Robert J. Fedor, Esq., L.L.C.

U.S. citizens living in Canada oppose FATCA

The full and widespread effects of the U.S. federal government's attempts to crack down on foreign asset and account holders are being felt around the world. The Foreign Account Tax Compliance Act calls upon foreign governments and financial institutions to report and provide information about U.S. citizens with known foreign accounts and assets totaling $50,000 or more.

Prior to the passage of FATCA, the IRS charges that many U.S. citizens routinely used foreign accounts and foreign investments to hide assets and avoid paying income tax. FATCA not only requires U.S. citizens with foreign accounts and assets to comply with reporting regulations and procedures, but also penalizes countries and foreign financial institutions that fail to sign agreements to abide by FATCA's terms.

Unlike the majority of countries, the U.S. imposes income taxes on all U.S. citizens. This is true for even U.S. citizens living abroad or those who were born, but no longer live in the U.S. This last point is at the center of a recent lawsuit that was filed against the Canadian Attorney General by two U.S. citizens who moved to Canada as children.

Under the terms of FATCA, the two individuals are required to report and pay U.S. taxes on foreign accounts and assets. The Canadian government is also legally obligated to provide identifying and account information on the two qualifying U.S. citizens, as it is among the 80 plus countries that have signed FATCA agreements with the U.S. federal government.

In the lawsuit, the two Canadian U.S. citizens assert that, by abiding with FATCA, the Canadian government is effectively violating its own Canadian Charter of Rights and Freedoms. Additionally, the plaintiffs have filed a separate compliant related to what they deem as the unlawful "place of birth taxation" practice with the United Nations.

U.S. citizens, who were born in the U.S., but live abroad or who have foreign accounts or assets in excess of $50,000 are required, under FATCA, to report these assets to the IRS. Failing to do so may result in legal action being taken and an individual could face criminal charges related to tax evasion as well as other tax penalties.

Forbes, "Canadians File Suit To Block FATCA And Prohibit Handover Of U.S. Names To IRS," Robert J. Wood, Aug. 12, 2014

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