# Beware: CRA sends your data to IRS



## james4beach (Nov 15, 2012)

http://www.cbc.ca/news/politics/taxes-internal-revenue-service-fatca-united-states-1.3954789

Harper decided to allow the Canada Revenue Agency to send personal tax information to the I.R.S. The CBC is reporting that banking records for more than 315,000 Canadians were went to the I.R.S. last year. Beware that you have not been notified if your data was sent to the I.R.S.

The US imposes rules on "U.S. Persons" (unless they file certain disclosures). A U.S. person could be
- US citizens, including Canadians born in the US
- people who spend more than a certain number of days in the US, like snowbirds, business people, etc.

I.R.S. is big on penalties, such as potentially hundreds of thousands in penalties for failure to report a bank account via FBAR, and other penalties for failing to file that can be tens of thousands of dollars. *This is really serious... if you are a U.S. person, seek out an expert immediately.*

There are a number of things you must do if you are a U.S. Person, including filing annual FBAR (a listing of all your non-US accounts), abstaining from using Canadian mutual funds or ETFs / filing complex PFIC paperwork with the IRS, and of course filing a US tax return or exemption based on Closer Connection or a claim under the Tax Treaty.


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## james4beach (Nov 15, 2012)

Some additional notes. The main thing is that the US has steadily been stepping up its aggressiveness on this over the last few years. If you regularly travel to the US, even just for vacations, you really might face a world of problems.

Be especially careful on the substantial presence test. It's a complex formula. They know exactly when you cross the border.

Secondly, even if you're filing the Closer Connection exemption, be very careful about the FBAR requirement. Look into whether you still need to fill this. I say this because the penalties are so enormous if you don't, especially if you are judged to be wilfully evading FBAR -- penalties over $100,000

FBAR is also not a requirement under the tax code (it's not an IRS thing, not part of tax law). It's a filing with the Treasury Department. So the IRS may exempt you from having US tax obligations, but that does not free you from FBAR requirements. They are different departments.

Bottom line, if you're a U.S. citizen or exceed the substantial presence test, see an expert.


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## heyjude (May 16, 2009)

Canadians should put pressure on Ottawa to put a stop to this. 

I'm even more concerned about Trump's plan to spy on social media and contact lists of visitors to the US. 

White House discussing asking foreign visitors for social media info and cell phone contacts
http://www.cnn.com/2017/01/29/polit...grant-policy-social-media-contacts/index.html

I'll be avoiding the US for the foreseeable future.


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## RCB (Jan 11, 2014)

"This is really serious... if you are a U.S. person, seek out an expert immediately."

That is the LAST thing you should do. The FIRST thing you should do us go to:

http://isaacbrocksociety.ca

"Experts" have been fleecing Canadians over this for several years, tens of thousands gone.

"Canadians should put pressure on Ottawa to put a stop to this."

Many if us have donated to a lawsuit against the Canadian government for implementing this, and it is now winding its way through court. Progress can be found at the above link. And for the record, Trudeau was against this when Harper was in power, but has failed to do anything about it, thus the continuation of the lawsuit.

Also for the record, the IRS cannot collect within Canada if one was a Canadian resident/citizen at the time the "debt" occurred.


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## gardner (Feb 13, 2014)

There is no way to win by pressuring Ottawa. The US is putting pressure directly on the banks and they are going to cave no matter what. The CRA deal is a back door to let the banks comply with the americans without violating their privacy regulations -- because the CRA is doing it. But if the CRA exited the deal, they would have no choice but to report directly or else see their ability to operate in the US or with US counter parties destroyed completely. They would be out of business.

CRA is not CAUSING this, and probably has no real control. Frankly the fact that the CRA is in the loop makes me slightly more comfortable about the whole thing, because that may actually be accountable at some level, where the banks would not be.

