← All countries
🇨🇦

Canada

Moderate

RRSPs, RRIFs, registered pension plans, and other Canadian retirement plans within Article XVIII(7) of the treaty need no Form 3520 or 3520-A under Rev. Proc. 2014-55. Trust-form TFSAs and FHSAs have no exemption; whether they are U.S. trusts is not settled, so the cautious course is full reporting. RESPs and RDSPs may qualify under Rev. Proc. 2020-17 §5.04, with open questions.

Tax-deferred employer plans

Registered pension plans (RPPs)

Part I
No
Part II + Form 3520-A
No
Part III
No
Form 4970
No

Rev. Proc. 2014-55 removes all of them, for every beneficiary.

What it is

A pension plan registered by the Minister under the Income Tax Act.1 Both the employer and the members can pay in,2 and members can add voluntary contributions on top of what membership requires.3 The plan's assets can be held by a trust or by a pension corporation, and both are exempt from Canadian income tax.4

Trust classification

A foreign trust when held in trust; the filing is the same either way.

An RPP held in trust is a trust, because a trustee holds the assets for the members,5,4 and a foreign one, because it is governed by Canadian law.6,7 An RPP held by a pension corporation is not a trust. The difference does not change the filing, because Rev. Proc. 2014-55 covers any trust, company, organization, or other arrangement within the treaty's pension article.8

§402(b) analysis

The employer-paid part can be a §402(b) employees' trust; the exemption still removes the filing.

The IRS has recognized that a Canadian plan can be a §402(b) employees' trust, with the highly compensated employee rule as the limit.9 For the employer-paid part of an RPP held in trust: employer contributions are U.S. income to you when paid, to the extent vested,10,11 unless the treaty excludes them (see below), and the foreign earned income exclusion cannot cover them;12 you are not treated as owner of that part;13 and once your own voluntary contributions exceed your employer's, you are treated as owner of the part yours fund. Contributions the plan requires you to make out of your pay are not voluntary, and the IRS has treated contributions like them as the employer's.14,15 If you are a highly compensated employee and one reason the plan is not exempt is that it fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year instead.16 None of this changes the filing, because Rev. Proc. 2014-55 removes it.17

Exemption analysis

Exempt under Rev. Proc. 2014-55.

Rev. Proc. 2014-55 exempts every beneficiary of a Canadian retirement plan, whether or not they are eligible individuals, from reporting contributions, distributions, and ownership on Form 3520, and relieves the plan's custodian of Form 3520-A.17 A Canadian retirement plan is any arrangement within Article XVIII(7) of the treaty: resident in Canada, generally exempt from Canadian income tax, and operated exclusively to provide pension or employee benefits.8,18 An RPP is a pension plan whose trust or pension corporation is exempt from Canadian tax,1,4 so we read it as within Article XVIII(7); the Form 3520 instructions name RRSPs and RRIFs but not RPPs, and extend the exemption to “any other Canadian retirement plan” within Rev. Proc. 2014-55.19 Unlike Rev. Proc. 2020-17, this exemption does not depend on having filed U.S. returns. It defines a beneficiary as someone taxed currently on the plan's undistributed income,20 which a member of an employer plan read as a §402(b) trust may not be; such a member files nothing for it anyway: contributions to a §402(b) trust aren't reportable, the member isn't its owner, and payouts reported as compensation stay off Part III.21,13,22

Treaty provisions

U.S. tax on the plan's income waits until payout, with nothing to file to claim it.

Article XVIII(7) lets a U.S. citizen or resident elect to defer U.S. tax on income accrued in the plan until it is paid out,18 and Rev. Proc. 2014-55 treats an eligible individual (one who has filed U.S. returns and not reported the plan's undistributed income) as having made that election, so nothing is filed to claim it.23 Someone who has reported that income needs the IRS's consent to elect.24 Separately, a U.S. citizen who lives in Canada and works there as an employee can exclude contributions to a qualifying retirement plan, an RPP among them, up to what a U.S. plan would allow.25,26 The saving clause does not override either rule.27,28 Treaty positions that modify the taxation of pensions or employment income are among those for which Form 8833 is waived.29

3520/3520-A treatment

Nothing to file on Forms 3520 or 3520-A.

Exempt: no Part I, Part II, Part III, or Form 3520-A.17,19 No Form 4970: payouts are taxed under §72, subject to the treaty, not under the trust distribution rules.30,31 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.32,33

Tax-deferred individual plans

RRSPs and RRIFs

Part I
No
Part II + Form 3520-A
No
Part III
No
Form 4970
No

Rev. Proc. 2014-55 removes all of them, for every beneficiary.

What it is

A registered retirement savings plan (RRSP) is a contract with an annuities provider, an arrangement in trust with a trust company, or a deposit, funded by the individual or their spouse or common-law partner.34 A registered retirement income fund (RRIF) is an arrangement under which a carrier pays the annuitant at least a minimum amount each year from property transferred to it.35 An employer can also arrange RRSPs for its employees as a group plan.26

Trust classification

A foreign trust when held in trust; the filing is the same either way.

An RRSP or RRIF held in trust is a foreign trust;34,5,6 one written as an annuity contract or held as a deposit is not a trust at all. The difference does not change the filing, because the exemption covers every RRSP and RRIF.19

§402(b) analysis

Generally does not apply.

