Over the past several years, a “Concerned Citizen” has submitted several Access to Information requests to CRA, demanding detailed information about what is being reported. After a series of complaints and appeals, CRA has been more forthcoming. I have seen the document received in response and asked Concerned Citizen to provide a brief summary of the results:
“A recent Access to Information Act Request revealed that for 2019, Canadian financial institutions reported approximately 615,000 accounts with a balance under US$50,000 to CRA for eventual transmission to the IRS under the terms of the FATCA agreement. The US-Canada IGA sets out a reporting threshold of US$50,000 – accounts below this balance are not required to be reported. Canadian banks have nevertheless chosen to report accounts of lower value. With approximately 1 million accounts reported in total for 2019, over 60 percent of these records did not need to be sent. Since reporting began in 2014, roughly one-half to three-quarters of all accounts reported fell below the balance threshold and need not have been included in the annual transmission of data to the IRS.
Total accounts and account-holders reported
These numbers have been publicly available, though the request has given us more accurate totals than the estimates published in media accounts.
2014 158228
2015 318345
2016 632042
2017 727280
2018 900000 approx
2019 1000000 approx [to be confirmed]
Because individuals and business entities generally have multiple accounts, the total number of individual account-holders subject to FATCA reporting will be much lower than the total number of accounts reported. CRA was asked to estimate the number of account-holders based on common elements in the data, such as matching addresses, SIN or SSN values, etc. CRA was unwilling or unable to provide this information.
Country of account owner
FATCA requires that Canadian financial institutions identify accounts held by US persons, regardless of where they live. CRA was asked to provide the total numbers of accounts associated with Canadian addresses and with US addresses. This allows us to estimate the proportion of Canadian residents affected (who could be dual citizens, or US expats without Canadian citizenship) to US residents affected (who could be Canadian expats in the US, or former US expats with Canadian assets).
CRA initially refused this request, but after an appeal and complaint it eventually provided a set of estimates for individuals and entities associated with addresses in each country. Of interest, the Canadian addresses make up 62 to 75 percent of the total accounts – so roughly one-quarter to one-third of accounts reported likely belong to US residents, who would be US taxpayers and presumably filing FBAR reports as well. The following table shows the percentage of Canadian addresses each year:
| — | Canada address | US address | — | % Canada | |
| — | Individual | Entity | Individual | Entity | — |
| 2014 | 90K | 3K | 50K | 4K | 63 |
| 2015 | 140K | 40K | 100K | 9K | 62 |
| 2016 | 240K | 165K | 170K | 19K | 68 |
| 2017 | 280K | 215K | 175K | 19K | 72 |
| 2018 | 510K | 175K | 205K | 20K | 75 |
| 2019 | 505K | 150K | 225K | 21K | 73 |
(Astute readers may notice that the total number of records for each row does roughly match or fall slightly below the total number of accounts reported each year in the table previously shown.)
Accounts below reporting threshold
The US-Canada IGA only requires financial institutions to report US-person accounts with a balance over US$50,000. However, they are not prevented from reporting lower-value accounts. There has long been concern that banks were reporting more accounts than necessary, but no proof of this on a systematic basis.
CRA was asked to provide the number of accounts reported each year with a balance below the threshold. They initially refused, but after an appeal and complaint they did provide some estimated values. The following table lists these numbers along with a percentage of the total accounts reported for each year.
| % Total | ||
| 2014 | 115000 | 73 |
| 2015 | 200000 | 63 |
| 2016 | 330000 | 52 |
| 2017 | 345000 | 47 |
| 2018 | 610000 | 68 |
| 2019 | 615000 | 62 |
[the percentage for 2019 is based on the estimate of 1 million total – to be confirmed]
This information tells us that in any given year, anywhere from one-half to three-quarters of the account records sent to the IRS (via CRA) by Canadian banks were lower-value accounts that did not need to be reported.
Non-reportable account types
CRA was asked if they had any data to indicate that accounts belonging to types excluded from reporting under the IGA – RRSP, RESP, RDSP, TFSA and other similar accounts – were being reported to the IRS. CRA replied that the data they receive from financial institutions does not include any information to indicate account type. This is both good news and bad news. While we cannot rule out the possibility that some Canadian banks report these accounts when they are not required to, CRA’s response does indicate that the IRS would receive no information indicating the account type, which would be a possible concern for anyone holding TFSAs, for example.”
