US-Canada Cross-Border Tax Accountant: Vetting and Fair Quotes

What does a US-Canada cross-border tax accountant handle that a one-country preparer does not?

A cross-border tax accountant prepares the US and Canadian returns as one job, so each return uses the other's final numbers. A US-only preparer may not know how Canadian accounts and funds land on a US return; a Canada-only preparer usually does not prepare US returns at all.

The work is linked because the US taxes its citizens wherever they live: the treaty's saving clause in Article XXIX(2) keeps US tax on US citizens, and double tax is relieved mostly through foreign tax credits under Article XXIV and Form 1116. A credit in one country depends on the tax finally owed in the other.

A case is not simple when you moved during the year, have unfiled years in either country, hold Canadian funds or a TFSA as a US person, are self-employed, own rental property across the border, or live in Quebec. Before calling anyone, gather the last returns from both countries, a list of every account and fund with its country, and any letter from the IRS or the CRA. Whether you need help at all is covered in do you need a cross-border accountant.

FBAR and Form 8938 are US reports of foreign accounts and assets. A PFIC (passive foreign investment company) is the US label for certain foreign corporations; a fund set up outside the US, such as a Canadian ETF or mutual fund, can be one.

What should I ask a cross-border tax accountant on the first call?

Ask questions that make the preparer describe how both returns fit together. A preparer with real US-Canada experience answers in terms of specific forms, the order of the returns and who signs them.

• "Who prepares and signs each return?" Expect a named person for the US return with a PTIN, and a named person or firm for the Canadian return (IRS Topic 254).
• "Which return do you finish first, and why?" Expect an answer tied to your facts that says which country's tax is worked out first and why, under the treaty's credit rules in Article XXIV.
• "How do you handle my TFSA (or RESP, FHSA) on the US return?" Expect a specific answer, or an honest note on where the rules are unclear, not "nothing to report".
• "Do my Canadian ETFs or mutual funds need Form 8621?" Expect a fund-by-fund review (IRS Publication 54).
• "Which information forms will I need?" Expect FBAR, Form 8938 and others named for your accounts.
• "Who answers if the IRS or the CRA sends a letter?" Expect a named person and the authorization they will need.

Which answers show a preparer is out of their depth on US-Canada returns?

An answer that dismisses a cross-border item without looking at your facts is a reason to ask for the reasoning; if none comes, treat it as a warning sign. These are common ones:

General warning signs that apply to any preparer are in choosing a US expat tax preparer.

One cross-border firm or a preparer in each country: who must sign and how do I check each side?

Either setup can work if each return has an accountable signer and the two sides share final numbers. What matters is who signs each return and who represents you if an authority asks questions.

With two firms, ask who sends final figures to whom, and by when. How to give each one access to your IRS and CRA records is in do you need a cross-border accountant.

How much does a cross-border tax accountant cost, and what moves the quote?

No government source sets a fee for cross-border returns, so judge a quote by its scope. The price rises with each return, form, account and year that has to be prepared, and with each judgment call the preparer has to make.

Wage-only returns, no non-US funds, last year's returns from both countries in hand and organized slips usually keep a quote down.

Is this cross-border tax quote normal? How to compare two quotes

No official source says what a normal quote is, so a fair one is itemized and matches your own list of returns, forms and years. Compare what each quote covers before comparing totals. A lower quote that says only "US return" may leave out the Canadian return, the FBAR, each Form 8621 or a state return, which then cost extra or are never filed.

Put both quotes side by side and check that each one names:

• Every return, by country and year: Form 1040 or 1040-NR, T1, any Quebec or US state return.
• Every information form: FBAR, Form 8938, each Form 8621, Form 1116 by category, and any treaty disclosure.
• Who prepares and who signs each return.
• What is billed separately: letters from the IRS or the CRA, amendments, extra funds or accounts found later.
• The fee basis: a fixed fee per return or per form, or an hourly rate. Avoid a fee based on a share of your refund or the tax saved: the IRS says so (Topic 254), and Circular 230, section 10.27 generally bars it for CPAs, enrolled agents and attorneys preparing an original return.

The engagement letter should state:

• The scope: returns, forms and years.
• The deadline for each country's return.
• Who fixes an error, and at whose cost.
• What is billed extra.
• How your records come back if you leave, for both countries.