An RRSP is funded by the individual or their spouse or common-law partner,34 and §402(b) reaches only an employer's contributions to an employees' trust,10 so it generally does not apply. No IRS guidance says how §402(b) treats an employer's contributions to a group RRSP; it does not change the filing.19

Exemption analysis

Exempt under Rev. Proc. 2014-55.

Rev. Proc. 2014-55 and the Form 3520 instructions exempt transfers to, ownership of, and distributions from an RRSP or RRIF, for every beneficiary.17,19

Treaty provisions

U.S. tax on the plan's income waits until payout, with nothing to file to claim it.

Article XVIII(7) lets you defer U.S. tax on the plan's undistributed income, and Rev. Proc. 2014-55 treats an eligible individual as having made that election, so no form is filed.18,23 Someone who has reported that income needs the IRS's consent to elect.24 The saving clause does not override Article XVIII(7).28

3520/3520-A treatment

Nothing to file on Forms 3520 or 3520-A.

Exempt: no Part I, Part II, Part III, or Form 3520-A.17,19 No Form 4970: payouts are taxed under §72, subject to the treaty.30 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.32,33

Tax-free savings accounts (TFSAs)

Part I
FileEach contribution
Part II + Form 3520-A
FileEach year
Part III
FilePayouts
Form 4970
No

For a TFSA held in trust. Whether it is a trust for U.S. purposes is not settled; these answers take the cautious course of reporting it as one. One written as an annuity contract or held as a deposit is not a trust, and none of these apply.

What it is

A TFSA is an arrangement in trust with a trust company, an annuity contract, or a deposit, held by an individual aged 18 or over for their own exclusive benefit.36 Only the holder can contribute.37 A trust governed by a TFSA is exempt from Canadian income tax to the extent the Act provides.38

Trust classification

Not settled when held in trust; this guide treats it as a foreign trust. Otherwise not a trust.

Canadian law sets up a TFSA held in trust as an arrangement in trust with a trust company, and exempts the trust from Canadian tax to the extent the Act provides,36,38 which reads like a foreign trust.5,6 Whether it is one for U.S. purposes is not settled, and no IRS guidance addresses TFSAs. Federal law, not Canada's label, decides,39 and the closest IRS ruling holds that an arrangement whose title-holder only holds and transfers title at the owner's direction is not a trust,40 though not where the title-holder does more than that.41 This guide takes the cautious course of treating a TFSA held in trust as a foreign trust. One written as an annuity contract or held as a deposit is not a trust, so §6048 does not reach it. Check the account agreement.

§402(b) analysis

Does not apply.

§402(b) does not apply: only the holder can contribute,37 and §402(b) reaches only an employer's contributions to an employees' trust.10

Exemption analysis

None.

A TFSA is not a pension plan, so it is outside Article XVIII(7) and Rev. Proc. 2014-55.18,8 Rev. Proc. 2020-17 covers only retirement trusts and medical, disability, or educational savings trusts,42 and a TFSA is a general savings account kept for the holder's benefit.36 The proposed regulations describe a further category, savings trusts worth $50,000 or less, but the rule that grants the exemption lists only the retirement and medical, disability, or educational categories, so we do not rely on it.43

Treaty provisions

No deferral.

No treaty provision defers or exempts U.S. tax on TFSA income: Article XVIII(7) covers only plans operated to provide pension or employee benefits.18

3520/3520-A treatment

Full reporting for a TFSA held in trust, on the cautious course.

For a TFSA held in trust, on the cautious course: each contribution is a Part I transfer, and you are treated as owner,44,45 so Part II and Form 3520-A are due each year,46 and payouts go on Part III.47 The trustee will not file Form 3520-A for you, so you attach a substitute to your Form 3520.48 No Form 4970, because the income is taxed to you each year.49 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.32,33

First home savings accounts (FHSAs)

Part I
FileEach contribution
Part II + Form 3520-A
FileEach year
Part III
FilePayouts
Form 4970
No

For an FHSA held in trust. Whether it is a trust for U.S. purposes is not settled; these answers take the cautious course of reporting it as one. One written as an annuity contract or held as a deposit is not a trust, and none of these apply.

What it is

An FHSA is an arrangement in trust with a trust company, an annuity contract, or a deposit, held by a qualifying individual to save for a first home.50 Contributions are limited to C$8,000 a year plus carryforward, and C$40,000 for life.51 A withdrawal toward a qualifying home is a qualifying withdrawal.52 A trust governed by an FHSA is exempt from Canadian income tax to the extent the Act provides.38

Trust classification

Not settled when held in trust; this guide treats it as a foreign trust. Otherwise not a trust.

An FHSA held in trust is in the same position as a TFSA held in trust:50 whether it is a trust for U.S. purposes is not settled,40 and this guide takes the cautious course of treating it as a foreign trust.5,6 One written as an annuity contract or held as a deposit is not a trust.

§402(b) analysis

Does not apply.

§402(b) does not apply: the holder funds it,50 and §402(b) reaches only an employer's contributions to an employees' trust.10

Exemption analysis

None.

Saving for a home is not one of the purposes Rev. Proc. 2020-17 covers (retirement, or medical, disability, or educational benefits),42,53 and an FHSA is not a pension plan within Article XVIII(7).18 As with TFSAs, we do not rely on the proposed regulations' $50,000 savings-trust category.43

Treaty provisions

No deferral.

No treaty provision defers or exempts U.S. tax on FHSA income.18

3520/3520-A treatment

Full reporting for an FHSA held in trust, on the cautious course.

