Watch out! FATCA's on your doorstep, warns Toronto advisor

Watch out! FATCA's on your doorstep, warns Toronto advisor

Watch out! FATCA 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)

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  • David Zimmerly 2014-01-19 7:48:48 AM
    If Canada does indeed sign an IGA with the U.S., there will be major Charter challenges and class-action suits. Most of these so-called U.S. Persons are also Canadian citizens who enjoy the same rights and protections under Canadian law as anyone else. It is illegal for banks to ask their customers their place of birth or to deny them services on the basis of their national origin. While the compliance industry keeps prattling on about the "inevitability" of FATCA, nothing could be further from the truth. The entire world is just beginning to wake up to what a monstrous, extraterritorial overreach FATCA represents. If and when the U.S. is foolish enough to actually apply 30% withholding, the blowback domestically of capital flight from foreign investors and creditors will straighten them out in a hurry. FATCA will fail miserably.
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  • Douglas Wright 2014-01-20 4:50:43 PM
    I agree with David.

    Peter Hogg, who is arguably Canada's foremost constitutional lawyer has opined that FATCA would not withstand a constitutional challenge in Canada. FATCA represents the ultimate in American arrogance and stupidity. To think that people who live and pay taxes elsewhere are the solution to their financial quagmire!! Amazing!!

    Will Obama be submitting an FBAR to Kenya?

    Russia has refused to sign unless there is full reciprocity, and insists that American law cannot interfere with the operation of Russian financial institutions. Canada should insist on the same, to which of course, Americans would not agree. Americans obviously think that territorial overreach is their exclusive privilege.

    FATCA will fail for another reason that few people have predicted. In my judgement, it is only a question of when (not if) the US$ will lose its status as the world's reserve currency. When that happens, FATCA will be toothless.

    From what I can see, the process of the US$ losing that status is already under way. Signatories to date on FATCA are pitifully few. Refusal to accept US dollars is gaining momentum.

    Americans are so desperate to increase their exports that they have taken to exporting their laws.

    Our sheeple in the compliance industry should stop cackling like sheep and grow some balls.
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