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

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

Watch out! FATCA

But, the implications are not just restricted to filing personal income tax. Registered accounts such as RESPs and TFSAs are considered "foreign trusts" by the IRS
and are also potentially taxable. This becomes more complicated for people – for example those born in Canada to U.S. parents or born in the U.S. to Canadian parents – who may not realize they are U.S. citizens.

This, according to Altro, is why Canadian advisors need to get with the program.

“In addition to filing taxes, there is usually a bunch of other problems,” says Altro, who is one of a niche group of advisors qualified to service both Canadian and U.S. clients. “There are people getting advice from good Canadian advisors that are good at Canadian financial planning, but are not taking into account the U.S. tax system. Some good planning in Canada does not work on the U.S. side and they (clients) end up with onerous tax consequences.”

In his business, Altro conducts a financial audit on every client he decides to take on, making sure that all U.S. citizens clean up their acts (i.e.. filing outstanding taxes), before a financial plan is developed. He recommends all advisors do the same for their U.S. clients over the next several months, working with a cross-border specialist – either in-house or third-party – who knows the U.S. system inside and out.

“If an advisor is not getting ahead of this, figuring out which clients are U.S. citizens and what they need to do to clean up any issues they may have, then some other advisor will point this out to the client,” warns Altro. “(The law) will create a lot more awareness of the importance of understanding whether you need external or internal help to figure out what the implications are for U.S. clients.” (continued on Page 3)

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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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