For an FHSA held in trust, on the cautious course: the same as a TFSA held in trust: Part I for contributions, Part II and a substitute Form 3520-A each year, and Part III for payouts.44,45,46,47 No Form 4970, because the income is taxed to you each year.49 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.32,33

Registered education savings plans (RESPs)

Part I
DependsA U.S. subscriber's contributions
Part II + Form 3520-A
DependsA U.S. subscriber treated as owner
Part III
DependsA U.S. beneficiary's payments, or a U.S. subscriber's refunds
Form 4970
DependsPayouts from a part no U.S. person owns, such as grants

None of these if you rely on the Rev. Proc. 2020-17 exemption.

What it is

An RESP is an arrangement under which a promoter agrees to pay educational assistance payments to a beneficiary, with the property held irrevocably by a trust.54,55 The subscriber pays in, up to C$50,000 per beneficiary for life,56 and government grants under the Canada Education Savings Act can be added.55 The plan can refund the subscriber's contributions, and income paid out to a subscriber rather than for education (an accumulated income payment) carries an extra 20% tax (12% in Quebec).55,57 A trust governed by an RESP is exempt from Canadian income tax to the extent the Act provides.38

Trust classification

A foreign trust.

A trust holds the plan's property, under Canadian law.55,5,6

§402(b) analysis

Does not apply.

§402(b) does not apply: the subscriber, not an employer, funds the plan, and §402(b) reaches only an employer's contributions to an employees' trust.54,10

Exemption analysis

Rev. Proc. 2020-17 may cover it; one condition is unsettled.

Rev. Proc. 2020-17 §5.04 covers savings trusts for educational benefits,53 and an RESP with five or fewer beneficiaries meets three of its four conditions on the face of Canadian law. It is tax-favored: the trust is exempt and the government adds grants.38,58 Its trustee must file information returns with the Minister.59 Contributions are capped at C$50,000 per beneficiary, about US$36,523 at the Treasury rate for December 31, 2025, under the US$200,000 lifetime limit;56,60,61 a family plan's cap is per beneficiary, so one for six or more can pass it. The open question is the fourth: earnings paid out for anything but education carry the extra tax, but the subscriber's own contributions can be refunded at any time without one.57,55,62 No IRS guidance addresses RESPs. The exemption also needs you to be an eligible individual.63

Treaty provisions

No deferral.

No treaty provision defers or exempts U.S. tax on RESP income: Article XVIII(7) covers only plans operated to provide pension or employee benefits.18

3520/3520-A treatment

Nothing to file if you rely on the exemption; otherwise Parts I to III can apply.

If you rely on the exemption: none of Forms 3520 or 3520-A.53 If not: a U.S. subscriber's contributions are Part I transfers, and the subscriber is treated as owner of the part they fund for any year the plan has a U.S. beneficiary,44,45 and likely in any year, since the subscriber's contributions can be refunded and the plan's income paid to the subscriber;55,64 the cautious course treats you as owner either way. So Part II and Form 3520-A are due each year;46 a U.S. beneficiary who receives a payment, or a U.S. subscriber who receives a refund or an income payment, files Part III.47 No Form 4970 on the part you own, because its income is taxed to you each year.49 The government grants come from neither you nor the beneficiary, and whose they are is not settled: they are repayable to the government if not used for education, which points to their not being part of what you own,55 and a grant paid out to a U.S. beneficiary may then be an accumulation distribution on Form 4970.65 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.32,33

Registered disability savings plans (RDSPs)

Part I
DependsA U.S. person's contributions
Part II + Form 3520-A
DependsA U.S. contributor treated as owner
Part III
DependsA U.S. beneficiary's payments
Form 4970
DependsNone on a part you own

None of these if you rely on the Rev. Proc. 2020-17 exemption.

What it is

An RDSP saves for a person with a disability. Its property is held by a plan trust; contributions are capped at C$200,000 for the beneficiary over all their RDSPs; only a holder, or someone with a holder's written consent, can contribute; and the plan can pay out only disability assistance payments, transfers to another RDSP, and repayments of government grants and bonds.66 A trust governed by an RDSP is exempt from Canadian income tax to the extent the Act provides.38

Trust classification

A foreign trust.

A plan trust holds the property, under Canadian law.66,5,6

§402(b) analysis

Does not apply.

§402(b) does not apply: the plan is funded by its holders and government programs, not an employer, and §402(b) reaches only an employer's contributions to an employees' trust.66,10

Exemption analysis

Rev. Proc. 2020-17 may cover it; two conditions are unconfirmed.

Rev. Proc. 2020-17 §5.04 covers savings trusts for disability benefits,53 and an RDSP meets most of its conditions on the face of Canadian law. It is tax-favored: the trust is exempt and the government adds grants and bonds.38,58 Contributions are capped at C$200,000, about US$146,092 at the Treasury rate for December 31, 2025, under the US$200,000 lifetime limit,66,60,61 but the Act does not count government grants and bonds as contributions;67 if Rev. Proc. 2020-17 counts them, a plan that receives the most it can may pass US$200,000. We have not confirmed this condition. Payments are limited to disability assistance payments.66,62 Nor have we confirmed the condition that information about the plan is reported to the tax authorities: the Act requires the issuer to notify the Minister responsible for the program when a plan is set up, not the tax authority.68,69 No IRS guidance addresses RDSPs. The exemption also needs you to be an eligible individual.63

Treaty provisions

No deferral.

