Recently I published a post on TaxConnections.com regarding FATCA and the decision of the Canadian government to sign an intergovernmental agreement with the United States Treasury. Worldwide, governments are struggling to raise funds and eliminate cross border tax evasion. Bankers, expats and several foreign governments believe that President Obama’s Foreign Account Tax Compliance Act – FATCA – is overly burdensome and a threat to the sovereignty of foreign nations. No where has the opposition been as vocal as it has from our northern neighbor, Canada.
This week we received a press release from the Canadian Charter Challenge Fund (or “C3F”) for short. According to the release, the group, spearheaded by Dr. Stephen Kish of Toronto and Lynne Swanson of London, Ontario, claims that FATCA discriminates against approximately 1 million Canadians and their families. The group claims that the IRS improperly deems many Canadians to be “U.S. persons” despite their Canadian citizenship.
According to a published release, C3F has hired a lawyer to determine whether Canada’s participation in FATCA violates Canada’s Constitution and Charter of Rights and Freedoms.
“It’s time for Canadians to get angry. FATCA is a threat to all Canadians and cannot be captive to party politics,’ said Dr. Kish. Ms. Swanson added, “It is despicable the Harper government thinks so little of Canadians that they are forced to raise money from those with limited means to retain counsel to ensure their fundamental rights are protected from foreign demands.”
The group calls FATCA “chilling.”
There has been a growing number of expat groups and Canadians calling for the repeal of FATCA. Even the Republican Congressional caucus has called for repeal. Notwithstanding some strongly worded press statements, we don’t see a repeal anytime soon.
This means if you have unreported accounts you must carefully weigh your options. The failure to report offshore accounts and file missing FBARs could earn you a trip to prison although the risk of criminal prosecution is remote. Unfortunately, the risk of huge civil penalties is very real. Whether or not the U.S. can collect those penalties in Canada (or would even try) is another story. True U.S. citizens and taxpayers – especially those with assets or income in the United States – remain at risk.
What should you do if you are living in Canada and believe you have U.S. reporting obligations? Our best advice is to speak with an experienced US FBAR lawyer and determine if you even have a reporting requirement. If you do, he or she can explain your obligations and options. Once you have that information, you may also wish to speak with a Canadian lawyer to determine any collections risks.
We suspect that most Canadians and expats living in Canada with US reporting obligations can avoid all or most penalties. Obviously, however, each case is different.
If you have failed to report a foreign account or file an FBAR form (Report of Foreign Bank and Financial Accounts), the penalty is up to the greater of $100,000 or 50% of the highest historical account balance. As noted above, there are options and alternatives available for taxpayers who can demonstrate they did not act willfully.
We welcome questions about FATCA, FBAR and foreign reporting issues and will gladly explain your responsibilities and explore your options. Our FBAR attorneys have helped many taxpayers with a wide variety of offshore reporting problems.
For more information, contact attorney Bethany Canfield at or by telephone at (414) 223-0464. The author may also be contacted at or by telephone at (414) 704-6731 (direct). All inquiries are protected by the attorney – client privilege and kept in strict confidence. Our IRS tax services are available worldwide.
Need more information? Our Due Diligence blog has hundreds of text searchable articles on FATCA and FBARs.
Post by Brian Mahany, Esq.
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