All US citizens in Canada have always been required to file US income tax returns. As of January 1, 2013, Canadian banks are required to disclose to the IRS assets and bank accounts held by US citizens in Canada so the obligation is now more urgent than ever.
In addition to an income tax return, you are required to disclose your common Canadian financial products to the IRS. A Tax Free Savings Account does not protect income that builds up inside it from US tax. Since the IRS may consider your TFSA a foreign trust, you will have to disclose it to them. Similarly, you need to file a special form in order to defer US tax on your RRSP. The IRS may treat Canadian mutual funds as a type of foreign holding company. So you need to disclose which ones you own. Failing to file annual tax returns may expose you to thousands of dollars in fines. For example, you might be fined up to $10,000 simply for not reporting your non-US bank accounts. Since your bank is now obliged to advise the IRS about these accounts, there is little chance of evading scrutiny.
Filing a US tax return and making these disclosures can appear daunting, but need not be difficult. For most people, it will simply involve filling out some paperwork and sending it in. Rather than pay a professional hundreds of dollars, you can do it yourself. You can also take advantage of a recent IRS program to catch up on past returns or even renounce your US citizenship. This guide explains how, using step-by-step, plain language instructions. It includes all of the forms you need. No software or other publication is designed specifically to help US citizens in Canada meet their tax obligations.