FATCA for Canadians and Americans in Canada: What the Banks Report, What the CRA Forwards, and Who Should Care

Short version: Form 8938 Explained: FATCA Foreign Asset Reporting

FATCA is the reason a Canadian bank asks where you were born, and understanding the regime is the fastest cure for both the panic and the complacency it produces. The architecture: the US Foreign Account Tax Compliance Act (2010) requires foreign financial institutions worldwide to report accounts held by US persons or face a 30% withholding tax on their US-source payments; Canada implemented it through an intergovernmental agreement (2014) and domestic legislation under which Canadian financial institutions report to the CRA rather than directly to the IRS, and the CRA exchanges the information with the IRS annually — a design that routes the data through Canadian privacy law and Canadian administration. What institutions must do: identify accounts with US indicia — US citizenship or residency declared, US place of birth, US address or phone number, standing instructions to US accounts, a US power of attorney — through due diligence on new accounts (the questionnaire) and periodic review of existing ones; request self-certification of status where indicia appear (the W-9 for US persons, a W-8BEN or equivalent with supporting evidence for non-US persons with a US birthplace); and report US-person accounts annually: account holder identifiers (including the US taxpayer identification number), account numbers, year-end balances, and gross income figures (interest, dividends, proceeds by category, phased in over the early years). What is exempt from institutional reporting: registered plans — RRSPs, RRIFs, TFSAs, RESPs, RDSPs, and registered pension plans — are generally excluded under the agreement's annex, along with certain small institutions and accounts below de minimis thresholds for pre-existing accounts; the exemption is the institution's, not the account holder's, whose own FBAR and Form 8938 obligations for the same plans are unaffected. Who is inside the regime: US citizens (including dual citizens who have never lived in the US), green card holders, and US tax residents holding Canadian accounts — the American in Canada, in all forms; who is outside it: Canadians with no US status, whose only encounter is the questionnaire (answered "no" with no evidence needed absent US indicia) or, where they were born in the US and later relinquished citizenship, the request for a certificate of loss of nationality. The reciprocal flow is the part Canadians miss: the agreement is two-way — US financial institutions report accounts held by Canadian residents to the IRS, which exchanges with the CRA (interest and certain other income on US accounts of Canadian residents), so the Canadian snowbird's Florida bank account is visible to the CRA through the same channel, and the T1135 and foreign-income omissions the Canadian side cares about are checkable against it. What FATCA does not do: it does not tax anything (it is an information regime — the taxes are the ordinary ones the information helps enforce); it does not make anyone a US person who wasn't one; it does not report registered plans institutionally; and it does not close accounts — institutions choose to, as the account-closure guide explains, for reasons that are partly FATCA and partly securities regulation. Who should care, and how much: the compliant American in Canada — not much; the reports match the returns; the questionnaire is a form. The non-compliant American in Canada — a great deal, because the data has been flowing for a decade and the catch-up decision has a clock (the FATCA-letter guide's sequencing). The Canadian with US accounts and a casual attitude toward reporting them on the T1135 or including their income — some, because the reciprocal flow makes the omission visible. The Canadian with no US connection — none beyond answering the bank truthfully. The regime is ten years old and unglamorous; its practical meaning is that cross-border account information is no longer private in either direction, and that compliance in both countries is now a matter of matching data that already exists rather than volunteering data that doesn't.

Key takeaways

• Information, not tax: FATCA reports accounts; the taxes it enforces are the ordinary ones — it creates no new liability and no new US persons.
• The Canadian route: institutions report to the CRA, the CRA exchanges with the IRS — indicia screening, self-certification (W-9 or W-8 with evidence), and annual reporting of identifiers, balances, and income.
• Registered plans are institution-exempt only: RRSPs, TFSAs, RESPs, and their kin are not reported by the bank — and remain fully reportable by the owner on the FBAR and Form 8938.
• Two-way flow: US institutions report Canadian residents' accounts to the IRS for exchange with the CRA — Florida bank accounts are visible north, and T1135 omissions are checkable.
• Who's inside: every US citizen, green card holder, and US tax resident with Canadian accounts; who's outside: Canadians with no US status, whose only encounter is a truthful questionnaire.
• What to do with it: compliant Americans carry on; non-compliant Americans treat the decade of data flow as the clock on their catch-up; Canadians with US accounts report them properly — the regime's real effect is that matching, not disclosure, is now the compliance model.

Reading your own position in five minutes

Are you a US citizen, green card holder, or US tax resident? If no: answer bank questionnaires truthfully, and if you have US accounts, report them on the T1135 and include their income — the reciprocal flow sees them. If yes: are your US filings current, including FBAR and 8938 for the accounts (registered plans included)? If yes: the bank's reports match your returns; the questionnaire is paperwork. If no: the reports have been flowing since you were identified, streamlined and the repair procedures remain open, and the FATCA-letter guide's two-week sequence starts today. Five minutes, four questions, one of four answers.

Worked example

Four people at one Toronto branch, one FATCA questionnaire each. Person one: Canadian-born, no US connection — checks "no," done; the regime never touches her again. Person two: born in Buffalo, relinquished US citizenship formally in 2016 — provides her certificate of loss of nationality, checked "no," done. Person three: a US citizen, compliant — signs the W-9, knows her RRSP and TFSA are on her FBAR and 8938 even though the bank won't report them, files as usual; the bank's annual report of her chequing and taxable accounts matches her returns exactly. Person four: a US citizen, never filed — signs the W-9 (truthfully, as he must), and learns from the branch conversation that the bank has been reporting his taxable account since 2015; the questionnaire becomes the discovery date in his streamlined certification, and his foreign-track submission goes in four months later with zero tax and full penalty protection. Same form, same counter, four correct answers — and the only one for whom the regime had consequences was the one for whom it had always had them, quietly, for a decade.

Official sources

FATCA "generally requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on withholdable payments." — Internal Revenue Service, Foreign Account Tax Compliance Act (FATCA), https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca

Under the Canada-U.S. agreement, "relevant information on accounts held by U.S. residents and U.S. citizens (including U.S. citizens who are residents or citizens of Canada) are reported to the Canada Revenue Agency (CRA). The CRA exchanges the information with the IRS through the provisions and safeguards of the Canada-U.S. tax treaty." — Canada Revenue Agency, Guidance on the Canada-U.S. Enhanced Tax Information Exchange Agreement, https://www.canada.ca/en/revenue-agency/services/tax/international-non-residents/enhanced-financial-account-information-reporting/reporting-sharing-financial-account-information-united-states/guidance-on-canada-s-enhanced-tax-information-exchange-agreement.html

Practitioner note

FATCA is misunderstood symmetrically: Canadians fear a regime that doesn't concern them, and non-compliant Americans dismiss one that has been reporting them for ten years. Our five-minute position read sorts clients into the four real categories, and its practical lesson is the same for everyone inside the regime — the compliance model is now matching, not disclosure, so the returns should say what the banks already have.

See also: Browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the FATCA position assessment — status confirmation, the reporting-flow explanation in both directions, the compliance-state check for US persons, and routing into the repair procedures where the data has outrun the filings. See cross-border pricing or book a call.