No treaty provision defers or exempts U.S. tax on RDSP income: Article XVIII(7) covers only plans operated to provide pension or employee benefits.18

3520/3520-A treatment

Nothing to file if you rely on the exemption; otherwise Parts I to III can apply.

If you rely on the exemption: none of Forms 3520 or 3520-A.53 If not: a U.S. person who contributes files Part I and is treated as owner of the part they fund for any year the plan has a U.S. beneficiary,44,45 so Part II and Form 3520-A are due each year;46 a U.S. beneficiary who receives a payment files Part III.47 No Form 4970 on the part you own, because its income is taxed to you each year.49 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.32,33

Trusts and other structures

Family trusts and testamentary trusts

Part I
DependsA U.S. person who funds it
Part II + Form 3520-A
DependsA U.S. person treated as owner
Part III
DependsA U.S. person who receives a distribution
Form 4970
DependsAccumulation distributions from a non-grantor trust
What it is

A trust set up under Canadian law, during someone's life or by their will, in which a trustee holds investments or a business for family members.5 If the trustee mainly runs a business for profit rather than holding property for the family, U.S. law may classify the arrangement as a business entity rather than a trust.70

Trust classification

Usually a foreign trust.

Usually an ordinary trust, because the trustee holds property for the beneficiaries,5 and a foreign trust, because it is governed by Canadian law and administered in Canada.6,7

Owner analysis

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.45 Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.71 A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone, or if only they or their spouse can receive distributions during their life.72 Otherwise no one is owner, and the trust is taxed as a separate, non-grantor trust.73

Treaty provisions

No relief.

The saving clause lets the United States tax its citizens and residents as if there were no treaty, apart from listed provisions,27,28 none of which concerns foreign trust reporting.

3520/3520-A treatment

Part I for whoever funds it, Part II and Form 3520-A for an owner, Part III for whoever receives a distribution.

A U.S. person who transfers property to the trust files Part I for that year.44 A U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year.46,48 A U.S. beneficiary who receives a distribution files Part III for that year.47 A distribution from a non-grantor trust that carries out income the trust kept in earlier years is an accumulation distribution, taxed with an interest charge on Form 4970.65 Rev. Proc. 2020-17 does not apply: it covers only retirement trusts and medical, disability, or educational savings trusts.42 FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.74

Gifts and inheritances

You report gifts and bequests on Form 3520 Part IV when, in one tax year, you receive more than $100,000 from a nonresident alien individual or a foreign estate, counting gifts from persons related to them together,75 or more than $20,116 (for 2025) or $20,573 (for 2026) from foreign corporations or foreign partnerships.76,77 Tuition someone pays directly to a school for you, and payments made directly to a medical provider for your care, are not foreign gifts and do not count.78,79 If you rely on the 2024 proposed regulations, the $100,000 is adjusted for inflation, to about $201,160 for 2025 and $205,730 for 2026,80 and gifts from a covered expatriate (a former U.S. citizen or long-term resident covered by section 877A) received from January 14, 2025 are reported once the year's total passes $19,000.81 A gift that is late or left off Part IV is charged 5% of its amount for each month the failure continues, up to 25%.82 Since May 2026 the IRS's own procedures do not assess that penalty when a late Form 3520 reporting gifts arrives, but the law is unchanged and an examination can still assert it.83

When someone dies, Canada treats them as having sold their property just before death and taxes any gain on their final return, unless the property goes to a spouse or common-law partner or another exception applies.84 A bequest from the estate of a Canadian who was not a U.S. citizen or resident counts toward the $100,000 Part IV threshold.75

Penalties and practical notes

A Form 3520 that is late, incomplete, or wrong is penalized at the greater of $10,000 or 35% of the amount involved: the value transferred, for a transfer missing from Part I, or the distributions received, for a distribution missing from Part III.85,86 When a trust's Form 3520-A is late or incomplete, the U.S. owner owes the greater of $10,000 or 5% of the trust assets the owner is treated as owning at the end of the year.87 If a failure continues more than 90 days after the IRS mails a notice, $10,000 more is charged for each 30 days. In all, once the IRS can tell the amount involved, the penalties for one failure are cut to that amount and any excess is refunded, so a $7,000 distribution left off Part III costs no more than $7,000.88,89,90 No penalty applies to a failure due to reasonable cause and not willful neglect, and a foreign law that forbids disclosing the information is not reasonable cause.91 A late or incomplete Part I, II, or III, or Form 3520-A, also keeps the IRS's time to assess the related tax open until 3 years after the information is filed: for the whole income tax return, or, if the failure had reasonable cause, only the items it relates to.92

The registered plans that can still need Forms 3520 and 3520-A are TFSAs and FHSAs held in trust, and RESPs and RDSPs when the exemption is not relied on.19,42 A trust's U.S. tax year is the calendar year.93 A substitute Form 3520-A is attached to your Form 3520 and due on the same date.48,94

