Originally, my understanding was that existing customers would not be signaled under FATCA regulations unless their accounts were over $50,000. Yesterday, I spoke with a woman whose accounts never exceed $10,000 in aggregate. Furthermore, she is a young mother who hasn’t worked much in the last few years since coming to Canada, and so she has never had an IRS tax liability, as her income would be well below the Foreign Earned Income Exemption. She holds her accounts jointly with her Canadian-only husband. This case highlights why we need the legal action of ADSC.
Yesterday she received the following correspondence from her bank. It shows that they have determined that she has US indicia. They have threatened her with reporting her accounts to the CRA in violation of section 8 of the Canadian Charter of Rights, which would require the CRA to obtain a warrant before seizing her account information. But now the TD Bank has threatened to transfer her account information to the CRA. But what crime has she committed that the TD has threatened this action? None at all.
I have recommended that she do nothing–not fill out the self-certification form. But I’d like to hear what others think. Please discuss.
Here is the self-certification form. Please note the date at the bottom: June 9, 2014.
http://ipolitics.ca/2016/04/14/baby-girl-drawn-into-cra-irs-information-sharing-controversy/
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Tax Time Extensions
An eight-month old baby girl could soon find herself on the list of Canadians whose banking information is being shared by the Canada Revenue Agency with the United States Internal Revenue Service under a controversial information sharing deal.
The girl’s parents were astonished recently to receive a letter from the TD Bank where they had opened an account for their daughter, calling on their daughter to either fill in forms attesting to the fact she was not a U.S. person or risk having her bank account information sent to the CRA to be shared with the IRS.
“Please note, if this documentation is not provided, we may be obligated to report your accounts to the CRA,” the bank wrote in a letter addressed to the baby girl by name.”………..
Posting this here as relevant to this post.
Further to the story above, here is the letter from TD sending a Canadian infant’s personal and financial information to the CRA to pass to the IRS:
http://maplesandbox.ca/wp-content/uploads/2016/04/TD-Baby-Elle-Letter.pdf
Graphic says it all:
http://isaacbrocksociety.ca/2016/04/15/dear-valued-customer-indicators-found-your-place-of-birth-is-the-united-states/comment-page-1/#comment-7472487
The 50,000.00 threshold has an exempt status only for accounts identified as of June 30 , 2014. If there was additional change in circumstances etc to cause additional indicia to be detected then the account would be up for review. There is no exempt status for any account after June 30, 2014.
What happens if you ignore the td letter and they reported you to CRA?
Either nothing or your year-end account balance plus a few other details get sent to the IRS, where it likely gets buried in a pile of data nobody ever looks at. ,
Thanks Ron. So the role of CRA in all this is just send the information received from the bank to the IRS without taking any action?
Correct. If CRA receives your data from the bank, they pass it on to the IRS as part of their annual data dump. They don’t look at it themselves.
Your ignoring a letter may or may not lead to TD sending your data to CRA. If concerned, you can make an Access to Information request to find out.
What are the circumstances here, did you actually receive such a letter? Did you have any sort of US indicia, like a past address or phone number?
Note that the information in this post is quite old now. TD no longer asks customers to sign a W8 or W9, but has its own form to declare US and other tax residency.
Thanks again Ron. Couple weeks ago, I received a letter from TD along with w-9 form to fill it out and return it to them or they will report me to CRA. I called a branch and they told me it could be because you have a US phone number on your file.
Interesting. For new account opening, TD now has its own form, where you essentially check yes/no to US or other tax residency, and provide a Social Security Number or other ID numbers (no more W8 or W9). In your case it sounds like someone at the branch going through the files looking for any US addresses or phone numbers in their accounts.
However, what I don’t understand is the ultimatum: submit the W9 or we report you to the CRA (see details on that below), because someone who is not a US person can easily have US indicia such as an old mailing address or phone number on file (e.g. any Canadian who studied or worked in the US for a few years, kept their bank account in Canada, then returned). Banks are meant to treat US indicia as grounds for further investigation, not automatically assume that the customer is a US person. But not all bank employees seem to grasp this.
Without knowing your circumstances, I can’t say exactly what you should do. I would probably call up the branch and say “I’m not a US citizen, but I lived there for a few years which is why you have a US phone number on file. I’m not subject to FATCA so I don’t need to sign a W9. Please go away.” That should be the end of it. (I had a similar conversation years ago with an investment advisor.)
In case you’re concerned, it’s perfectly fine to lie to a bank. If you make no progress with TD, close your accounts, then go down the street and and open new accounts with another bank, being very careful to use your drivers license as ID if you have a US birthplace, and declare yourself to be a Canadian resident only.
More details on what “reporting you to CRA” means:
(1) If you sign the W9 or otherwise indicate US person status, the bank reports your account data to CRA, which passes it on to the IRS along with hundreds of thousands of other accounts in a huge data dump each year; this data would include your SSN.
(2) If you refuse to answer the letter or sign the W9 or acknowledge US person status *and* the bank believes you to be a US person, they are obliged to report you to CRA as a “recalcitrant accountholder”; CRA passes on your data to IRS with a “recalcitrant” flag but without an SSN, since you failed to provide one; supposedly there is provision somewhere for a $100 fine from CRA because you refused to cooperate, but likely never enforced.
PS Clarifications to my footnotes above:
(1) You may already know this, but the account data passed on from bank to CRA to IRS is not a detailed record of transactions, but name and address of account holder, SSN if provided, year-end balance, and any interest or dividend income.
(2) I may not quite have it right on when banks report someone as recalcitrant. Either they do it if a customer refuses to answer, period, or if they also suspect the customer to be a US person. Shouldn’t really matter in your case, best approach is to talk your way out of it by making the appropriate excuse for any US indicia they have.
Jay. Tell them the W9 is NOT applicable because it is for US taxpayers.. You should offer to fill in a W8 Ben form. The W8 Ben does not go to the IRS. It stays with your bank. It tells them you are not a US taxpayer. The reason to fill it in only applies if you have US investments. Say you are lucky enough to own Apple shares which pay a dividend. With the W8, they withhold 15% in taxes which you claim as a credit on your Canadian taxes. Without the W8, they would withhold more.
Appreciate your help Ron. I never thought having a us$ account may cause the bank to shed light on me even it is a personal account that never exceed $10k and I do not need it. I think the best thing I do is to ignore the letter.
Thanks Portland. The problem is they think I am a us person because I have a us number on my file. Whatever form I fill I do not think I will be done with them and I just decided to ignore the letter and let them report me.
Call them up and explain that you are not a US person and/or take your business elsewhere.
Thanks Ron
Just received the same exact letter – can you please let me know what happened?
FATCA happened and they must suspect you are a US person.
@Vanessa
Everything I wrote in response to Jay is still valid and would presumably apply in your case as well. We can’t offer further advice without knowing something more specific – do you have an old US phone number or address on file, for example?
Main point is: just say no. Tell them you’re not a US citizen (or US person) and most likely they won’t ask you to prove it. But if you ignore the letter they won’t magically go away.