The problem comes down to what "US Person" means, and the FATCA language does not specify. The officials of the hour can make it mean anything they care to make it mean. They could decide it means person who is any or all of these things and effectively sweep up everyone:
-- has been to the US
-- works for a US company
-- has a US$ bank account
-- holds US domiciled securities
-- pays $US withholding taxes on anything


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## mordko (Jan 23, 2016)

This was imposed by the Obama administration on the whole world. Absolutely no way around it. They are big, so they can and do dictate the terms.


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## james4beach (Nov 15, 2012)

I agree, there's no way around this stuff. The US wields too much economic power... other nations have to comply.

But the CRA (or banks) really should be notifying people when their information has been shared with the IRS. This is a question of privacy, too. I want to know who has a list of all my bank accounts or assets.


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## Userkare (Nov 17, 2014)

james4beach said:


> I agree, there's no way around this stuff. The US wields too much economic power... other nations have to comply.


Then maybe you want to edit your original post to not make it look like Harper suddenly woke up one day and said "hey... how can I screw Americans living in Canada".



> But the CRA (or banks) really should be notifying people when their information has been shared with the IRS. This is a question of privacy, too. I want to know who has a list of all my bank accounts or assets.


The bank will ask if you are a "US person" for tax purposes. If you answer "yes", you can be absolutely100% sure that your information is being reported to the CRA, then IRS. If you refuse to answer at all, you may be contacted by CRA to clarify your situation. If you answer "no", then your information will not be shared, unless there's some evidence that you're lying.

Also, this is not news. It's been known about for a few years. You even discussed here.... http://canadianmoneyforum.com/showt...gn-Account-Tax-Compliance-Act?highlight=FATCA


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## james4beach (Nov 15, 2012)

Harper didn't challenge the US on it, he _did_ agree to the information sharing. He could have at least stood up more for Canadian sovereignty or negotiated something better.

The "news" part is that there's been a large increase in the number of Canadians' records that are sent to the US


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## james4beach (Nov 15, 2012)

heyjude said:


> I'm even more concerned about Trump's plan to spy on social media and contact lists of visitors to the US.
> 
> White House discussing asking foreign visitors for social media info and cell phone contacts
> http://www.cnn.com/2017/01/29/polit...grant-policy-social-media-contacts/index.html
> ...


Personally, I clear my messages (SMS, WhatsApp, Kik, etc) before crossing into the US. On every trip, I wipe out the conversations. I also delete the apps.

Consider exporting your contacts and storing them offline. All Android phones allow you to export to a file. You can then store that file somewhere, and re-import it later. I consider it my duty to protect the privacy of people in my circles; unless they are individually consenting to allow the US to see their data, it's my responsibility to protect their info.


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## mordko (Jan 23, 2016)

james4beach said:


> Harper didn't challenge the US on it, he _did_ agree to the information sharing. He could have at least stood up more for Canadian sovereignty or negotiated something better.
> 
> The "news" part is that there's been a large increase in the number of Canadians' records that are sent to the US


Banks from all over the world were providing information to the US, as stipulated by the Obama administration. Saying that Harper could have challenged it is ludicrous, unless he wanted to bankrupt Canadian banks. Harpers government reached a deal to ensure reciprocal arrangements and compliance with Canadian laws on managing personal information.

The US law was idiotic, but it had nothing to do with the actions of our government.


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## Userkare (Nov 17, 2014)

mordko said:


> Banks from all over the world were providing information to the US, as stipulated by the Obama administration. Saying that Harper could have challenged it is ludicrous, unless he wanted to bankrupt Canadian banks. Harpers government reached a deal to ensure reciprocal arrangements and compliance with Canadian laws on managing personal information.
> 
> The US law was idiotic, but it had nothing to do with the actions of our government.


Exactly!!!!!!!!!

Seems that the only country that probably will never have a tax treaty is... Russia. But who knows, now that Donny & Vlad are buds, they might be signed up as well.

http://www.iexpats.com/fatca-countries/


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## Userkare (Nov 17, 2014)

james4beach said:


> The "news" part is that there's been a large increase in the number of Canadians' records that are sent to the US


I hadn't heard that before; did you find any other references? Were any of these Canadians not self-identified as US persons? I'm asking b/c my birthplace is US ( but I have a CLN ). Also I know a few people ( dual US+Can citizens ) who have decided the best way to handle FATCA is to stick their heads in the sand and pretend it isn't there.