All notes (94)
  1. Income Tax Act (Canada) s.248(1)“registered pension plan means a pension plan (other than a pooled pension plan) that has been registered by the Minister for the purposes of this Act and whose registration has not been revoked”
  2. Income Tax Act (Canada) s.147.1 (return of contributions made in error)“a contribution made by a member of the plan, or an employer who participates in the plan”
  3. Income Tax Act (Canada) s.248(1)“additional voluntary contribution to a registered pension plan means a contribution that is made by a member to the plan”
  4. Income Tax Act (Canada) s.149(1)(o)-(o.1): no tax on a pension trust or a pension corporation administering a registered pension plan“a trust governed by a registered pension plan”
  5. Treas. Reg. §301.7701-4(a)“an arrangement created either by a will or by an inter vivos declaration whereby trustees take title to property for the purpose of protecting or conserving it for the beneficiaries”
  6. Treas. Reg. §301.7701-7(a)(1)-(2): a trust is domestic only if it meets both the court test and the control test“The term foreign trust means any trust other than a domestic trust.”
  7. Treas. Reg. §301.7701-7(c)(3)(ii)“a court within a territory or possession of the United States or within a foreign country is not a court within the United States”
  8. Rev. Proc. 2014-55, §3“the term “Canadian retirement plan” means any trust, company, organization, or other arrangement that is within the scope of Article XVIII(7) of the Convention”
  9. Rev. Proc. 2014-55, §2.01“unless the plan is an employees' trust within the meaning of section 402(b) of the Internal Revenue Code (“Code”) and the individual is not a highly compensated employee subject to the rule of section 402(b)(4)(A)”
  10. 26 U.S.C. §402(b)(1)“Contributions to an employees' trust made by an employer ... shall be included in the gross income of the employee in accordance with section 83”
  11. Treas. Reg. §1.402(b)-1(a)(1)“but only to the extent that the employee's interest in such contribution is substantially vested at the time the contribution is made”
  12. 26 U.S.C. §911(b)(1)(B)(iii)“The foreign earned income for an individual shall not include amounts ... included in gross income by reason of section 402(b) (relating to taxability of beneficiary of nonexempt trust)”
  13. 26 U.S.C. §402(b)(3)“A beneficiary of any trust described in paragraph (1) shall not be considered the owner of any portion of such trust under subpart E”
  14. Treas. Reg. §1.402(b)-1(b)(6)“contributions made by an employee are not incidental when compared to contributions made by the employer if the employee's total contributions as of any date exceed the employer's total contributions on behalf of the employee as of such date”
  15. IRS Chief Counsel memorandum CC:INTL:FREV-253878-96 (Oct. 10, 1997), with the CC:EBEO memorandum of Sept. 26, 1997, on the Singapore Central Provident Fund (advice, not precedent)“Because nonelective contributions withheld from an employee's salary are not withheld at the election of the employee and are not constructively received by the employee, those contributions are considered employer contributions and are taxable pursuant to § 402(b)(1).”
  16. 26 U.S.C. §402(b)(4)(A)“If 1 of the reasons a trust is not exempt from tax under section 501(a) is the failure of the plan of which it is a part to meet the requirements of section 401(a)(26) or 410(b), then a highly compensated employee shall ... include in gross income ... an amount equal to the vested accrued benefit of such employee (other than the employee's investment in the contract)”
  17. Rev. Proc. 2014-55, §5.01“beneficiaries (regardless of whether they are “eligible individuals” within the meaning of section 4.01 of this revenue procedure) and annuitants are not required to report contributions to, distributions from, and ownership of a Canadian retirement plan ... pursuant to the reporting obligations imposed by section 6048 (Form 3520). In addition, custodians are not required to file Form 3520-A with respect to a Canadian retirement plan.”
  18. U.S.–Canada Income Tax Convention, Article XVIII(7), as replaced by the 2007 Protocol“a beneficiary of a trust, company, organization or other arrangement that is a resident of the other Contracting State, generally exempt from income taxation in that other State and operated exclusively to provide pension or employee benefits may elect to defer taxation”
  19. Instructions for Form 3520 (Rev. December 2025), Exceptions To Filing“Transfers to, ownership of, and distributions from a Canadian registered retirement savings plan (RRSP), a Canadian registered retirement income fund (RRIF), or any other Canadian retirement plan that is within the meaning of section 3 of Rev. Proc. 2014-55.”
  20. Rev. Proc. 2014-55, §3: who is a beneficiary“who holds an interest in a Canadian retirement plan or plans and who would be subject to current U.S. income taxation under the domestic law of the United States on undistributed income accrued in such plan or plans”
  21. 26 U.S.C. §6048(a)(3)(B)(ii)“Subparagraph (A) shall not apply with respect to a trust which is ... described in section 402(b), 404(a)(4), or 404A”
  22. Instructions for Form 3520 (Rev. December 2025), Exceptions To Filing“Distributions from foreign trusts that are taxable as compensation for services rendered (within the meaning of section 672(f)(2)(B) and its regulations), so long as the recipient reports the distribution as compensation income on its applicable federal income tax return.”
  23. Rev. Proc. 2014-55, §§4.01-4.02 (eligible individual: has filed U.S. returns, has not reported the plan's undistributed earnings, and has reported distributions as if the election had been made)“will be treated as having made the election in the first year in which the individual would have been entitled to elect the benefits under Article XVIII(7) with respect to the plan”
