New international sharing pact will put banks, unsuspecting Canadians under scrutiny
In 6 months, a little known U.S. tax law goes into effect that will affect people around the world, including Canadians. Not only might the law — the Foreign Account Tax Compliance Act (FATCA) — reach into Canadians' pockets, by raising bank costs, but it also brings privacy and financial implications for those with American ties. Here's a rundown on what the law is and what it means for Canadians.
What is FATCA?
The Foreign Account Tax Compliance Act became U.S. law in March 2010 but will take effect around the world on July 1, 2014. The goal of the law is to find offshore accounts held by U.S. taxpayers seeking to avoid paying taxes on them.
Under the law, banks from around the world will be asked to sift through their accounts to look for clients with U.S. connections, then share that information with the U.S. Internal Revenue Service.
The U.S. is looking for tax cheats, but critics say innocent people are getting caught up in the hunt.
Who is affected by this law?
The short answer is almost every Canadian. It is expected to cost banks substantial amounts of money to implement the systems required to find residents with U.S. connections, costs the banks may well pass along to all their clients.
Some estimate it could cost $100 million for each financial institution.
Those directly affected by the law include dual citizens, Canadians with Green Cards and some snowbirds who spend considerable time in the U.S.
Why does this affect them?
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