Beginning in July of 2014, Canadian financial institutions will be required to start gathering and reporting information on accounts held by U.S. residents and U.S. citizens, including those who are resident of Canada.
The account information will be collected and reported to the Canada Revenue Agency (CRA), who will then transfer the information to the IRS. The reporting obligations arose as a result of the Foreign Account Tax Compliance Act (“FATCA”) and financial institutions who have to comply with FATCA will be assessing their account information to determine who may be a potential U.S. resident or citizen.
For accounts opened after July 1, 2014, financial institutions may ask you to declare whether or not you are a U.S. person. If a financial institution determines that an account is a “reportable account” then the financial institution is obligated to collect and report the required information.
The information that is to be collected and reported includes information about the account holder (i.e. name and address) and information about the account (i.e. account number and balance). The information only relates to certain types of accounts. For instance, RRSPs, RRIFs, RPPs and TFSAs are exempt from the reporting requirements. The financial institutions are also required to report on account holders who fail to respond to their financial institution when contacted about whether or not they are a U.S. person.
Once the information is reported, which is set to begin in 2015, the IRS will be entitled to use the information to verify that the account holders are in compliance with U.S. tax laws.
Thanks to Darren Buma of KWB Chartered Accountants for providing this content.
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