How Does Streamlined Filing Work for Retirees With Canadian Pensions? CPP, OAS, an RPP, and a RRIF, Each on Its Own Line

Retirees are a large share of streamlined filers: Americans who moved to Canada decades ago, worked a Canadian career, and are now drawing Canadian pensions with no idea that the IRS wanted a return every year. Their submissions are simpler than a working person's in one way (no salary, no corporation, often no PFICs) and more particular in another, because each kind of retirement income has its own treaty rule. CPP and OAS paid to a Canadian resident are taxable only in Canada and are excluded from US income by treaty. An employer pension is taxable in both with a foreign tax credit. A RRIF is pension income in the US, less any basis, with the Canadian tax as a credit. And the TFSA that a retiree's bank recommended is the item that generates most of the US tax and all of the trust forms.

Key takeaways

• CPP, QPP, and OAS paid to a resident of Canada: under Article XVIII(5), taxable only in Canada. Excluded from US income; reported on Form 1040 line 6a with zero taxable on 6b and a Form 8833 disclosure. No US tax, no foreign tax credit needed.
• Employer pension (RPP, DB or DC): taxable in Canada as a resident and in the US as pension income (line 5); the Canadian tax is a foreign tax credit on Form 1116 (general basket for employer-sourced pensions under the regulations); the credit usually eliminates the US tax.
• RRIF withdrawals: pension income in the US; taxable to the extent they exceed the retiree's US basis (contributions made while a US person that were not US-deductible); the Canadian tax on the withdrawal is a credit. The RRIF itself is deferred under the treaty and reported on the FBAR and Form 8938.
• US Social Security received by a Canadian resident: taxable only in Canada (with the 15% exclusion); excluded from US income with Form 8833.
• TFSA: earnings taxable in the US each year; Forms 3520 and 3520-A; the retiree's main US tax item.
• Investment income (Canadian interest, dividends, capital gains): reported, with Canadian mutual funds as PFICs; the foreign tax credit in the passive basket.
• Deductions: the standard deduction (plus the additional amount for age 65 and the temporary senior deduction from 2025) usually exceeds any itemized deductions; medical expenses rarely clear 7.5% of AGI.

CPP, QPP, and OAS

Article XVIII(5) provides that social security benefits paid to a resident of the other country are taxable only in that country. CPP, QPP, and OAS are Canadian social security benefits; paid to a US citizen resident in Canada, they are taxable only in Canada. The US return reports them on line 6a (Social Security benefits, gross) with zero on line 6b, and attaches Form 8833 disclosing the treaty-based exclusion. No US tax; no credit needed. The streamlined returns for the three years follow this treatment; the T4A(P) and T4A(OAS) amounts are converted at the average rate for the gross figure.

The OAS clawback is a Canadian matter and is unaffected.

The employer pension

A defined benefit or defined contribution pension from a Canadian employer is taxable in Canada as ordinary income and in the US as pension income (line 5a gross, 5b taxable in full; there is no US basis in an employer-funded pension). The Canadian tax attributable to the pension is a foreign tax credit on Form 1116; the IRS regulations source employer pension income to where the services were performed, so a Canadian-career pension is foreign-source in the general basket, and the credit is fully usable. At Canadian rates the credit eliminates the US tax and produces a carryforward.

The RRIF

The RRIF is treaty-deferred (automatically, under Rev. Proc. 2014-55, for an eligible individual) and reported on the FBAR and Form 8938. Withdrawals are pension income on line 5. The taxable amount is the withdrawal less the pro rata share of the retiree's US basis: contributions the retiree made to the RRSP while a US person (which were not US-deductible), recovered proportionately. A retiree who contributed for thirty years as a US citizen has substantial basis; one who contributed before becoming a US person (a Canadian who naturalized late) has none. The Canadian tax on the withdrawal (at resident marginal rates for a Canadian resident) is a foreign tax credit in the passive basket (the regulations treat RRSP income as passive for most individuals), and it usually covers the US tax.

The basis record is the retiree's problem: contribution receipts and notices of assessment back to the first contribution. A reconstruction from the CRA's records is usual.

US Social Security

A US citizen in Canada receiving US Social Security (from earlier US work) reports it on line 6a with zero taxable, Form 8833, and the treaty exclusion; Canada taxes it with the 15% deduction. No US tax.