A CPA, enrolled agent or attorney must promptly return records you need for your US filings when you ask, and a fee dispute generally does not change that. Where state law lets them keep records in a fee dispute, they need only return records that must be attached to your return and give you reasonable access to the rest (Circular 230, section 10.28).

What should a quote cover for catch-up years or the year I move between the countries?

A catch-up or move-year quote should list each year and each form, because these jobs grow with every year and every account found. A flat "catch up my taxes" quote does not show what will be filed.

• Unfiled US years while living in Canada: the quote should list each year's return and FBAR, say who decides which IRS program fits, and say what happens to the fee if that answer changes; see Streamlined Foreign Offshore Procedures and catching up on missed US returns.
• The move year: the quote should state the date it assumes you became or stopped being a resident of each country, and name the dual-status US return if one applies (resident for part of the year, nonresident for the rest), the Canadian departure or arrival return, any state return, and decisions on property you own when you move. See moving from Canada to the US or moving from the US to Canada.
• Both: ask what happens to the fee if more accounts or funds turn up partway through.

If the preparer gets it wrong, who answers to the IRS and the CRA?

You do. The IRS says you are ultimately accountable for every item on your return, and the CRA says you are responsible for all information on your return even if someone else prepared it (IRS Topic 254; CRA). Tax, interest and any penalty land on your account first.

The preparer can face separate consequences. In the US, a preparer can owe penalties for an understatement due to an unreasonable position or willful or reckless conduct (26 USC 6694), and you can report misconduct on Form 14157 (IRS). In Canada, a preparer can owe a third-party penalty for a false statement on your return that they know is false, or would be expected to know but for culpable conduct (Income Tax Act, section 163.2; CRA). Neither removes what you owe. To fix a return a preparer already filed, see tax preparer filed a wrong return.

Example

All three cases are illustrative.

A dual citizen in Ontario (Canadian dollars)

A dual citizen in Ontario earns a C$90,000 salary, has an RRSP and holds two Canadian ETFs in a TFSA. A complete quote lists the T1, the Form 1040 with Form 1116, the FBAR, Form 8938 if the accounts pass its threshold, a Form 8621 decision for each of the two funds, and whether Forms 3520 and 3520-A are filed for the TFSA, or why not. A quote that says only "US return" leaves most of that out.

A Canadian on a TN visa with a Toronto condo (US and Canadian dollars)

A Canadian working in the US on a TN visa earns US$120,000 and rents out a Toronto condo for C$30,000 a year. The quote should name the US return, the rental schedule on it, the foreign tax credit, the Canadian side of the condo rent, FBAR for the Canadian accounts and any state return. If the person is a non-resident of Canada, the Canadian side covers who withholds on the rent, Form NR6, the NR4 slip and the section 216 return (a separate return a non-resident landlord can choose to file on rental income) and its deadline; if still resident, the rent goes on the regular T1. The quote should state which residency it assumes in each country and, if both treat the person as resident, how the treaty tie-breaker settles it. See Canadians on a TN visa.

Two quotes after five unfiled US years in Canada (US dollars)

A US citizen in Canada has not filed for five years and holds US$60,000 across Canadian bank and investment accounts. Quote A is one flat amount for "US taxes". Quote B is higher and, assuming the Streamlined Foreign Offshore Procedures fit, lists three US returns, six FBARs, Form 14653 and a Form 8621 decision per fund each year. Quote A may not include the FBARs or fund forms at all. Compare what each one files before comparing totals.

Different for you?

• You are not sure you need anyone: see do you need a cross-border accountant.
• You are a Canadian who spends winters in the US: see snowbirds and US residency.
• You file only a US return from a country other than Canada: see choosing a US expat tax preparer.
• You file only in Canada: see choosing an accountant in Canada.
• You own a Canadian business or corporation with US activity: see when a Canadian business needs a cross-border accountant.
• You have unfiled US years, a move year or a letter from the IRS or the CRA: these quotes depend on judgment about years, forms and penalties; get cross-border tax help, and see answering an IRS letter from Canada.
• A preparer already filed a wrong return: see tax preparer filed a wrong return.