US Resident: Unreported Bank Account In Canada

Question

I'm Canadian living in the US for the last 6 years. Recently, I obtained a US passport.

I've had a bank account in Canada during last 6 years I've been living in the US. On the account there's a 5 figure dormant savings account - savings I earned while living in Canada. Inside the bank account in Canada, everything is on a checking account, however, in the past couple of years, I also had an investment account. Over the years, the investment account made little money on the overall, if not being net negative and I moved it all to checking last in 2020.

Am I in trouble due to the fact that I didn't report this account while being on a green card in the US? Now I'd like to transfer money from the Canadian bank account into a US bank - can I just do a wire transfer - is the IRS going to consider this as a problem of some kind? What's my best best in this situation to get the money transferred into the US?

Update to answer some questions: Even though there was some income in the range of 100$ per year on those investments and possibly negative over the years, I did not mention those incomes on my US taxes in previous years.

Answer 1

Am I in trouble due to the fact that I didn't report this account while being on a green card in the US?

YES. As a US citizen, lawful permanent resident aka green-card holder OR other 'resident alien' as defined by the tax code (aka the 'substantial presence test', which excludes some people actually living in the US and includes some people actually NOT living in the US) you are (since 2011) required to report foreign financial accounts and assets UP TO TWO WAYS:

• for accounts totalling over $10k at any time, you must file FBAR (Foreign Bank Account Report) with FinCEN (NOT IRS) (until a few years ago this also used to be on a different schedule, June something instead of April 15);

• if you are living in the US (you are/were) for accounts and some other assets totalling over $50k at the end of the year or $75k at any time if single (double those figures if married filing jointly), report on form 8938 attached to your tax return, but only if you are required to file a tax return (i.e. income above the filing threshhold for your status, or certain special cases like AMT, SE tax, or reconciling APTC or AHCTC)

I find this comparison page on the IRS website very handy.

Failing to make either of these reports when required can have harsh penalties, which were aimed at rich people using foreign accounts to cheat on tax, but for the (many) 'small fry' swept up in these broad nets, IRS has a streamlined compliance program which for taxpayers living in US requires you to file 3 years of amended tax returns, 6 years of 'missing' FBARs, and assesses a fixed penalty of only(!) 5%. Compare to this recent Q for someone living outside US.

As far as the transfer of money, IRS doesn't care about that. FinCEN does care if you do cash transactions over $10k, but carrying large amounts of cash over long distances is risky anyway, and especially difficult during COVID although that should improve soon.

If the money is currently held in CAD and you also want/need to convert to USD, that part may be a little more work. The bank(s) will gladly do it as part of the transfer, but usually won't give you the best rate; there are several independent services that offer better rates (there are plenty of Qs about that, just search) but require some work to set up and use.