Foreign Tax Account Compliance Act – and how it could affect you!
If you are one of those Canadian residents that is also a US citizen, but you haven’t been compliant with your US filing and reporting requirements, you may want to consider taking advantage of the Offshore Voluntary Disclosure Program before it ends. Since 2009, the IRS has had special rules in place allowing Canadians in this situation to comply with their US filing and reporting requirements without penalty. Originally slated to end in 2012, the IRS has left this program open, but could announce its closure at any time. With FATCA in place, financial institutions will have to report to the IRS all clients who are US citizens and hold certain financial accounts. This means that the IRS will soon be aware of individuals who haven’t been compliant in their filings. This could mean tens of thousands of dollars in penalties for non-compliance. If you think this may be a situation that could affect you, talk to your financial advisor.
What in the world is FATCA?
FATCA (Foreign Account Tax Compliance Act) is a new piece of US legislation that requires foreign (i.e. anything outside of the US) financial institution to provide information to the US government about the bank account holdings of any “US persons” (citizens or residents of the US).
They have done this as a way to find US persons who are not reporting their foreign holdings as they are supposed to. Canada has signed an inter-governmental agreement with the US such that it will actually be the Canada Revenue Agency that collects this info from the Canadian banks and gives it to the US government (so we’re paying for it!).
The details of this are complex but suffice to say that if you are a “US person”, you should make sure you know what the deal is. You can check this link to a related Q&A on our website. Contact your tax and financial advisors for more information as it relates to you.
Thanks to Richard Wilson, Partner, for this info link.
FATCA: ENHANCED FINANCIAL ACCOUNT INFORMATION REPORTING