The Canadian Revenue Agency recently sent approximately 900,000 financial records of Canadian residents to the Internal Revenue Service.
Since 2014, bank records of over 2.6 million customers have been sent to the USA from Canada under FATCA. The purpose is to find out who could be subject to US taxes.
What Canadian Bank Records are Shared
Such records may include names, addresses, account numbers, balances, interest and other income; however, the CRA and financial institutions do not automatically notify people when their information has been shared.
Lawyer John Richardson, co-chair of the Alliance for the Defence of Canadian Sovereignty (ADCS), said to CBC: "There is no doubt that it is pushing a lot of people into US tax compliance. It's also pushing a lot of people, when they become aware of this, into straight renunciation of their citizenship."
People whose account information is shared with the IRS are not automatically notified by either their financial institutions or the CRA.
Under the agreement, the IRS is supposed to send the CRA information about US bank accounts held by Canadians. However, the CRA refuses to reveal how many records it has received from the IRS.
However, the number of records doesn't necessarily correspond to the number of Canadian residents affected. Some people may have more than one bank account, while some joint accounts could have more than one account holder — including Canadians who don't have US citizenship.
What is FATCA?
The FATCA international tax code was designed to stop Americans stashing money abroad to evade tax. It forces banks worldwide to start revealing, via national tax agencies, information on clients with links to America. And it spawned the Common Reporting Standard, whereby over 100 countries swap data with each other to discourage cross-border tax dodging.
Unlike most countries, the United States levies income taxes based on citizenship rather than residency.
But many Americans living abroad have found it has also caused problems for them. Banks have warned that they could be forced to close accounts belonging to US citizens because of ongoing difficulties with FATCA.
FATCA has also been challenged by "accidental Americans" outside of Canada: the French Association of Accidental Americans appealed against the reporting requirements earlier this year, while a US-born British citizen commenced a crowdfunding campaign to challenge the Act in September.
What to do if you have Canadian bank accounts
If you have Canadian bank accounts, and are not sure if you should be reporting to the IRS - please contact us. We can help you get into compliance with all IRS filing and reporting requirements.