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On Jan. 7, 2016, the IRS added new frequently asked questions (FAQs) to its website on the streamlined offshore compliance program, which includes guidance to participants in Canadian registered retirement savings plans (RRSP), registered retirement income fund (RRIF) or other similar Canadian retirement plans. Generally, an individual who is a citizen or resident of the US and a beneficiary of a Canadian retirement plan may be subject to US tax on accrued income in the plan even though the income is not currently distributed to the beneficiary. However, under Article XVIII (7) of the US-Canada income tax treaty, an individual may elect to defer taxation until the funds are distributed from the plan. Even though the earnings are not reportable until the funds are distributed from the plan, the beneficiary of the plan may still be required to file a FinCEN 114, Report of Foreign Bank and Financial Accounts (FBAR) or a Form 8938, Statement of Specified Foreign Financial Assets.

The FAQs address situations under the Streamlined Domestic Offshore Procedures (SDOP) in which individuals have not reported their Canadian retirement funds on a FBAR or Form 8938 under the following situations:

  • An individual that was deemed to make a treaty election under Rev. Proc. 2014-55, and has other unreported foreign financial assets that is filing under the SDOP; the Canadian retirement plan will not be subject to the 5 percent penalty and an explanation should state that they are an "eligible individual" in the narrative statement of facts on Form 14653 or Form 14654.
  • Same as above except that the individual has no other unreported financial assets; there is no need to report the accounts via the SDOP. Instead file any delinquent FBARs pursuant to the Delinquent FBAR submission procedures and any delinquent Forms 8938 with a reasonable cause statement.
  • Other situations in which the individual reported accrued income from the retirement plan on their income tax returns, whether they are an "eligible individual" or not, may require amended returns to be submitted through either the SDOP or just the normal channels.
  •  The updated FAQs act as a good reminder that if you are a beneficiary of an RRSP, RRIF or a similar Canadian retirement plan, there are potential FBAR or Form 8938 filings that may be required. Penalties for not filing the required forms can be severe, starting at $10,000 per occurrence of non-filing.

    For more information contact your local UHY LLP professional or visit us online at
    By Carolyn Johnson, CPA