FBAR (FinCEN 114) for Canadian Landlords in New Hampshire

# FBAR (FinCEN 114) Guide for Canadian Landlords with New Hampshire Rental Property ## What Is the FBAR? The FBAR (Report of Foreign Bank and Financial Accounts), officially known as **FinCEN Form 114**, is a U.S. financial disclosure form required by the Financial Crimes Enforcement Network (FinCEN). It requires U.S. persons to report foreign financial accounts—including Canadian bank and investment accounts—that exceed **$10,000 USD at any point during the calendar year**. The FBAR is separate from your U.S. federal income tax return (Form 1040). You do not file it with the IRS; instead, you file it electronically with FinCEN through the BSA E-Filing System. ## How FBAR Applies to Canadian Landlords in New Hampshire As a Canadian citizen or permanent resident who owns rental property in New Hampshire, you face a unique tax situation: - **U.S. tax residency**: If you hold a U.S. green card, are a U.S. citizen, or meet the **Substantial Presence Test** (183+ days in the U.S. over a three-year weighted period), you are classified as a U.S. person for federal tax purposes. - **New Hampshire advantage**: New Hampshire imposes **no state income tax**, meaning you will not owe state taxes on your rental income. However, this does not exempt you from federal FBAR requirements. - **Canadian bank accounts**: Your Canadian bank accounts, registered accounts (RRSPs, TFSAs), and brokerage accounts are considered "foreign financial accounts" under U.S. law, regardless of how they are treated in Canada. The FBAR requirement applies to the **aggregate value** of all foreign accounts. If your Canadian chequing account, TFSA, or RRSP combined exceed $10,000 USD at any point in the year, you must file. ## Who Must File the FBAR You must file FinCEN Form 114 if **all** of the following apply: 1. You are a U.S. person (citizen, green card holder, or substantial presence test resident) 2. You have a financial interest in or signature authority over one or more foreign financial accounts 3. The aggregate balance of all foreign accounts exceeds $10,000 USD at any time during the calendar year 4. The account is maintained at a foreign institution (a Canadian bank qualifies) **Important**: "Financial interest" includes accounts where you are the sole owner, joint owner, or have authority to control account funds. Even if someone else manages the account, if you have a legal interest, it must be reported. ## Step-by-Step: How to Complete and File the FBAR ### Step 1: Determine Your U.S. Tax Residency Status Before filing an FBAR, confirm whether you are classified as a U.S. person: - U.S. citizen or green card holder: **Automatic filer** - Canadian resident: Apply the **Substantial Presence Test**: Count all days in the U.S. during the current year (full count) plus one-third of days in the prior year and one-sixth of days in the year before that. If the total exceeds 183 days, you are a U.S. resident for tax purposes. ### Step 2: Identify All Foreign Financial Accounts List every foreign account in which you have a financial interest or signature authority: - Canadian bank accounts (chequing, savings) - Canadian TFSAs - Canadian RRSPs - Canadian brokerage/investment accounts - Joint accounts with spouses or family members (you must report your share and any account you can control) **Critical**: Include accounts held in Canada even if they are registered or tax-deferred in Canada. ### Step 3: Calculate Aggregate Maximum Value For each account, identify the **maximum balance** it reached at any point during the calendar year (January 1 – December 31). Sum all maximum balances in USD: - Convert Canadian balances to USD using the **average exchange rate for the year** (or daily rates; the method must be consistent) - If aggregate maximum exceeds $10,000 USD, you must file ### Step 4: Complete FinCEN Form 114 Access the **BSA E-Filing System** at `bsaefiling.fincen.gov`: - Register or log in with your credentials - Create a new FBAR filing for the relevant tax year - Provide: - Your full name, address, date of birth, and Social Security Number (or ITIN if you don't have an SSN) - Each foreign financial institution's name, address, and account number - Account type (savings, chequing, investment, etc.) - Country where the account is maintained (Canada) - Maximum balance reached during the year (in USD) - Date account was opened and closed (if applicable) ### Step 5: Submit Electronically - FinCEN does not accept paper filings - Electronically submit through the BSA E-Filing System - **Do not** file with your Form 1040 or with the IRS - You will receive an electronic confirmation upon successful submission ### Step 6: Retain Documentation Keep copies of: - Completed FBAR confirmation - Bank statements from all Canadian accounts - Exchange rate documentation used for conversion - Any correspondence with FinCEN ## New Hampshire-Specific Considerations ### No State Income Tax Simplification (With Caveats) New Hampshire's **lack of state income tax** simplifies your state filing obligations—you will not owe New Hampshire income tax on your rental income. However: - You **still must file federal FBAR** if requirements are met - Your rental property may still incur New Hampshire **property tax** (average effective rate: **2.09%**), which is deductible on your U.S. federal return - You must still file a U.S. federal income tax return (Form 1040) reporting your New Hampshire rental income and depreciation ### Coordinating FBAR With Form 1040-NR or Form 1040 If you are a non-U.S. resident alien, you file **Form 1040-NR**. If you are a U.S. resident (green card or substantial presence), you file **Form 1040**. The FBAR is filed separately, but your worldwide income (including Canadian investment income) must be reported on your U.S. federal return. ### Canada-U.S. Tax Treaty Coordination The **Canada-U.S. Tax Treaty** provides relief from double taxation, but it **does not exempt you from FBAR filing**. You may claim a **Foreign Tax Credit** (Form 1118) on your U.S. return for Canadian taxes paid on investment income, but the FBAR requirement is independent and mandatory. ### Canadian T1 Return Considerations If you are a **Canadian resident for Canadian tax purposes**, you must also file a Canadian T1 return reporting your worldwide income, including the U.S. rental property income. Coordinate your Canadian and U.S. filings to ensure consistent reporting and claim applicable foreign tax credits in both countries. ## Common Mistakes to Avoid 1. **Forgetting joint accounts**: If your spouse's name is on a Canadian account and you can access it, report it even if it is not solely yours. 2. **Excluding registered accounts**: Many Canadian landlords mistakenly believe RRSPs and TFSAs are exempt. They are not; they must be reported. 3. **Using incorrect exchange rates**: Use consistent, verifiable exchange rates (IRS mid-market rate or your financial institution's rate). 4. **Missing the $10,000 threshold**: The threshold applies to the **maximum aggregate balance at any point during the year**, not the average or year-end balance. 5. **Filing with the IRS instead of FinCEN**: The FBAR goes only to FinCEN, not to the IRS. 6. **Ignoring signature authority**: Even if you do not own an account but have signing authority (e.g., power of attorney), you must report it. ## Key Deadlines | **Deadline** | **Filing Event** | |---|---| | **April 15** | Original FBAR filing deadline (calendar year reports due) | | **October 15** | Automatic extension deadline (no request needed; automatic 6-month extension) | | **No extension beyond October 15** | FinCEN does not grant extensions beyond October 15 without reasonable cause | | **Penalty for late/non-filing** | Up to $10,000 per violation; potential criminal penalties for willful violations | ## New Hampshire Landlord Key Takeaways - **FBAR is mandatory for U.S. persons with Canadian accounts over $10,000 USD** at any point during the year, regardless of New Hampshire's lack of state income tax. The absence of state income tax does