The TFSA and investment income

Retirees hold TFSAs (often maximized) and non-registered investments. The TFSA's earnings are US income each year; Forms 3520 and 3520-A are filed for each covered year; the account is on the FBAR and Form 8938; the streamlined submission waives the trust-form penalties. Non-registered Canadian mutual funds are PFICs with Forms 8621; individual stocks and GICs are ordinary; the Canadian tax is a passive-basket credit that, on Canadian eligible dividends and capital gains, is often less than the US tax, leaving a residual.

Deductions and credits

The standard deduction for a married couple over 65 is the base amount plus two additional amounts, plus (for 2025 through 2028) the $6,000-per-person senior deduction under the 2025 law, subject to income limits. Most retirees do not itemize. Medical expenses (Canadian extended health premiums, dental, drugs) are deductible only above 7.5% of AGI. The foreign tax credit is the main mechanism.

The submission

Three years of 1040s (with Forms 8833, 1116, 8938, 3520/3520-A, 8621 as applicable), six FBARs (the RRIF, the TFSA, the bank and brokerage accounts), Form 14653. The narrative is the retiree's: when they came to Canada, their career, the preparer who never asked, the accounts, the discovery. Tax is typically the US tax on the TFSA and on investment income beyond the credit, plus interest.

Worked example

A US-citizen widow, 74, in Victoria since 1985, with CPP ($14,000), OAS ($9,000), a BC teachers' pension ($38,000), RRIF withdrawals ($30,000; RRSP contributions of $180,000 made as a US citizen; RRIF value $400,000), a $110,000 TFSA in GICs and a Canadian bond fund, and a $150,000 non-registered account in Canadian bank stocks.

• CPP and OAS. Line 6a; zero taxable; Form 8833. No tax.
• Pension. $38,000 (converted) on line 5; Canadian tax on it as a credit; no US tax.
• RRIF. $30,000 on line 5; basis ratio $180,000 / $400,000 = 45%; $16,500 taxable; Canadian tax on the withdrawal as a credit; no US tax.
• TFSA. GIC interest and bond fund income (the fund is a PFIC: Form 8621); about $4,500 a year of US income; Forms 3520 and 3520-A; the main US tax item.
• Bank stocks. Qualified dividends; Canadian tax on eligible dividends as a credit; a small residual plus NIIT if above the threshold (it is not).
• Result. Roughly $600 a year of US tax, mostly on the TFSA, plus interest; no penalties; six FBARs; three returns.
• After. Close the TFSA; keep everything else.

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

"Benefits under the social security legislation in a Contracting State (including tier 1 railroad retirement benefits but not including unemployment benefits) paid to a resident of the other Contracting State shall be taxable only in that other State, subject to the following conditions: (a) a benefit under the social security legislation in the United States paid to a resident of Canada shall be taxable in Canada as though it were a benefit under the Canada Pension Plan, except that 15 per cent of the amount of the benefit shall be exempt from Canadian tax; and (b) a benefit under the social security legislation in Canada paid to a resident of the United States shall be taxable in the United States as though it were a benefit under the Social Security Act, except that a type of benefit that is not subject to Canadian tax when paid to residents of Canada shall be exempt from United States tax." — Canada-United States Tax Convention, Article XVIII(5), https://www.canada.ca/en/department-finance/programs/tax-policy/tax-treaties/country/united-states-america-convention-consolidated-1980-1983-1984-1995-1997.html

Under Rev. Proc. 2014-55 an "eligible individual" — one who "is or at any time was a U.S. citizen or resident (within the meaning of section 7701(b)(1)(A)) while a beneficiary of the plan" and has filed any required U.S. returns — is treated as having made the Article XVIII(7) election to defer U.S. tax on income accrued in an RRSP or RRIF until distribution, without filing Form 8891. — Internal Revenue Service, Revenue Procedure 2014-55, https://www.irs.gov/pub/irs-drop/rp-14-55.pdf

Practitioner note

Retiree submissions are the ones where the treaty does the most work: CPP and OAS out, the pension covered by the credit, the RRIF covered by the credit and the basis. What is left is the TFSA, and it is always the TFSA. We reconstruct the RRSP basis from the CRA's records, file the three treaty positions on Form 8833, and close the TFSA the year after.

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 retiree's streamlined submission with the treaty positions on each income type, the RRIF basis reconstruction, and the TFSA trust forms. See cross-border pricing or book a call.