Filing Back Tax Returns for U.S. Citizens Living in Canada

Allan Madan, CA
 Jul 18, 2013

This short article is called ‘Filing Back Tax Returns for US Citizens Living in Canada’ and it can help simplify the process of catching up with back taxes for Americans living in Canada. Before we start, I’ll tell you why it’s so important for you to become tax compliant with the IRS.

The Importance of Filing Back Taxes for US Citizens Living in Canada:

US citizens must file a US tax return every single year and report their worldwide income to the IRS. They must also file a FBAR. This is a report of their bank and financial accounts held overseas. Failure to file could result in a penalty of up to $10,000 per year, per account. In fact, the IRS has so much power that it could require the Canada Revenue Agency to disclose your personal financial information to them.

Now that you know why it’s so important, how do you become in compliance? There are three ways that you can become complaint with the IRS, and they as listed below.

The Streamlined Process:

The first way of filing US tax returns for US citizens living in Canada that allows you to become complaint with the IRS is through the Streamlined Process. The Streamlined Process allows full compliance without any penalties. With the Streamlined Process you must file six years of past due FBARs and three years of past due US tax returns, plus the current year. To qualify for this program you must meet four conditions:

  1. You are a US citizen or a Green Card holder.
  2. You have not lived in the US since January 1st 2009.
  3. You have not filed a US tax return or a FBAR since 2008.
  4. You are a low compliance risk.

The IRS considers you a low compliance risk if your tax returns are fairly simple and if you do not have a significant amount of tax owing to the IRS. With the Streamlined Process you must pay all taxes plus interest that are due. While there is no end date for this program the IRS could close the Streamlined Process at any point in time. That’s why I recommend that you take advantage of the Streamlined Process as soon as you can.

Now, please don’t worry about the Streamlined Process. Most US citizens living in Canada will not owe any tax to the IRS because the Canadian tax rates are higher than the US tax rates, and also because you will receive a foreign tax credit on your US tax return for Canadian taxes already paid.

Quiet Disclosure:

The second way, when it comes to catching up with back taxes for Americans living in Canada, is through Quiet Disclosure. Quiet Disclosure means that you are filing past due US returns and past due FBARs and paying the related taxes and interest due. Do not notify the IRS of your submission either formally or by any other means; it must be quiet. While there is no guarantee, the IRS may process your returns normally without any penalty. Under the worst case scenario you could be assessed the maximum allowable penalty amount.

Overseas Voluntary Disclosure Program:

The third way of filing past due returns for US citizens living in Canada in order to become tax compliant with the IRS is through the Overseas Voluntary Disclosure Program. This program is meant for US citizens who have significant undisclosed assets that are overseas. In this program you must file past due US returns and past due FBARs along with paying what’s known as the offshore penalty. There are three types of offshore penalties:

  1. Standard Penalty is 27.5% of the highest value of your offshore assets during the period of disclosure.
  2. Reduced Penalty is 12.5% of the value of your offshore assets if the value is less than $75,000 each year.
  3. Super Reduced Penalty is 5% of the value of your offshore assets. To qualify for this super reduced penalty of 5% you must meet three main conditions:
  • You lived in Canada during the year.
  • You filed your Canadian tax returns on time and do not have any outstanding Canadian taxes.
  • You have earned less than $10,000 in US source income.


The information provided on this page is intended to provide general information. The information does not take into account your personal situation and is not intended to be used without consultation from accounting and financial professionals. Allan Madan and Madan Chartered Accountant will not be held liable for any problems that arise from the usage of the information provided on this page.

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Comments 2

  1. Hi, i just sent you an email asking if you did offer services in the streanline process. Now i see that you do after checking some of the different links on your site. I’m impressed that made such a clear and professional video in that exact topic.

    I have not filed any US taxes because i didn’t know there was a law saying so. I was born in usa but I’ve lived here my whole life even obtaining Canadian citizenship here. I want to relinquish sooner or later but i realize i need to in compliance first.

    Can you tell me what your estimated fees are for this type of service? My taxes are pretty simple not much investments etc. If that helps to give you idea pricing wise. As well i have obviously not filed the FBARS. I was told by a friend they heard on the news that us citizens living in Canada have to file taxes in the us and asked me if i did that because he heard there were possible fines and penalties. So over the last couple of weeks, I’ve been frazzled and reading as much as i could to find out more about this. I’m a relatively low income earner under $40,000 per year.

    It would be great if i can find out if you are able to help. Of note, i never applied for a SSN because i never worked out there. Thank you for your time.


    Ms. X (name left blank)

    1. Hi Ms. X,

      As you may know, the Streamlined Process was created by the IRS to allow delinquent tax filers (who are US citizens living abroad) to become compliant with the IRS. The advantage of the Streamlined Process is that it is easy, and eliminates civil penalties for late-filing.

      You do not have to file tax returns for every single year that you are behind. Rather, under the Streamlined Process, you have the file the following returns:

      1) US personal tax returns for the past 3 years, plus the current year
      2) Foreign Financial Bank Account Report (FBAR) for the past 6 years, plus the current year

      So long as you did not have significant sources of other income, aside from your yearly employment income of $40,000, it’s unlikely that you will have a US tax liability. Please feel free to contact me at or call me at 905-268-0150 to discuss this matter further.

      Thank You,

      Allan Madan, CPA, CA & Team


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