The US-Canada border is the world's longest international border, and millions of people live, work, and bank on both sides. Whether you are a US citizen who has moved to Canada, a Canadian with US investment accounts, or someone who crosses the border regularly for work, you face a unique set of banking and tax challenges. This guide covers the most important ones.
US Citizens Living in Canada — The Dual-Filer Problem
The United States is one of only two countries in the world (the other is Eritrea) that taxes its citizens based on citizenship rather than residency. This means that even if you are a US citizen living permanently in Canada, paying Canadian taxes, and earning Canadian income, you are still required to file a US federal tax return every year with the IRS.
Most US citizens living in Canada owe no US tax (because Canadian taxes are higher than US taxes, and the Foreign Tax Credit eliminates double taxation), but the filing obligation remains, and failing to file can result in significant penalties.
FBAR — Report of Foreign Bank and Financial Accounts
Critical FBAR Requirement
US persons (citizens, green card holders, residents) must file a FinCEN Form 114 (FBAR) if the aggregate value of their foreign financial accounts exceeds $100 USD at any point during the calendar year. A Canadian chequing account counts as a "foreign financial account" for US purposes.
Key FBAR facts:
- Filed electronically with FinCEN (not the IRS) by April 15 (October 15 with extension)
- Reports all foreign financial accounts — bank accounts, brokerage accounts, some pension accounts
- Penalties for non-filing: up to $100 per violation (non-willful); up to $100,000+ (willful)
- Report the maximum value of each account during the year, not the year-end balance
- RRSP and TFSA accounts may need to be reported (consult a cross-border tax professional)
FATCA — Foreign Account Tax Compliance Act
FATCA requires foreign financial institutions (including Canadian banks) to report information about accounts held by US persons to the IRS. Canadian banks are required to identify US persons (by citizenship, birthplace, or other indicators) and report their account information to the CRA, which passes it to the IRS under the Canada-US IGA (Intergovernmental Agreement).
What this means for you:
- Canadian banks will ask for your US taxpayer identification number (SSN or ITIN) if they identify you as a US person
- Your Canadian bank account information may be reported to the IRS annually
- Refusing to provide your SSN may result in your account being closed or reported as "recalcitrant"
US-Problematic Canadian Accounts — TFSA and RRSP
From a US tax perspective, Canadian registered accounts create complications:
- TFSA: Canada considers TFSA growth tax-free, but the US does not recognize this treaty protection automatically. US persons may owe US tax on TFSA investment income unless a specific treaty election is made annually on Form 8891 or similar position.
- RRSP: The Canada-US treaty explicitly recognizes RRSPs. Growth inside an RRSP is deferred from US tax (similar to a US IRA) if a treaty election is made on Form 8891. Contributions are not US-tax-deductible, but growth is deferred.
Holding USD Accounts in Canada
Major Canadian banks offer USD chequing and savings accounts. These are useful for:
- Receiving USD income (from US clients, US employers, US dividends)
- Avoiding constant currency conversion costs
- Traveling or shopping in the US without conversion fees
- Holding USD while the exchange rate is unfavourable for conversion
Major Canadian banks offering USD accounts: RBC, TD, Scotiabank, BMO, CIBC. Most charge monthly fees for USD accounts or require minimum balances. Wise also allows you to hold USD in Canada with no monthly fee.
CUSMA/USMCA — TN Visa and Cross-Border Work
Under the Canada-United States-Mexico Agreement (CUSMA, formerly NAFTA), certain Canadian professionals can work in the US on TN visas without a traditional work visa. Similarly, some US citizens may work in Canada under specific categories. TN visa holders living in Canada face the same US citizen tax filing obligations described above.
Additional Forms US Citizens in Canada May Need
Common US Forms for Canadians
- FinCEN 114 (FBAR): Annual foreign bank account report
- Form 8938 (FATCA): Statement of Specified Foreign Financial Assets (higher thresholds than FBAR)
- Form 2555: Foreign Earned Income Exclusion (may not apply if living in Canada but worth discussing with advisor)
- Form 1116: Foreign Tax Credit
- Form 8833: Treaty-based return position disclosure (for RRSP/pension treaty elections)
Banking Solutions for Cross-Border Individuals
For everyday Canadian banking, KOHO is a solid no-fee option. For cross-border needs, TD has the strongest US-Canada banking relationship — they own TD Bank in the US and offer integrated cross-border banking. RBC also has US operations (City National Bank). Wise is excellent for holding both CAD and USD with minimal fees.