Without Streamlined: more than US$100,000 in penalties.
- With Streamlined: zero penalty, simple regularization.
Practical steps to regularize
- Check eligibility.
- Gather bank and tax statements.
- Produce 3 years of 1040 and 6 FBARs.
- Sign the « non-willful » la certification.
- Submit through the IRS Streamlined channel.
FAQ
Do I have to declare my RRSP in the United States?
Yes, the RRSP must be reported on FBAR and sometimes on Form 8938.
What is the difference between FBAR and FATCA (Form 8938)?
The FBAR covers bank accounts > US$ 10,000 in aggregate. Form 8938 also covers other assets above US$ 50,000.
Is Streamlined still available in 2025?
Yes, but the IRS can terminate it without notice.
How much does regularization cost?
It depends on the number of forms, but IRS penalties are waived for non-residents.Cela dépend du nombre de formulaires, mais les pénalités IRS sont annulées pour les non-résidents.
Conclusion
The Streamlined Foreign Offshore Procedure is a unique opportunity for US citizens living in Canada.
By filing three years of returns and six FBARs, they can get back into compliance without penalties.
👉 Contact Effisca for a confidential analysis of your situation and regularize your situation without stress.