Read: US Citizens in Canada—the IRS is lurking

Larry Jacobson, Macdonald, Shymko & Company Ltd.
June 2012

It is no secret that the United States taxes on citizenship, not residency. However, once we cross the border, the situation is the exact opposite. According to the Fair and Accurate Credit Transactions Act (FACTA), Canadian financial institutions will soon be required to report on the foreign assets of their American clients. Failure to report would result in a loss of their Intermediary Status, which no institution is willing to risk.

On the bright side, Americans need not be hesitant of filing their US Tax Returns (1040s). In most cases little or no U.S. taxes will be owed. Following the 1040 is a report of any foreign bank and investment account. Compliance requires Americans to disclose all foreign accounts by completing the Report of Foreign Banks and Financial Accounts (FBAR) and submitting this to the U.S. Department of the Treasury. The fines for non-compliance can be anywhere from $10,000 to $100,000! The do-nothing-approach will probably not be a successful strategy. In a situation like this, it is necessary to be proactive not reactive.

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