Edit: So far, all I find is other references to the same Elizabeth Thompson, CBC News article. Basically, nothing has changed, just that the system is winding up. For a moment there, I thought maybe they were widening the butterfly net, but it looks like they're not.


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## mordko (Jan 23, 2016)

Userkare said:


> Exactly!!!!!!!!!
> 
> Seems that the only country that probably will never have a tax treaty is... Russia. But who knows, now that Donny & Vlad are buds, they might be signed up as well.
> 
> http://www.iexpats.com/fatca-countries/


Right on. And even without the treaty, Russian banks are providing the data to the US (because they don't want to be bankrupted either), except that the transfer is unregulated.


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## james4beach (Nov 15, 2012)

Userkare said:


> I hadn't heard that before; did you find any other references? Were any of these Canadians not self-identified as US persons? I'm asking b/c my birthplace is US ( but I have a CLN ). Also I know a few people ( dual US+Can citizens ) who have decided the best way to handle FATCA is to stick their heads in the sand and pretend it isn't there.


Sorry, I don't have any other sources. I only saw this one article at CBC. I have no idea what criteria they use to share information with the US, but I doubt that it's just limited to US citizens.


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> I agree, there's no way around this stuff. The US wields too much economic power... other nations have to comply.


The form of the compliance varies ... those with a significant US business as well as number of customers that fit "US person" take one route, others with few "US person" clients have been reported to be telling the small number that fit to take their business elsewhere.


Cheers


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## Eclectic12 (Oct 20, 2010)

Userkare said:


> I hadn't heard that before; did you find any other references? ...
> For a moment there, I thought maybe they were widening the butterfly net, but it looks like they're not.


Is an increase in the number of records being sent all that surprising?
I can recall some of the early articles about FATCA saying that only something like 200K were self-identifying as US citizens where the American gov't estimated more like 900K were in Canada.


Cheers


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## Eclectic12 (Oct 20, 2010)

james4beach said:


> ... I have no idea what criteria they use to share information with the US, but I doubt that it's just limited to US citizens.





> 7.2 The due diligence is required to be undertaken to identify U.S. reportable accounts and certain payments to NPFIs. Financial institutions are required to take certain actions, such as collecting information and/or reviewing information in their possession to determine whether to treat an account as a U.S. reportable account. These requirements result in a financial institution having to:
> 
> *search for certain defined U.S. indicia linked to an account holder;* and/or
> *request that account holders self-certify their status.*
> ...


http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/gdnc-eng.html
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/menu-eng.html


It seems one is flagged due to some factor or self-identify, with the financial institution off the hook and the account holder on the hook for complicated situations. So far, the "certain defined U.S. indicia" doesn't jump out ... but it is a long document. :biggrin:

*Update*
It looks like section 8 has some of the searchable factors where a current U.S. mailing address or residence address is an example.

Cheers


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## kcowan (Jul 1, 2010)

The Mexicans resisted the IRS because of the cost of compliance. Then the IRS stipulated that any banks that refuse to comply will not be allowed to do business with US Persons. So then we got an apologetic call saying we had to complete the forms. In our case, we simply confirmed that we are not US Persons and never have been.


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## Userkare (Nov 17, 2014)

Eclectic12 said:


> Is an increase in the number of records being sent all that surprising?
> I can recall some of the early articles about FATCA saying that only something like 200K were self-identifying as US citizens where the American gov't estimated more like 900K were in Canada.
> Cheers


If the increased number is explained simply as the result of the information working its way through the system, then it's expected. 

