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American-Canadian IRS Tax Law?

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  • Oct 3rd, 2014 9:17 pm
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[OP]
Newbie
Oct 1, 2014
3 posts
Montreal, QC

American-Canadian IRS Tax Law?

I heard of this law a while back. Can someone explain this in more detail? Basically from what i read its any american that has money in canadian banks will be reported to the usa irs no matter what? I heard there was protest with this b/c there are canadians that were born in the usa but left to canada a long time ago and upset about this. Is it b/c their information will be reported to the usa governement? Do they have to owe taxes to the usa's irs?


I also read there is an exception such as if the persons canadian bank account is under 50000, there would be no reporting whatsoever to the IRS of the usa?


I read this law came into effect july 1, 2014 or august 1, 2014? So basically before this date if you held a canadian bank acct, the usa irs won't know about it but after this date if you have an active bank account they would know? But they wouldn't know about individuals with under a certain balance? I cannot imagine canadian banks sharing those canadian who were born in the usa a long time ago or an american that have like 200 dollars in their bank accts only right?


Also i heard this law came into effect as well for usa and all european banks? Thus any american in europe will have similar thing as with usa and canada? So basically its canada and european countries only and every other country such as south america or other places aren't included in this? That doesn't really make sense unless im mistaken?
7 replies
Deal Expert
Feb 29, 2008
21528 posts
2394 upvotes
Montreal
The law is just a US tax anti avoidance measure. All US citizens, and all US permanent residents, whether they live in the US or abroad must file taxes in the US and report all world income for the rest of their natural lives, or until such time as they renounce citizenship or residency.

Whether the candian banks report it or not, you must report your income from Canadian sources on your US tax return.
Sr. Member
Apr 28, 2014
675 posts
174 upvotes
Oakville, ON
Joeandy20 wrote:
Oct 2nd, 2014 2:15 pm
I heard of this law a while back. Can someone explain this in more detail? Basically from what i read its any american that has money in canadian banks will be reported to the usa irs no matter what? I heard there was protest with this b/c there are canadians that were born in the usa but left to canada a long time ago and upset about this. Is it b/c their information will be reported to the usa governement? Do they have to owe taxes to the usa's irs?


I also read there is an exception such as if the persons canadian bank account is under 50000, there would be no reporting whatsoever to the IRS of the usa?


I read this law came into effect july 1, 2014 or august 1, 2014? So basically before this date if you held a canadian bank acct, the usa irs won't know about it but after this date if you have an active bank account they would know? But they wouldn't know about individuals with under a certain balance? I cannot imagine canadian banks sharing those canadian who were born in the usa a long time ago or an american that have like 200 dollars in their bank accts only right?


Also i heard this law came into effect as well for usa and all european banks? Thus any american in europe will have similar thing as with usa and canada? So basically its canada and european countries only and every other country such as south america or other places aren't included in this? That doesn't really make sense unless im mistaken?
You are referring to FATCA - Foreign Account Tax Compliance Act

http://en.wikipedia.org/wiki/Foreign_Ac ... liance_Act

The USA (along with Eritria) are the only countries in the world that practice Citizenship Based Taxation. Which means if you are a US citizen, regardless if you were born to two Canadian living there on a work visa and then left for Canada as a kid and never came back, you are required to file a) tax returns, b) Foreign Bank Account Reports (FBAR's) to the IRS

FATCA came into effect July 1, 2014. For people who are opening new accounts at a Canadian bank, the bank will ask if you are a US Citizen.

For existing customers, the bank will do a search on those with balances over $50,000. Certain accounts, such as RRSP, TFSA, RESP, and RDSP are exempted.

If one of the following things are on the customer file:

i) Indication of US Citizenship or US Passport as ID
ii) US address
iii) US phone number
iv) Power of Attorney to US Person
v) Standing Order to Transfer Funds to US Bank
vi) A "in care of" or "in hold of" US address that is the sole address on the account

The bank must contact you to confirm whether or not you are a US citizen. If you are a US citizen, or you don't respond, the bank is required to forward your info to the CRA who will share it with the IRS.

This applies to banks the world over. It is causing quite a problem.

Here is the website established by Canadian-Americans who are caught up in FATCA who are suing the Federal Government. You can get more info there:

http://isaacbrocksociety.ca/

And for those who say, "Why don't you just do the easy thing and give up your US Citizenship":

You have to go to a US Consulate, attend two interviews, pay a $2350 USD processing fee, and file 5 years worth of US tax returns and FBAR's; which is more money.

