FATCA won, but Canada got a small agreement Canada has agreed to comply with FATCA, but will only provide information on accounts held by U.S. depositors holding more than $50,000. Jeffrey S. Freeman, J.D., LL.M More than one million U.S. citizens currently reside in Canada, many of which have forgotten that Canada is considered a foreign country and not actually part of the United States in spite of its close proximity. Given Canada's high tax rates many dual citizens don't worry about U.S. taxes, but they are still required to file U.S. taxes each year. Set to take effect July 1, 2014 the Foreign Account Tax Compliance Act (FATCA) will require foreign financial institutions (banks, insurers, and investment funds) to send the IRS information about offshore accounts of Americans. The United States and Canada recently signed and intergovernmental agreement (IGA) to appease the U.S. request for information under FATCA. The Canadian IGA allows for Canadian Banks to report their data to the Canada Revenue Agency, which will then provide the data to the IRS. An additional provision included in the IGA details preexisting individual accounts that will not be reported on. Preexisting individual accounts with a balance or value that does not exceed $50,000 as of June 30, 2014 are exempt unless the financial institution elects to report on them. This greatly eases the burden on Canadian financial institutions and some U.S. citizens that do not have substantial wealth might breathe a sigh of relief if they have not consistently filed their U.S. taxes. Lower Value Accounts (greater than $50,000 account balance, $250,000 cash value insurance contract or annuity contract, that do not exceed $1M) will have an electronic records search performed looking for any indications that the funds are owned by a U.S. citizen. The following all serve as indicators and account information would then be turned over to the Canada Revenue Agency:
identification of the account holder as a U.S. citizen or resident clear identification of U.S. place of birth Current U.S. mailing or residence address (includes U.S. post office box) Current U.S. telephone number Standing instructions to transfer funds to a U.S. account Currently effective power of attorney or signatory authority granted to a person with a U.S. address If the only address on file is a U.S. "in-care-of" or "hold mail" address
FATCA is complex as shown by the forty-seven page IGA determining how Canada and the U.S. will follow the act. Those individuals still questioning the impact FATCA will have on their delinquent taxes should seek expert legal counsel as soon as possible. FATCA is coming, even Canada is on board.
About Freeman Tax Law Freeman Tax Law is a boutique tax law firm with national exposure equipped to handle all domestic and international tax law matters. At Freeman Tax Law, the attorneys and professional staff have vast experience with foreign tax compliance, international tax planning, and resolving
tax controversies involving offshore banking matters. Freeman Tax Law helps taxpayers and foreign entities become in compliance with laws such as Foreign Account Tax Compliance Act (FATCA) and Offshore Voluntary Disclosure Program (OVDP). In addition to handling complex tax controversies, the Freeman Tax Law team has extensive expertise in assisting clients with wealth management and estate planning. Freeman Tax Law (855) 935-5945 email@example.com www.freemantaxlaw.com