If you live in Canada but hold US citizenship or a green card, you already know you file taxes in both countries. What surprises most people is how easy it is to get it wrong, even after doing it for years.

At L&R Accounting, we work with cross-border filers across Ontario, and the same mistakes come up every season. Here are the five we see most often.

1. Forgetting that the US taxes worldwide income

Canada taxes you based on residency. The US taxes you based on citizenship. If you are a US citizen living in Toronto, you owe the IRS a return on your global income, including your Canadian salary, rental income, and investment gains. Many people assume that living abroad means they are off the hook. They are not.

2. Missing the FBAR filing deadline

If you have Canadian bank accounts (including joint accounts, TFSAs, and RRSPs) with a combined balance that exceeds US $10,000 at any point during the year, you must file an FBAR (FinCEN 114) by April 15, with an automatic extension to October 15. The penalties for not filing are steep: up to US $10,000 per account per year for non-willful violations. This is separate from your tax return and is filed directly with FinCEN, not the IRS.

3. Not claiming the Foreign Tax Credit properly

The Canada-US tax treaty exists to prevent double taxation. The Foreign Tax Credit (Form 1116 for the US, or the foreign tax credit on your Canadian return) lets you offset taxes paid to one country against what you owe the other. But many filers either skip this entirely or calculate it incorrectly, especially when different types of income (employment, dividends, capital gains) are taxed at different rates in each country. Getting this wrong means you pay more than you should.

4. Ignoring TFSA reporting on the US side

A Tax-Free Savings Account is a great tool in Canada. But the IRS does not recognize it as tax-exempt. For US tax purposes, a TFSA is a foreign trust, and the reporting requirements (Forms 3520 and 3520-A) are complex and time-consuming. The income earned inside the TFSA is taxable on your US return. Many cross-border filers either skip TFSA reporting entirely or do not realize it is required until they receive an IRS notice.

5. Filing with software that does not handle cross-border rules

Standard tax software (TurboTax, H&R Block online) is built for straightforward domestic returns. Cross-border filing involves currency conversions, treaty elections, foreign tax credits, and forms that consumer software does not support well. A missed treaty election or an incorrect conversion rate can trigger a reassessment or an audit.

What to do about it

Cross-border tax is not something to figure out on your own. A CPA who holds both Canadian and US designations can file both returns in coordination, apply the treaty correctly, and make sure nothing is missed.

If you are a US citizen or green card holder living in Ontario, reach out to L&R Accounting. We specialize in Canada-US cross-border tax and can review your situation.

Geetha Srinivasan, CPA (Ontario), CPA (US)
L&R Accounting Services Ltd.