The wolves may appear to be at bay with a deal over FATCA reached last week between Canada the U.S., but your clients are not entirely in the clear, warns one Toronto financial advisor.
On the advice of Matt Altro, CEO of MCA Cross Border Advisors, Canadian advisors should weed out their clients who are U.S. citizens and begin making the necessary preparations now – well beyond the July 1 deadline, when the new U.S. tax law comes into effect around the world.
"Advisors can look at this as a wake-up call. It's why they need to find out whether their clients are U.S. citizens or not," says Altro. "I suggest advisors communicate directly with their clients ... so they can at least inform them of their obligations or refer them to someone who can."
Referring clients to qualified third-party service providers – including accountants and lawyers – may be necessary to deal with complex tax filings and other investment disclosures subject to IRS scrutiny. "The tax filing is just the tip of the iceberg when it comes to what a U.S. citizen needs to know ... there are a series of income tax traps they (clients) can fall into if they are not informed," Altro says.
Initially, the Foreign Account Tax Compliance Act
(FATCA) raised alarm in Canada, as Canadian financial institutions would have been required to report information on account holders who are U.S. residents and U.S. citizens directly to the IRS, potentially violating Canadian privacy laws. (continued.)