INFocus: Some facts about FATCADate: July, 2014
This article was originally published in the inFocus Summer ’14 Issue.
Did you know…?
The Foreign Account Tax Compliance Act (FATCA) is U.S. legislation requiring certain non-U.S. entities (including Canadian financial institutions) to report information to the U.S. Internal Revenue Service (IRS) regarding accounts held by certain U.S. persons. FATCA helps ensure that overseas (non-U.S., including Canadian) income is reported by U.S. persons to the IRS. Enacted on March 2010, FATCA became operational on July 1, 2014.
As a result of FATCA, in February 2014, Canada entered into an intergovernmental agreement (IGA) with the U.S. to implement FATCA’s provisions. Effective as of June 19, 2014, Canadian legislation to implement and ratify the IGA is now in force. As a result of the IGA, entities in Canada that are required to report information under FATCA will provide the information to the Canada Revenue Agency (CRA), who will in turn provide the information to the IRS.
If a Canadian entity fails to comply with the new legislation, a 30 per cent withholding tax may be levied on U.S. source payments made to the Canadian entity. As well, penalties may apply to the Canadian entity under the Canadian Income Tax Act.
Canadian entities should determine what their requirements are, if any, under FATCA to report information about U.S. account holders to the CRA. The legislation and supporting guidance is complex; competent professional advice should be sought to assist with understanding and complying with the legislation.
If you are one of the estimated one million U.S. citizens living in Canada, consider if your U.S. personal income tax filings are up to date. A U.S. citizen is required to file a U.S. personal income tax return (and various other compliance documents) each year, regardless of the fact that they may reside outside of the U.S. The fact that the Canadian-resident U.S. citizen does not owe any tax does not absolve the U.S. citizen from their U.S. filing responsibility.
If you are a Canadian-resident U.S. citizen and have not yet become compliant with respect to your U.S. personal tax filing obligations, consider if now is the time to do so. The IRS offers a streamlined program to encourage taxpayers to come forward and become compliant. If you are a Canadian-resident U.S. citizen and would like to determine if you can become compliant through the IRS streamlined program, please speak to your Crowe Soberman advisor.
Connect with the Authors
Alexandra (Ali) Spinner, CPA, CA, Alexandra Spinner Professional Corporation, Partner – Tax Group
Marissa Verskin, CPA, CA, Senior Manager – Tax Group
Alexandra (Ali) Spinner and Marissa Verskin are involved in all aspects of the firm’s domestic tax practice. Ali is also involved in international tax matters. Both are experienced in estate and trust planning, corporate structures, reorganization and tax planning.
Specific professional advice should be obtained prior to the implementation of any suggestion contained in this article.
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