US Tax and Estate Planning
Since 2014, the Canada Revenue Agency (CRA) has shared more than 1.6 million Canadian bank records of Americans living in Canada and Green Card holders living in Canada with the Internal Revenue Service (IRS). This information transfer stems from the Foreign Account Tax Compliance Act (FATCA) and the subsequent conclusion of an information transfer agreement between Canada and the United States which implements FATCA, the FATCA Intergovernmental Agreement.
Under US tax law, all US taxpayers, regardless of where they reside, are required to disclose their foreign bank accounts with an aggregate balance in excess $10,000 USD (even for one day of the year) to the IRS by filing Foreign Bank Account Reports (FBARs). Failure to make these disclosures can result in severe penalties, including a penalty of $10,000 USD per account for “non-willful” failures. Willful failures can result in even greater penalties.
In furtherance of this disclosure requirement, the US government adopted FATCA to oblige foreign financial institutions to disclose the bank records of US taxpayers. Canada concluded the FATCA Intergovernmental Agreement to implement FATCA in exchange for the IRS providing information on US bank accounts held by Canadians. Under the FATCA Intergovernmental Agreement, Canadian financial institutions share information on bank accounts held by clients who may be US citizens or Green Card holders with the CRA. In turn, the CRA forwards the information to the IRS. Currently, neither the CRA nor Canadian financial institutions inform the targeted clients of these information transfers.
The CRA provided the IRS with information on 600,000 Canadian bank accounts each year in 2016 and 2017. It is anticipated that this number increased in 2018 and will increase again in 2019. If you are an American living in Canada, hold a Green Card holder, or have links to the United States such as being born in the United States, we strongly recommend that you consult one of our qualified cross border professionals to determine if you fall under the scope of FATCA and are compliant with your US tax filing obligations.
For an interesting read on a legal challenge to the FATCA Intergovernmental Agreement, here is a link to a CBC News article on the subject: https://www.cbc.ca/news/politics/tax-fatca-u-s-canada-1.4988135
The comments offered in this article are meant to be general in nature and are not intended to provide legal advice regarding any individual situation. Before taking any action involving your individual situation, you should seek legal advice to ensure it is appropriate for your circumstances.
About the author
Shlomi Steve Levy is a Partner of Levy Salis LLP and is a member of the Quebec Bar, the Law Society of Ontario (L3), the Society of Trust and Estate Practitioners, and the Canadian Bar Association.