Canadian RRSP and TFSA: IRS Reporting Requirements

Canada's two most popular registered savings accounts — the RRSP and the TFSA — are treated very differently by the IRS. The RRSP (Registered Retirement Savings Plan) is recognized as a pension-like account under the US-Canada tax treaty: US persons who make a specific election can defer US taxation on income earned inside the RRSP until distributions are taken, mirroring the Canadian treatment. TFSAs (Tax-Free Savings Accounts), on the other hand, receive no protection under the treaty, and income and gains inside a TFSA are fully taxable annually on your US return — there is no US tax-free status for a TFSA. Both the RRSP and TFSA must be reported on FBAR if the aggregate threshold is met, and on Form 8938 if the individual asset threshold is exceeded. The RRSP election must be made on a timely filed return, and many US-Canadian filers miss it in early years when they're not aware of the requirement.