# Closed TFSA account 3520a/3520



## bkool4ya (Feb 8, 2016)

Hello,

It seems like TFSA is causing a lot of headaches for folks including myself.
I was looking for answers on this forum but wanted to know if anyone can help me with my current situation?

I closed my TFSA (savings only) account May of 2015 when I found out that there was a huge tax issue (I moved to the US in April 2015), but I had a TFSA trading account at year end with ZERO balance and ZERO activity since it was opened back in 2014.

I am wondering if i need to file a form 3520 or 3520a? For each?? 

This is my first time filing Tax in the US as a non-resident and having a hard time.

Any help would be much appreciated!

Thank you


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## bkool4ya (Feb 8, 2016)

Please Help!


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## BBCWatcher (Dec 28, 2012)

Closing a foreign account _after_ you move to another country means you haven't avoided tax or financial reporting problems. On the contrary, you might have created a taxable event instead. But that's "water under the bridge" now. What's done is done. (For future reference to others: "don't panic." Think through what you're doing first, _including tax implications_, then take action if it makes sense. But if you didn't know the answers to your questions back in May, then it might have been a really bad idea to take the action you did. We'll see....)

From the U.S. perspective a Canadian TFSA is "just another foreign account." So at a minimum you'll have to report it via FinCEN Form 114 and/or IRS Form 8938, as applicable.

I've seen conflicting information on whether a TFSA requires a Form 3520 (or Form 8858) filing, probably because there are different kinds of TFSAs. If you have an ordinary deposit account as your TFSA, probably not. If it's a trust arrangement, probably. Just ignore the label "TFSA" since it has no meaning in the U.S. tax code, and treat the foreign account according to the actual facts and circumstances. There doesn't appear to be any tax treaty provision for TFSAs either.

Here's my best guess then -- and assuming that your TFSA was structured as an ordinary deposit account with a TFSA label:

1. Report the account via FinCEN Form 114 and/or IRS Form 8938, as applicable;

2. Report the gains on the account. If you're filing as dual status for 2015, then you'd calculate and report the gains starting from the date you entered the United States until you closed the account. If that's interest you'd report the interest on IRS Form 1040 Schedule B. If you paid any Canadian income tax on those gains then you can take a Foreign Tax Credit (IRS Form 1116) to account for that foreign income tax.

And that's that, with those assumptions (and in my view).


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## bkool4ya (Feb 8, 2016)

Thanks for your response. How about the trading TFSA account that has never been used with zero balance??


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## BBCWatcher (Dec 28, 2012)

A zero balance account has no U.S. tax consequences since there's no income associated with it.

However, FinCEN Form 114's and IRS Form 8938's instructions indicate that even zero (or negative) balance foreign accounts over which you have signature authority must be reported. You're still subject to those U.S. financial reporting requirements on such accounts, it would appear, and assuming of course you meet the filing thresholds for either or both of those reports.


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## Bevdeforges (Nov 16, 2007)

As BBC hinted at, you only need to file the FinCEN if your combined balance in all foreign accounts exceeds $10,000 during the year. 

And, as far as I know, you only file a form 8938 if you file a regular income tax return for the year. (I.e. if your income for the year is below the filing threshold for your status). 
Cheers,
Bev


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