  24. Rev. Proc. 2014-55, §4.04“If such a beneficiary desires to make an Article XVIII(7) election with respect to a Canadian retirement plan, the beneficiary must seek the consent of the Commissioner.”
  25. U.S.–Canada Income Tax Convention, Article XVIII(13)-(14), added by the 2007 Protocol (limited to what a corresponding U.S. plan would allow)“Contributions made to, or benefits accrued under, a qualifying retirement plan in Canada by or on behalf of a citizen of the United States who is a resident of Canada shall be deductible or excludible in computing the citizen's taxable income in the United States”
  26. Treasury Technical Explanation of the 2007 Protocol, Article XVIII(15), citing paragraph 10 of the General Note“registered pension plans under section 147.1 of the Income Tax Act, registered retirement savings plans under section 146 that are part of a group arrangement described in subsection 204.2(1.32), deferred profit sharing plans under section 147”
  27. U.S.–Canada Income Tax Convention, Article XXIX(2) (saving clause), as amended“nothing in the Convention shall be construed as preventing a Contracting State from taxing its residents”
  28. U.S.–Canada Income Tax Convention, Article XXIX(3)(a), as replaced by the 2007 Protocol“paragraphs 1, 3, 4, 5, 6(b), 7, 8, 10 and 13 of Article XVIII (Pensions and Annuities)”
  29. Treas. Reg. §301.6114-1(c)(1)(iv) (Form 8833 reporting waived)“That a treaty reduces or modifies the taxation of income derived from dependent personal services, pensions, annuities, social security and other public pensions”
  30. Rev. Proc. 2014-55, §6“must be included in gross income by the beneficiary or annuitant in the manner provided under section 72, subject to any applicable provision of the Convention”
  31. Rev. Rul. 2007-48 (amplifying Rev. Rul. 74-299), on a nonexempt employees' trust“The taxation of the distributions is not governed by the provisions of § 662.”
  32. Rev. Proc. 2020-17, §3“This revenue procedure does not affect any reporting obligations under section 6038D or under any other provision of U.S. law, including the requirement to file FinCEN Form 114”
  33. Instructions for Form 3520 (Rev. December 2025), Exceptions To Filing and Additional Reporting“The exemptions from foreign trust information reporting described in Rev. Proc. 2014-55, Rev. Proc. 2020-17, and the proposed regulations under section 6048 do not affect any other reporting obligations.”
  34. Income Tax Act (Canada) s.146(1), retirement savings plan, paras. (a)-(b)“an arrangement under which payment is made by an individual or the individual’s spouse or common-law partner (i) in trust to a corporation licensed or otherwise authorized under the laws of Canada or a province to carry on in Canada the business of offering to the public its services as trustee”
  35. Income Tax Act (Canada) s.146.3(1), retirement income fund“an arrangement between a carrier and an annuitant under which, in consideration for the transfer to the carrier of property, the carrier undertakes to pay amounts to the annuitant”
  36. Income Tax Act (Canada) s.146.2(1), qualifying arrangement, para. (b), and s.146.2(2)(a)“the arrangement requires that it be maintained for the exclusive benefit of the holder”
  37. Income Tax Act (Canada) s.146.2(2)(c)“the arrangement prohibits anyone other than the holder from making contributions under the arrangement”
  38. Income Tax Act (Canada) s.149(1)(u), (u.1), (u.2), (u.4): no tax on a trust governed by an RESP, RDSP, TFSA, or FHSA, to the extent sections 146.1, 146.4, 146.2, and 146.6 provide
  39. Rev. Rul. 2013-14, applying Treas. Reg. §301.7701-1(a)(1)“whether an organization is an entity separate from its owners for federal tax purposes is a matter of federal tax law and does not depend on whether the organization is recognized as an entity under local law”
  40. Rev. Rul. 2013-14 (Mexican land trusts), following Rev. Rul. 92-105 (Illinois land trusts): not a trust under Treas. Reg. §301.7701-4(a)“because the trustee's only responsibility was to hold and transfer title at the direction of the taxpayer, a trust”
  41. Rev. Rul. 2013-14, Holdings“is permitted or required to engage in any activity beyond holding legal title to Greenacre, the holding of this revenue ruling does not apply”
  42. Rev. Proc. 2020-17, §1“certain tax-favored foreign retirement trusts and certain tax-favored foreign nonretirement savings trusts, as described in sections 5.03 and 5.04”
  43. Prop. Treas. Reg. §1.6048-5(b)(1), (b)(4), 89 Fed. Reg. 39,449 (May 8, 2024): paragraph (b)(4) defines a de minimis savings trust (value $50,000 or less), and the preamble says it is exempt, but paragraph (b)(1), which grants the exemption, names only paragraphs (b)(2) and (b)(3)“do not apply to any eligible individual's transactions with, or ownership of, a tax-favored foreign retirement trust as defined under paragraph (b)(2) of this section or a taxfavored foreign non-retirement savings trust as defined under paragraph (b)(3) of this section”
  44. 26 U.S.C. §6048(a)(3)(A)(ii) (reportable events, Form 3520 Part I)“the transfer of any money or property (directly or indirectly) to a foreign trust by a United States person”
  45. 26 U.S.C. §679(a)(1)“A United States person who directly or indirectly transfers property to a foreign trust (other than a trust described in section 6048(a)(3)(B)(ii)) shall be treated as the owner ... if for such year there is a United States beneficiary of any portion of such trust”
  46. 26 U.S.C. §6048(b) (U.S. owner of a foreign trust: Form 3520 Part II and Form 3520-A)
  47. 26 U.S.C. §6048(c)(1) (distributions, Form 3520 Part III)“If any United States person receives (directly or indirectly) during any taxable year of such person any distribution from a foreign trust, such person shall make a return”
