Streamlined Filing for Married Couples: Joint Returns, Both Signatures, and the Spouse Who Isn't American

A married couple's streamlined submission is one package with two people's facts in it. If both are US persons, the covered-year returns are usually joint, both spouses sign Form 14653 (or 14654), both must meet the track's requirements, and the certification narrative addresses each spouse's knowledge. If one spouse is not a US person, the US spouse files separately (married filing separately) for the covered years, or the couple elects under section 6013(g) to treat the non-US spouse as a resident and file jointly, which brings that spouse's worldwide income and accounts into the submission. The FBARs are individual: each US-person spouse reports every account they own or share.

Key takeaways

• Both spouses US persons, filing jointly: one submission; joint Forms 1040 (or 1040-X) for the three years; both spouses meet the non-residency test (SFOP) or the filed-return requirement (SDOP); both sign the certification; one narrative that states each spouse's circumstances.
• One spouse not a US person: the US spouse files married filing separately for the covered years (the default), reporting their own income and their share of joint accounts; the non-US spouse files nothing. Or the couple elects under section 6013(g) on the earliest covered year to treat the non-US spouse as a US resident and file jointly, in which case the non-US spouse's income, accounts, and any TFSA or PFICs enter the submission and continue to be reported until the election is revoked.
• FBARs: each US-person spouse files their own FBAR reporting accounts they own individually and the full value of joint accounts; spouses can file one FBAR covering only jointly held accounts if all their reportable accounts are joint and Form 114a is signed.
• Mixed eligibility: if one spouse qualifies for SFOP and the other only for SDOP (different day counts, or one spouse filed and the other did not), they cannot make a joint submission on one track; separate submissions or a joint SDOP submission.
• The 5% penalty (SDOP) is computed on the couple's combined foreign financial assets subject to the penalty for a joint submission.

Both spouses US persons

The common case: two US citizens (or a citizen and a green card holder) living in Canada, both non-filers. They submit under SFOP with joint returns for the three covered years (married filing jointly is usually better: the joint standard deduction, joint brackets, and the foreign tax credit on both spouses' Canadian tax). Both must meet the non-residency test (no US abode; 330 days outside the US in at least one of the three years); a couple where one spouse commutes to a US job may find that spouse fails it.

Form 14653 is signed by both spouses under penalties of perjury. The narrative must address each: how each became a US person, what each knew, each spouse's accounts and income. A narrative that describes only the husband's circumstances is inadequate for the wife's certification.

One spouse not a US person

A US citizen married to a Canadian who is not a US person files the covered-year returns as married filing separately: their own income (salary, their share of joint investment income by contribution), their own accounts and their share of joint ones on Form 8938, and their own FBAR (reporting joint accounts at full value). The Canadian spouse is not in the submission; their TFSA, mutual funds, and RRSP are not reported.

The alternative is the section 6013(g) election: the couple elects, on the earliest covered year's return, to treat the Canadian spouse as a US resident for the whole year and file jointly. The benefit is the joint brackets and standard deduction. The cost is that the Canadian spouse's worldwide income and accounts enter the submission and every subsequent return: their salary (with a foreign tax credit), their TFSA (income and Forms 3520/3520-A), their Canadian mutual funds (Forms 8621), their RRSP (deferred, reported). The election continues until revoked and cannot be re-made. For most mixed couples in Canada, married filing separately is the better answer in the streamlined submission and afterward; the election makes sense when the Canadian spouse has little income and no problematic accounts.

FBARs for couples

The FBAR is individual. Each US-person spouse files one, reporting accounts owned individually and every joint account at its full maximum value (not half). A US spouse with signature authority on the Canadian spouse's individual account reports that account as signature authority. Two US-person spouses whose reportable accounts are all jointly held can file a single FBAR with the non-filing spouse's authorization on Form 114a; if either spouse has an individual account, both file separately.

Mixed eligibility

Different residency results. If one spouse spent 40 days in the US each year (fails 330) and the other spent 20 (passes), the couple cannot submit jointly under SFOP. Options: the qualifying spouse submits under SFOP separately (married filing separately for the covered years) and the other under SDOP (if they filed returns) or delinquently; or both submit under SDOP jointly if both filed.

Different filing histories. SDOP requires that a return was filed for each covered year. A couple who filed jointly meets it together; a couple where one spouse filed separately and the other did not cannot use SDOP jointly.

The narrative for two

The narrative describes the couple's shared circumstances (the move, the preparer, the discovery) and each spouse's individual ones (each spouse's US status, each spouse's knowledge, each spouse's accounts). Where one spouse handled the finances, say so; where one spouse learned first, say when and how the other learned. Inconsistency between the spouses' accounts is a credibility problem.

Worked example

A US-citizen wife and Canadian husband in Ottawa; she has never filed; he is not a US person. Joint chequing ($40,000), her RRSP ($250,000), her TFSA ($80,000), his RRSP and TFSA, his mutual funds.

• Route. SFOP; she qualifies (Ottawa abode; few US days).
• Returns. Married filing separately for three years: her salary with the foreign tax credit; her share of the joint account's interest (by contribution); her TFSA's earnings with Forms 3520/3520-A; her RRSP deferred; Form 8938; Schedule B. Nothing of his.
• 6013(g) considered and rejected: his mutual funds would be PFICs and his TFSA a foreign trust on a joint return, for the benefit of the joint brackets she does not need (her tax is zero after the credit).
• FBAR. Hers: joint chequing at full value, her RRSP, her TFSA. Not his accounts. Six years.
• Certification. Signed by her; narrative about her.
• After. She closes her TFSA; he keeps his.

Official sources

The IRS states that a US citizen or lawful permanent resident meets the non-residency requirement where, "in any one or more of the most recent three years for which the U.S. tax return due date (or properly applied for extended due date) has passed," the individual "did not have a U.S. abode and the individual was physically outside the United States for at least 330 full days." Eligible taxpayers "will not be subject to failure-to-file and failure-to-pay penalties, accuracy-related penalties, information return penalties, or FBAR penalties." — Internal Revenue Service, U.S. Taxpayers Residing Outside the United States, https://www.irs.gov/individuals/international-taxpayers/us-taxpayers-residing-outside-the-united-states

The IRS states that where one spouse "is a U.S. citizen or a U.S. resident within the meaning of Internal Revenue Code (IRC) section 7701(b)(1)(A) and the other is not, you can choose to treat the nonresident spouse as a U.S. resident for tax purposes," and both spouses are then taxed on worldwide income. — Internal Revenue Service, Nonresident Spouse, https://www.irs.gov/individuals/international-taxpayers/nonresident-spouse

"A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year." — Financial Crimes Enforcement Network, Report of Foreign Bank and Financial Accounts (FBAR), https://www.fincen.gov/report-foreign-bank-and-financial-accounts

Practitioner note

The married submission has two questions before anything is prepared: do both spouses qualify for the same track, and is the other spouse a US person at all. A Canadian spouse who is not a US person stays out of the submission unless the couple elects them in, and we almost never elect them in; the joint brackets are not worth a TFSA and a shelf of PFICs on every future return.

See also: New to catching up? Start with what the Streamlined Foreign Offshore Procedure is and whether you qualify, and browse every cross-border tax topic guide, organized by situation.

Next step

Fairlight prepares the married streamlined submission on the correct track, the filing-status decision for a mixed couple, and both spouses' FBARs. See cross-border pricing or book a call.