It's not a cheap or easy process to renounce US Citizenship.
[OP]
Newbie
Oct 1, 2014
3 posts
Montreal, QC
Thanks for that information. So what you are saying is this new law applies to every other country that an american opens banks account in outside the usa? I had thought it was only canada and i heard europe as well. But every other country whether australia or south american countries still apply right?
Sr. Member
Apr 28, 2014
675 posts
174 upvotes
Oakville, ON
Joeandy20 wrote:
Oct 3rd, 2014 2:40 pm
Thanks for that information. So what you are saying is this new law applies to every other country that an american opens banks account in outside the usa? I had thought it was only canada and i heard europe as well. But every other country whether australia or south american countries still apply right?
That's right; every country. Every country has signed an Intergovernmental Agreement (IGA) in order to implement FATCA. You see, because most countries, including Canada, have privacy laws that would make enforcement of FATCA illegal.

The Canadian IGA gets around the privacy issue by reporting the account information and balances directly to the CRA, which is then shared with the IRS under the existing Canada-US Tax Treaty.

Canada and the US have had a tax treaty long before FATCA; FATCA enhances the information reporting.
[OP]
Newbie
Oct 1, 2014
3 posts
Montreal, QC
Hey thanks for that information. If thats the case, why did i only hear about that it includes USA and canada only and i didn't hear about other countries such as usa and south america, usa and costa rica etc? I only heard this was with canada and i believe europe but is there a reason I didn't hear this about other countries?



So basically for Canadians, this only affects them if they have ties to the usa right? Thus canada and other countries like south america, europe etc theres isn't any treaty?





Oh wait you say

That's right; every country. Every country has signed an Intergovernmental Agreement (IGA) in order to implement FATCA.


That means canada government will share information with mexico government, asia government will share information with europe government for banking basically every country is connected?


What im confused is do canadians have to be worry if they had bank accts in say europe? Do South Americans have to worry about bank accounts they had in the usa? Also i assume if they HAD it along time ago that wouldn't be a problem but if they still have one now, then it would not be good? I'm still bit confused with the if bank acct was opened before july 1, 2014 thing. Is that for every country as well? So if someone had a bank acct many years ago in another country but they no longer had the bank acct, that wouldn't be an issue?


What im confused is all i hear that many canadians and some americans don't like this law. yet i never hear anything like south american or european or any other country upset about this law.
Sr. Member
Apr 28, 2014
675 posts
174 upvotes
Oakville, ON
Joeandy20 wrote:
Oct 3rd, 2014 5:55 pm
Hey thanks for that information. If thats the case, why did i only hear about that it includes USA and canada only and i didn't hear about other countries such as usa and south america, usa and costa rica etc? I only heard this was with canada and i believe europe but is there a reason I didn't hear this about other countries?



So basically for Canadians, this only affects them if they have ties to the usa right? Thus canada and other countries like south america, europe etc theres isn't any treaty?





Oh wait you say

That's right; every country. Every country has signed an Intergovernmental Agreement (IGA) in order to implement FATCA.


That means canada government will share information with mexico government, asia government will share information with europe government for banking basically every country is connected?


What im confused is do canadians have to be worry if they had bank accts in say europe? Do South Americans have to worry about bank accounts they had in the usa? Also i assume if they HAD it along time ago that wouldn't be a problem but if they still have one now, then it would not be good? I'm still bit confused with the if bank acct was opened before july 1, 2014 thing. Is that for every country as well? So if someone had a bank acct many years ago in another country but they no longer had the bank acct, that wouldn't be an issue?


What im confused is all i hear that many canadians and some americans don't like this law. yet i never hear anything like south american or european or any other country upset about this law.
FATCA only affects you if you are a US Citizen or Green Card Holder. The purpose of FATCA is to help the US enforce Citizenship Based Taxation through the supplying of foreign account information held by Americans to the IRS.

If you have a bank account in Canada, and the bank learns you are a US Citizen, the bank reports to CRA who shares with IRS.

If you have a bank account in Argentina, and Argentinian bank learns you are a US Citizen, Argentinian bank reports to their tax authority who shares with IRS.

FATCA applies as of July 1, 2014 going forward for new accounts; existing accounts will be reviewed to see if they have to be reported. FATCA is not retroactive.
Deal Expert
Feb 29, 2008
21528 posts
2394 upvotes
Montreal
FATCA is an implementation tool. The general rule applies. US residents and citizens must report their worldwide income to the IRS. That is a US law. US law applies to US citizens, wherever they live in the world.

In other words, if you livein a country that does not report your holdings, and you do not report it, you are violating US tax law.

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