  48. Instructions for Form 3520-A (Rev. December 2025), When To File“If the foreign trust fails to file Form 3520-A, the U.S. owner must file a substitute Form 3520-A”
  49. 26 U.S.C. §671“there shall then be included in computing the taxable income and credits of the grantor or the other person those items of income, deductions, and credits against tax of the trust which are attributable to that portion of the trust”
  50. Income Tax Act (Canada) s.146.6(1), qualifying arrangement, para. (b): an arrangement in trust with a trust corporation, an annuity contract, or a deposit, between the issuer and a qualifying individual
  51. Income Tax Act (Canada) s.146.6(1), annual FHSA limit and FHSA carryforward ($8,000 a year; a carryforward of at most $8,000), and s.146.6(5)(b), FHSA deduction ($40,000 lifetime)
  52. Income Tax Act (Canada) s.146.6(1), qualifying withdrawal“the location of a qualifying home that the individual has begun, or intends not later than one year after its acquisition by the individual to begin, using as a principal place of residence”
  53. Rev. Proc. 2020-17, §5.04 (non-retirement savings trusts)“to operate exclusively or almost exclusively to provide, or to earn income for the provision of, medical, disability, or educational benefits”
  54. Income Tax Act (Canada) s.146.1(1), education savings plan“a person (in this definition referred to as the “promoter”) under which the promoter agrees to pay or to cause to be paid educational assistance payments to or for one or more beneficiaries”
  55. Income Tax Act (Canada) s.146.1(1), trust: its purposes include educational assistance payments, accumulated income payments, refunds of payments, and repayments under the Canada Education Savings Act“any person who irrevocably holds property under an education savings plan”
  56. Income Tax Act (Canada) s.204.9(1), RESP lifetime limit“for 2007 and subsequent years, $50,000”
  57. Income Tax Act (Canada) s.204.94(2): tax on accumulated income payments at 20%, or 12% for a resident of Quebec
  58. Rev. Proc. 2020-17, §5.03(1)“contributions to the trust that would otherwise be subject to tax are deductible or excluded from income, are taxed at a reduced rate”
  59. Income Tax Act (Canada) s.146.1(13.1)“Every trustee under a registered education savings plan shall, in prescribed form and manner, file with the Minister information returns in respect of the plan.”
  60. Rev. Proc. 2020-17, §5.04(3), converted at the Treasury rate on the last day of the tax year“Contributions to the trust are limited to $10,000 or less annually or $200,000 or less on a lifetime basis”
  61. U.S. Treasury, Bureau of the Fiscal Service, Treasury Reporting Rates of Exchange, Canada-Dollar: 1.369 (December 31, 2025)
  62. Rev. Proc. 2020-17, §5.04(4)“Withdrawals, distributions, or payments from the trust are conditioned upon the provision of medical, disability, or educational benefits, or apply penalties to withdrawals, distributions, or payments made before such conditions are met.”
  63. Rev. Proc. 2020-17, §5.02 (eligible individual)“is compliant (or comes into compliance) with all requirements for filing a U.S. federal income tax return ... and to the extent required under U.S. tax law, has reported as income any contributions to, earnings of, or distributions from, an applicable tax-favored foreign trust”
  64. 26 U.S.C. §677(a)(2): the grantor is treated as owner of a portion whose income may be held for the grantor“held or accumulated for future distribution to the grantor or the grantor's spouse”
  65. 26 U.S.C. §§665-668: an accumulation distribution from a trust that is not a grantor trust is taxed as if paid in the years the income was earned (§667), with an interest charge for a foreign trust (§668); figured on Form 4970
  66. Income Tax Act (Canada) s.146.4(4)(g)-(j): the $200,000 contribution limit, contributions only by or with consent of a holder, permitted payments, and the property held by the plan trust“the plan provides that no payments may be made from the plan other than (i) disability assistance payments, (ii) a transfer in accordance with subsection (8), and (iii) repayments under the Canada Disability Savings Act or a designated provincial program”
  67. Income Tax Act (Canada) s.146.4(1), definition of contribution: government grants and bonds are not contributions“contribution to a disability savings plan does not include (other than for the purpose of paragraph (b) of the definition disability savings plan) (a) an amount paid into the plan under or because of the Canada Disability Savings Act”
  68. Income Tax Act (Canada) s.146.4(3)(a)“the issuer of the plan provides without delay notification of the plan’s establishment in prescribed form containing prescribed information to the specified Minister”
  69. Rev. Proc. 2020-17, §5.04(2)“Annual information reporting with respect to the trust (or about the beneficiary or participant) is provided, or is otherwise available, to the relevant tax authorities in the trust's jurisdiction.”
  70. Treas. Reg. §301.7701-4(b)“generally are created by the beneficiaries simply as a device to carry on a profit-making business”
  71. 26 U.S.C. §679(a)(4)(A)“If a nonresident alien individual has a residency starting date within 5 years after directly or indirectly transferring property to a foreign trust, this section and section 6048 shall be applied as if such individual transferred to such trust on the residency starting date”
  72. 26 U.S.C. §672(f)(1)-(2)(A): a foreign person is treated as owner only of a trust they can revoke alone, or one that can pay only them or their spouse during their life“this subpart shall apply only to the extent such application results in an amount (if any) being currently taken into account ... in computing the income of a citizen or resident of the United States or a domestic corporation”
