IRS Hunt for Tax Cheats Affects Canadian Banks

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In its relentless pursuit of tax evaders who hide their assets in offshore bank accounts, the US government has come up with a new law called the Foreign Account Tax Compliance Act (FATCA) that was signed into effect last year by President Obama. Under this law, starting 2013 all foreign banks must report to the IRS all accounts held by US citizens and green card holders, including corporate accounts with significant US ownership, as well as what they own. Failure to comply will result in the IRS imposing a hefty 30% withholding tax on any US income, and transactions they or their customers do.

But when it comes to Canada, there is a big problem with compliance. This is due to the fact that Canadian banks do not require its account holders to declare their citizenship or immigration status. New accounts can be opened by anyone simply by proving identity using a driver’s license and one other piece of identification. In addition, there are no checks on existing account holders.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Darrin Mish, Tampa Tax Attorney, The Law Offices of Darrin Mish, P.A. | Attorney Advertising

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