If you want the IRS off your back, starting scouring your client files for U.S. citizens now, advises one Toronto advisor.
The new U.S. tax law, FATCA – Foreign Account Tax Compliance Act – which officially rears its head on July 1, is about to force U.S. citizens, residing outside the United States, to become fully financially accountable to their ‘home’ country.
Over the next two years, banks and other financial institutions in Canada and across the globe will have to identify to the IRS which customers are “indicia” – meaning U.S. citizens or former permanent residents who are required to file U.S. tax returns regardless of where they reside in the world. Additionally, anyone opening a new account will be required to disclose whether they are a “U.S. person.” Those who answer 'yes' may be flagged.
This process is estimated to cost upwards of $100 million for each Canadian financial institution. Residents directly impacted include dual citizens, Canadians with Green Cards and 'snowbirds' who spend a large amount of time in the U.S.
“All U.S. citizens living in Canada who have been under the radar and haven’t been filing their taxes, they are not going to be able to hide much longer,” says Matt Altro, CEO of MCA Cross Border Advisors. “If it (FATCA) convinces people there is no hiding from the IRS anymore, that could be a good thing because they won’t get caught with major tax repercussions down the road.” (continued on Page 2)