  73. 26 U.S.C. §671“Any remaining portion of the trust shall be subject to subparts A through D.”
  74. Instructions for Form 3520 (Rev. December 2025), Additional Reporting and Tax Information“You may be required to file Financial Crimes Enforcement Network (FinCEN) Form 114, Report of Foreign Bank and Financial Accounts (FBAR). In addition, you may be required to file Form 8938”
  75. Instructions for Form 3520 (Rev. December 2025), Who Must File, item 4“More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests”
  76. Rev. Proc. 2024-40, §3.48 (taxable years beginning in 2025)“exceeds $20,116”
  77. Rev. Proc. 2025-32, §4.47 (taxable years beginning in 2026)“exceeds $20,573”
  78. 26 U.S.C. §6039F(b)“Such term shall not include any qualified transfer (within the meaning of section 2503(e)(2))”
  79. 26 U.S.C. §2503(e)(2); Treas. Reg. §25.2503-6(b)(2) and (c), Examples (3)-(4): the payment goes straight to the school or the provider, and reimbursing you does not count“any amount paid on behalf of an individual ... as tuition to an educational organization ... for the education or training of such individual, or ... to any person who provides medical care ... with respect to such individual as payment for such medical care”
  80. Prop. Treas. Reg. §1.6039F-1(c)(2)(i)(A) and (v), 89 Fed. Reg. 39,449 (May 8, 2024): the adjustment runs from 1995, as section 6039F(d)'s does for the $10,000 that is $20,116 for 2025 and $20,573 for 2026, so the figures here are ten times those“are increased by an amount equal to the product of the amounts specified in such paragraphs and the cost-of-living adjustment for the taxable year of the gift under section 1(f)(3)”
  81. Prop. Treas. Reg. §1.6039F-1(c)(2)(ii) and (h)(2), for covered gifts received from the day the final section 2801 regulations were published, January 14, 2025 (90 Fed. Reg. 3,376); the section 2503(b) amount is $19,000 for 2025 and 2026 (Rev. Proc. 2024-40, §3.43(1); Rev. Proc. 2025-32, §4.42(1) and (3))“if the aggregate amount of covered gifts and bequests received by the U.S. person during the calendar year does not exceed the section 2801(c) amount, which is the dollar amount of the per-donee exclusion in effect under section 2503(b)”
  82. 26 U.S.C. §6039F(c)(1)(B)“an amount equal to 5 percent of the amount of such foreign gift for each month for which the failure continues (not to exceed 25 percent of such amount in the aggregate)”
  83. IRM 21.8.2.19.2 (05-01-2026), on answering inquiries; the penalty itself is unchanged in §6039F(c), and the examiners' penalty section, IRM 20.1.9.10, still covers it“IRS is no longer assessing penalties at filing on late Forms 3520 reporting foreign gifts and bequests in Part IV.”
  84. Canada Revenue Agency, Taxable capital gains on property, investments, and belongings (date modified 2026-01-20)“When a person dies, they are considered to have sold all their property just prior to death, even though there is no actual disposition or sale.”
  85. 26 U.S.C. §6677(a)“the greater of $10,000 or 35 percent of the gross reportable amount”
  86. 26 U.S.C. §6677(c)(1), (3) (gross reportable amount)“the gross value of the property involved in the event ... the gross amount of the distributions”
  87. Instructions for Form 3520-A (Rev. December 2025), Penalties; 26 U.S.C. §6677(b)“The U.S. owner is subject to an initial penalty equal to the greater of $10,000 or 5% of the gross value ... of the portion of the trust's assets treated as owned by the U.S. person at the close of that tax year”
  88. 26 U.S.C. §6677(a)“$10,000 for each 30-day period (or fraction thereof) during which such failure continues after the expiration of such 90-day period. At such time as the gross reportable amount with respect to any failure can be determined by the Secretary, any subsequent penalty imposed under this subsection with respect to such failure shall be reduced as necessary to assure that the aggregate amount of such penalties do not exceed the gross reportable amount (and to the extent that such aggregate amount already exceeds the gross reportable amount the Secretary shall refund such excess to the taxpayer).”
  89. 26 U.S.C. §6677(b)(2): for Form 3520-A, subsection (a), its limit included, applies at 5%“subsection (a) shall be applied by substituting “5 percent” for “35 percent””
  90. IRM 20.1.9.13.4 (01-29-2021), Penalty Computation“In cases where the gross reportable amount is less than $10,000 the initial penalty is equal to the gross reportable amount.”
  91. 26 U.S.C. §6677(d)“No penalty shall be imposed by this section on any failure which is shown to be due to reasonable cause and not due to willful neglect. The fact that a foreign jurisdiction would impose a civil or criminal penalty on the taxpayer (or any other person) for disclosing the required information is not reasonable cause.”
  92. 26 U.S.C. §6501(c)(8)(A)-(B): if the failure was due to reasonable cause and not willful neglect, the rule applies only to the items related to it“the time for assessment of any tax imposed by this title with respect to any tax return, event, or period to which such information relates shall not expire before the date which is 3 years after the date on which the Secretary is furnished the information required to be reported under such section”
  93. 26 U.S.C. §644(a)“the taxable year of any trust shall be the calendar year”
  94. Instructions for Form 3520 (Rev. December 2025), When and Where To File“If you are the U.S. owner of a foreign trust, the due date for filing a substitute Form 3520-A is the due date of your Form 3520.”

References

Ready to file?

If you have a foreign trust, pension, or gift from Canada that needs reporting, our guided interview walks you through Form 3520 and Form 3520-A step by step.

Start a filing

Last reviewed October 22, 2026