If, on the other hand, the increased numbers are because they have widened the "eligibility" to pay US taxes to those "tax citizens" who no longer believed, subsequent to 2004, that they were "citizens" of any kind; who since 2008, because of the HEART act, would have been required to pay an exit tax to become non tax-citizens. There's even a question as to whether or not the HEART Act can be applied retroactively to those who ceased to be citizens prior to 2004 - before there was any such thing as a "tax-citizen". This would mean that they could be punished for not complying with a law - at a time before that law had even been written yet!

Nice eh? I guess when you have the world's largest economy, and most powerful military, you can just make any laws you want, and then force the rest of the world to comply.

http://www.citizenshipsolutions.ca/...two-citizenships-introducing-the-tax-citizen/


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## Joebaba (Jan 31, 2017)

Hi all,

I’m not arguing whether any of this discussion is right vs wrong – good vs bad – etc.

I just want to comment on something James4beach said…
“Be especially careful on the substantial presence test. It's a complex formula”

I’ve heard many other people say it’s a “complex formula”.
In fact – it’s not complex at all.

Here’s the formula……
To meet this test, you must be physically present in the United States (U.S.) on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.

Simplistically, if you are in the US every year for 121 days, you won’t be considered a “US Resident for tax purposes” – because the result of the formula is 181.5. If you went every year for 122 days, you would be considered a “US Resident for tax purposes” as the result of the formula is 183.
I say “simplistically” because you probably go for a different number of days each year – but again, it’s not hard to calculate. But you do need to keep track of the number of days you’re in the US.

Joe

P.S. I can't post the link to the IRS site because this is my first post. But if you google search "IRS substantial presence test", it will be the first link offered.


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## Eclectic12 (Oct 20, 2010)

Userkare said:


> If the increased number is explained simply as the result of the information working its way through the system, then it's expected ...


Other than noting that both factors are at work in the increased numbers CRA is sending to the IRS ... there doesn't appear to be enough information to be sure which factor is more important.

Certainly for those I talk to, almost all say they (or their wife and/or kids) have US citizenship, which suggests that not many have been reclassified. Certainly there have been posts by those who have so it is not exceedingly rare.


Cheers


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## Eclectic12 (Oct 20, 2010)

Joebaba said:


> ... I just want to comment on something James4beach said…
> “Be especially careful on the substantial presence test. It's a complex formula”
> 
> I’ve heard many other people say it’s a “complex formula”.
> In fact – it’s not complex at all.


Agreed ... the bigger issue AFAICT are where people have "heard" or "read" that it is 183+ days without the prorating of the preceding two years.




Joebaba said:


> ... but again, it’s not hard to calculate. But you do need to keep track of the number of days you’re in the US.


This is the second issue ... for years there was nothing being reported so that the two hour trip across the border for groceries & gas could safely be ignored. Now that there's active reporting, the part about being on US soil counts as a day, regardless of it actually being a couple of hours is a potential to catch people up.


Cheers


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## james4beach (Nov 15, 2012)

I wouldn't be surprised if just owning US stocks/ETFs qualifies you for data export to the IRS. Perhaps anyone with more than 60k in US stocks gets reported to the IRS due to the possibility of estate taxes.

There's a long list of things that qualifies you for some kind of US tax interaction. Having US citizenship is one, spending time on US soil is another, owning US stocks is yet another.


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## Eclectic12 (Oct 20, 2010)

^^^^

Maybe in the future or through another agreement ... in the meantime, CRA's direction for the Canada-United States Enhanced Tax Information Exchange Agreement, signed on February 5, 2014 reads to me to be for a review, not automatic reporting.

Where the account that existed as of June 30, 2014, because the $50K exemption limit < $60K < $ 1 million, it is a "low value account". 

The value triggers an review of the financial institutions electronically searchable data for any of the following U.S. indicia:
identification of the account holder as a U.S. resident or a U.S. citizen;
an unambiguous indication of a U.S. place of birth;
a current U.S. mailing or residence address (including a P.O. Box);
a current U.S. telephone number;
standing instructions to transfer funds to an account maintained in the U.S. (regardless of who holds the account);
a current effective power of attorney or signatory authority granted to a person with a U.S. address; and
an "in-care-of" address in the U.S. that is the sole address the financial institution has on file for the account holder.

