FBAR – Implication for Canadian Permanent Residents and Citizens
The Internal Revenue Service (IRS) is increasing its focus on reporting of foreign financial accounts by U.S. persons. Despite recent protests by Finance Minister Jim Flaherty on the matter, the changes seem like they are going to go ahead. There are potentially significant implications that representatives should advise their US clients about. Put simply, just because your US clients are becoming Canadian permanent residents or citizens does not mean that they are absolved from reporting their taxes to the United States.
The Report of Foreign Bank and Financial Accounts (FBAR) is an IRS form. Any United States person who has a financial interest in any financial account in a foreign country where the aggregate value of the accounts exceeds $10,000 is required to file the form. Accounts that require reporting include Canadian bank accounts, investments, mutual funds, life insurance, RRSPs, RESPs, TFSA’s, etc. With such a low threshold, the FBAR reporting requirements likely apply to many of your American clients.
The IRS website states that failure to file an FBAR when required to do so may result in civil penalties, criminal penalties or both. If your clients have not been filing an FBAR when they were required to do so, then they can file the delinquent FBAR reports and attach a statement explaining why the reports were filed late. The IRS website states that no penalty will be asserted if the IRS determines that the late filings were due to reasonable cause.
Clients who knowingly fail to file the FBAR report could be subject to civil penalties equal to the greater of USD $100,000 or 50% of the total value of the foreign assets per year, assuming the client is non-compliant for multiple years. In addition, clients could be subject to criminal charges as well.
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Read more ›DISCLAIMER
Please note that none of the information on this website should be construed as being legal advice. As well, you should not rely on any of the information contained in this website when determining whether and how to apply to a given program. Canadian immigration law is constantly changing, and the information above may be dated. If you have a question about the contents of this blog, or any question about Canadian immigration law, please contact the Author.
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