Does my Canadian TFSA require Form 3520 filing as a foreign trust?

The IRS has never officially declared the Canadian Tax-Free Savings Account (TFSA) a foreign trust, but most U.S. tax professionals treat it as one and file Form 3520 and Form 3520-A conservatively because the penalty for missing these forms starts at $10,000 per form, per year. Until the IRS issues definitive guidance, filing is the safer path for most Americans in Canada.

Why the foreign trust question matters:

• The U.S.-Canada Tax Treaty covers RRSPs explicitly, but is completely silent on TFSAs
• Without treaty protection, the TFSA looks like a foreign grantor trust under U.S. tax law
• The IRS has never issued a ruling confirming or denying this treatment
• Some practitioners have successfully argued that TFSAs are custodial accounts at IRS Appeals, but the risk of non-filing outweighs the paperwork cost for most taxpayers

What filing conservatively looks like:

• Form 3520-A (the “trust’s” annual return): due March 15, extendable to September 15 via Form 7004. Penalty: the greater of $10,000 or 5% of account value for late filing
• Form 3520 (your report as U.S. owner): due with your Form 1040, including extensions. Penalty: the greater of $10,000 or 5 to 35% of account value, depending on the transaction type
• FBAR (FinCEN 114): always required if all your foreign accounts combined exceed $10,000 at any point in the year, regardless of the trust debate

In practice, you typically prepare Form 3520-A yourself as the account’s de facto trustee, then attach it to your Form 3520.

If you have an unreported TFSA, the IRS Streamlined Filing Compliance Procedures can help you catch up with reduced or eliminated penalties.

For a full breakdown of TFSA tax treatment, investment strategy, and whether to keep or close your account, see our guide to TFSAs for U.S. citizens in Canada.