No US indicia found means no reporting, unless the circumstances change to have a US indicia show up.

Where US indicia are found, the financial institution is required to attempt to cure it by documented steps, with the exception of being identified as a US resident or citizen. Fail to complete the documented steps, then it is reportable.




james4beach said:


> ... There's a long list of things that qualifies you for some kind of US tax interaction. Having US citizenship is one, spending time on US soil is another, owning US stocks is yet another.


As part of the agreement guidance, CRA's direction makes no mention about time on US soil. 


Cheers


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## james4beach (Nov 15, 2012)

Eclectic, that's very useful info you posted. Where did you find this text?


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## Eclectic12 (Oct 20, 2010)

I forget the Google search terms I used but when I saw a CRA link about fourth or fifth down, I visited it. I seem to have missed including the link in my post, as originally intended.
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/gdnc-eng.html#Toc390079570

I have found some useful stuff on CRA's web site before under the Business section ... so it was strange to see that directions for "financial institutions, their advisers, and Canada Revenue Agency (CRA) officials" would be under "Home -> Individuals and Families -> Individuals - Leaving and Entering Canada and non-residents -> Tax Treaties -> Enhanced financial account information reporting".

The Business section makes more sense to me ... but what do I know? :rolleyes2:


Like other articles, the guide is also available as a downloadable PDF from a link on the page.


Cheers


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## Argonaut (Dec 7, 2010)

I wonder how the CRA "knows" whether or not you're a dual-citizen. I haven't had any problems in my dealings with the CRA, but the IRS can go to hell.


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## gardner (Feb 13, 2014)

Argonaut said:


> I wonder how the CRA "knows" whether or not you're a dual-citizen.


Well the information about whether you are a reportable "US Person" is something the banks are meant to know and they would tell the CRA, who would tell the IRS. But since the meaning of US Person is ill-defined and could meany almost anyone, my bet is that they just report everyone.

The fact that there is some sort of compliance with the outrageous extra-territorial rules of the US is certainly annoying, but the real insult is that there is no transparency about it. The CRA should have to disclose to each person their status vis-a-vis this information sharing, and to show exactly what information was shared and when. And there should be a process for challenging incorrect information.


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## Userkare (Nov 17, 2014)

gardner said:


> Well the information about whether you are a reportable "US Person" is something the banks are meant to know and they would tell the CRA, who would tell the IRS. But since the meaning of US Person is ill-defined and could meany almost anyone, my bet is that they just report everyone.


Hopefully, it's not quite that bad. What concerns me is when there might be some US person indication, that the bank first asks the customer for clarification rather than just pass it on to CRA. If the person is not US taxable, then the further that information travels along the chain, the more difficult it could be to correct.

So far, when I've opened new bank accounts, the application simply asks if you're subject to US taxes - self declaration. It doesn't ask if you were unambiguously born in the US, or how many days in the past years you spent there.


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## Eclectic12 (Oct 20, 2010)

gardner said:


> Well the information about whether you are a reportable "US Person" is something the banks are meant to know and they would tell the CRA, who would tell the IRS. But since the meaning of US Person is ill-defined and could meany almost anyone, my bet is that they just report everyone.


The guidance is for the FI to do the evaluation then possibly as the account holder to self-certify so I'm doubting CRA is sending anything beyond what the FI tells them. After all, if CRA really wanted more account holders flagged as reportable, why include stuff like:



> A Canadian financial institution conducts an electronic record search in connection with a lower value account and no U.S. indicia are identified.
> 
> *The financial institution will not have reason to know that the account holder is a specified U.S. person even if it held a copy of a U.S. passport for the account holder.*
> 
> This applies only if the financial institution was not required to review or had not previously reviewed that documentation or information in connection with its obligations under Part XVIII of the ITA.


(Line splitting and bold text is mine for emphasis.)


