http://www.investmentexecutive.com/-/your-american-clients-and-the-irs?redirect=%2Fsearch
While canadian financial services institutions scramble to prepare for the new U.S. law that requires them to report on accounts held by their American customers, those clients may need a helping hand now.
The new regime starts next summer. For the estimated one million Americans in Canada, this new law means it will be almost impossible to remain off the radar of the U.S. Internal Revenue Service (IRS) any longer. As a result, your American clients may be panicking and in need of advice and reassurance.
That’s also partly because many such clients have been in denial for some time. But that denial is now a recipe for trouble. “For people who aren’t filing [their U.S. tax returns and] thinking, ‘I’m a small fish; they’re never going to get me’,” says Christine Perry, a lawyer with Keel Cottrelle LLP in Toronto who specializes in cross-border tax law, “I think that’s just a naive way of looking at it. Their accounts will be reportable accounts, and banks will turn over all that information to the [IRS].”
The U.S. Foreign Account Tax Compliance Act (FATCA), passed in 2010, is meant to prevent Americans from using accounts held at financial services institutions outside the U.S. from evading their tax obligations. FATCA requires global financial services firms, including those in Canada, to provide the U.S. government with the names and account numbers of clients who are American citizens, starting on July 1, 2014. Global banks that choose not to provide this information will be assessed a 30% withholding tax on all U.S.-source payments.
Andrea Taylor, director with the Toronto-based Investment Industry Association of Canada, advises that financial services firms and financial advisors must play a crucial role in educating their American clients and providing them with support.
“There are few things that are more terrifying to clients,” says Taylor, “than finding out that they are U.S. persons [for tax purposes] and that they are delinquent with the IRS, when they may not have even been aware of their U.S. citizenship or tax status or the requirements that go along with that. Advisors and firms need to have a strategy for the clients who are U.S. persons to ease their fears and let them know that the IRS has programs in place to waive penalties for persons who are low-risk.”
@ Edelweiss
Thanks again for spending what must have been considerable time researching T & C’s and account opening procedures. It must have taken some fortitude to read through all those T & Cs!!!
@Edelweiss..
Yes, thanks for that interesting, detailed effort on the T&Cs and internet onboardings. I forwarded it to someone I know in the UK so they can watch for it too.
I have to believe, that there will be a long lag time for all the T&Cs and systems to get updated to meet the realities of FATCA IGA requirements. I bet if you do this again in 6 months, things will have changed.
What are T and Cs?
@northernstar, T&Cs are ‘terms and conditions’. The small print in which companies disclose what they must but which offers no marketing value.
UK fund T&Cs have for years included boilerplate that excluded US persons. From Vanguard UK, for example: “… the Shares may not be offered or sold in the US or offered or sold to US Persons.” In theory this prevents US persons from using many perfectly ordinary investment vehicles available to other UK citizens. The FATCA IGA appears to have started moving this from theory to practice.
You say you aren’t American? YOUR PAPERS PLEASE!
@Northern Star… Thanks for asking, and thanks Wondering for answering.
We all do slip into our acronyms making the mistake of assuming all know what it means. I should learn to spell it out for clarity followed by the short hand. It is how you keep the language of finance obtuse to the public. Codify it for insiders, so they don’t get it. Printing money, is QE2, for example.
We should avoid this temptation especially for new readers on IBS (Isaac Brock Society). Something as familiar now to all of us as FATCA (Foreign Account Compliance Act) or TAS (Tax Payer Advocate Service) means nothing to new readers.
Now, I need to learn to practice what I preach! I am really guilty of using the shorthand 🙂
@JustMe
It is helpful for those who don’t know all these abbreviations. At first I thought online boarding referred to boarding a airline and those checking passenger info. LOL
I am not that up on new technology. I don’t have a phone with Internet. And do not know how to do Twitter.
When I was young we had party phones. My high school just got electric typewriters. Whoowe time has brought s lot of changes.
Around here IBS may be shorthand for Isaac Brock Society, but elsewhere it is an abbreviation for something else entirely!
Lol, Watcher. Never made the connection! I’ve always thought that IBS sounded like a Swiss bank. I like “Brock” personally.
@Watcher
Lol
@bubblebustin
7 like brock too.
@Watcher…
FATCA has indeed created an irritable bowel! 🙂
and @Just Me,
what will FATCA produce as a result?
Oh badger, that’s a four letter word! Tsk, tsk. 😉 I’ve heard it used in conjunction with storm.
@badger… 🙂
T and C’s. That used to look like “Turks and Caicos” to me, now not so much. Oy! What all of this has done to my thinking! I need a vacation but, can’t afford it. I’ll be glad to go back to when T and C stood for “Turks and Caicos” instead of what it means to me now.
I am getting fatcigued.
I’m getting Irritable BS.
@all,
had a good laugh!
: )