Ask Allan a Tax Question and he will respond to you with an answer to your question within 24 hours!
Hey there, I have GIC in the FHSA account that hasn’t matured yet. To close the account, I’ll lose all interests earned (~500 CAD) as well as penalties. I want to get an idea of the cost of reporting FHSA in the US to decide the best option. Also, I might come back to Canada and FHSA account can only be opened once in lifetime. Can you suggest what would a better option for me?
Hi Ivan,
Thank you for reaching out! Given your FHSA (First Home Savings Account) and your U.S. tax obligations, here are a few key considerations:
1. Reporting FHSA in the U.S.
The U.S. does not recognize the FHSA as a tax-deferred account, which means:
✔ Any income (such as GIC interest) earned within the FHSA is taxable in the U.S. even if it remains in the account.
✔ The FHSA may be considered a foreign trust, requiring additional reporting (e.g., Forms 3520 & 3520-A).
✔ If you hold investments inside the FHSA (other than cash or GICs), PFIC (Passive Foreign Investment Company) rules may apply, which can be complex and require additional filings.
2. Should You Close the FHSA?
Since the FHSA can only be opened once in a lifetime, closing it now means you won’t be able to open another if you return to Canada. If you plan to come back, keeping it open might be beneficial. However, you’d need to continue U.S. reporting.
If you close it:
✔ You’ll lose the interest earned (~$500 CAD) and may face penalties.
✔ You will no longer need to report it to the IRS.
If you keep it:
✔ You maintain the FHSA benefit if you return to Canada.
✔ You must report it annually to the IRS, which may involve additional compliance costs.
3. Cost of Reporting
The cost of reporting your FHSA depends on the complexity of the filing, including whether Forms 3520 & 3520-A are required. Our pricing typically starts at $750, and we can provide a more detailed estimate based on your situation.
in Accounting & Taxation Services
Ready to leave your accounting and taxation worries behind?
Unit 20, 145 Traders Blvd E Mississauga ON, L4Z 3L3 Canada
Call: (905) 268-0150 Email: info@madanca.com
SOCIAL CONNECT