Basically - CRA seems to be saying it's all up to the FI. Where I'd wonder about CRA sending more is where the IRS asks for info despite the FI deeming it is not reportable. Or maybe with the highlighting of Canada being marketed as a tax haven, other requirements or processes may be put in place.




gardner said:


> The fact that there is some sort of compliance with the outrageous extra-territorial rules of the US is certainly annoying, but the real insult is that there is no transparency about it. The CRA should have to disclose to each person their status vis-a-vis this information sharing, and to show exactly what information was shared and when. And there should be a process for challenging incorrect information.


While I agree the notification part should be more proactive and have a process for incorrect information - I'm not sure I'd call putting the guidance the FI's are using up on the web site as "no transparency".


Cheers


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## Eclectic12 (Oct 20, 2010)

Userkare said:


> Hopefully, it's not quite that bad. What concerns me is when there might be some US person indication, that the bank first asks the customer for clarification rather than just pass it on to CRA ...


The part I found interesting is that the FI is explicitly told the agreement *requires* the remedy steps to be applied before making the final decision.


> By virtue of subsection 265(5) of the ITA, a *financial institution is required* to apply subparagraph B(4) of section II of Annex I of the Agreement and attempt to cure the indicia before determining that an account is reportable ... If a financial institution identifies one or more U.S. indicia, the *financial institution must attempt to cure the indicia* by applying the appropriate steps set out in subparagraph B(4) of section II of Annex I of the Agreement. This is mandated by subsection 265(5) of the ITA. Reasonable efforts to cure the indicia must be made sufficiently in advance of the relevant reporting deadline to the CRA so that the results of those efforts inform information reported to the CRA.


Cheers


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## Userkare (Nov 17, 2014)

I think it should be clear what the banks and CRA are 'supposed' to do, but then you find stories like this...

http://maplesandbox.ca/2016/cra-gave-irs-bank-records-under-50000/

Again, the original source is CBC's Elizabeth Thompson. I honestly don't know if she's a champion for Canadian privacy rights, or if she's just being a bit quixotic.


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## gibor365 (Apr 1, 2011)

> I think it should be clear what the banks and CRA are 'supposed' to do, but then you find stories like this...


 What do you expect?! Canada will do everything US wants... Canada doesn't want to build "wall" on the border, like Mexico will do


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## Eclectic12 (Oct 20, 2010)

gibor365 said:


> Userkare said:
> 
> 
> > I think it should be clear what the banks and CRA are 'supposed' to do, but then you find stories like this...
> ...


Or is it that there were multiple accounts that were aggregated to be over $50K, which makes all accounts reportable?


Cheers


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## Nononymous (Jun 10, 2015)

There is hope of movement on this issue, on both sides of the border. The Canadian lawsuit goes to trial this year. With the new administration in the US there is at least a chance that FATCA might be weakened - lobbyists are hard at work, a repeal bill has been re-introduced, there is encouraging language in the GOP platform (for whatever that's worth).

At very least the people in the American Expats Facebook group have had a couple of conversations with former IRS officials, who've confirmed that the US has very limited interest and ability to pursue ordinary (i.e. not extremely wealthy) US citizens abroad, and that "accidental Americans" or those dual citizens with no US ties (assets, income, property, future inheritance etc.) should not enter the US tax system unless they wish to renounce (and even then it's quite possible to renounce and ignore the compliance and exit tax regime). 

So, as ever, the strategy for non-compliant dual citizens in Canada remains:

1. Cut it off at the source by ensuring that your bank has no record of US citizenship or birthplace or anything of that nature - evasive answers or outright lying is a popular and effective technique.

2. If you are reported, or think you've been reported, it doesn't necessarily mean that the IRS will get around to doing anything with the information (it's only balances, nothing about income) so don't feel that you need to immediately start filing US tax returns.

3. Be very, very skeptical of professional advice, from lawyers and accountants, as they are constitutionally biased towards compliance; take no action until you've educated yourself by going to isaacbrocksociety.ca, Facebook and other information sources.


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