Data is the new gold.
Just imagine how useful this is coming in from all over the world to a nation that does not understand its taxation ends at its borders.
Oh, and taxes from people that we know have no political voice to complain.
The possibilities are endless.
RIP privacy.
Data dump.
https://www.drakesoftware.com/content/gao-finds-foreign-tax-reporting-needs-tweaks/
They just don’t get it.
If they improve the compliance they will increase the renunciations. It is compliance that forces renunciations because the system is fundamentally punitive and unworkable. The vast majority that counter my claims of a human rights abuse do so from the safety of never having truly lived under the regime as it now stands complete with FATCA.
The only way to make citizenship based taxation fair and workable is to end it.
Thank you so much to Concerned Citizen for procuring these stats and to the Isaac Brock Society for publishing them!
National Taxpayers Advocate Recommendation:
Harmonize Reporting Requirements for Taxpayers Subject to Both the Report of Foreign Bank and Financial Accounts and the Foreign Account Tax Compliance Act by Eliminating Duplication and Excluding Accounts a U.S. Person Maintains in the Country Where He or She Is a Bona Fide Resident.
https://www.taxpayeradvocate.irs.gov/wp-content/uploads/2021/01/ARC20_PurpleBook_02_ImproveFiling_9.pdf
For those who don’t like info on small (!) banking accounts of you and your neighbors being turned over by your own Government to IRS — please put your thoughts into action — and help us try to kill the actual Canadian FATCA IGA law that embraces the turnover and makes it possible.
Please donate at http://www.adcs-adsc.ca/DonateADCS.html to help pay our litigation costs.
Any amount welcome.
My guess is that our trial in Canada’s Federal Court of Appeal will likely be in last quarter of this year/maybe early 2022.
Thanks.
The banks are not at fault here.The Canadian government which brought this on and serves as the clearinghouse for the tax information should be obliged to at least screen what they send. The fact that more than half of the private tax information that the Canadian government submits to the IRS shouldn’t have been submitted the first place , according to the requirements , means that the Canadian government is really more the culprit here . They are giving out more than than they are required. Totally disgusting.
Is anyone surprised by this?
No, but it’s good to have it actually confirmed that they are doing this.
The good news for Canadians at least is that it’s still dead easy to avoid the whole silly business. If anything it’s easier now than it was back immediately after 2014. They’ve long since finished doing any follow up on old accounts with US indicia (like mine that had a US mailing address on file from our time in grad school) and with new accounts the question they ask is super vague – “Are you resident of another country for tax purposes?” – so even US citizens who don’t know about the tax obligation will give the smart answer by accident. So not surprising that the total number is beginning to plateau at a level that’s probably what, 10 to 20 percent of the dual citizens in the country. Not great, but could be much worse.
The CRA’s harvest of unnecessary personal data is especially disturbing given that they are not able to keep it safe: https://www.cbc.ca/news/politics/cra-accounts-locked-1.5947714
Yep. Being as I do not earn enough nor have enough to meet the legal threshold, this is what has worried my personally.
I have worked for a large IT professional services vendor, which does business with several banks in Switzerland. I can confirm that the banks in Switzerland indiscriminately gather data on US persons below the USD $50,000 threshold and forward it directly to the IRS, despite the Model 2 IGA between Switzerland and the United States exempting such accounts.
Modifying internal bank IT systems is cumbersome and the Swiss banks are petrified of the US. Consequently, the banks simply forward everything. The banks require US persons to waive their rights under the Swiss Banking Secrecy Act of 1934 to open an account, so they could not care less what happens to the customers.
I spoke to a senior lawyer friend of mine about suing the Swiss government because, among other things, the FATCA IGA discriminates against Swiss people who may also be US persons based on nationality and violates local data protection laws. My friend assures me that my legal arguments are sound. However, the FATCA IGA between Switzerland and the US is a typical Swiss compromise among various politically powerful stakeholders (i.e. Swiss government, US government, UBS and Credit Suisse). Therefore, the courts would find pretextual grounds for upholding the current mistreatment of people because the Swiss government fears US retaliation. Aside from payment systems transiting through the US and the accompanying risk of the US sanctioning a large Swiss bank, Switzerland has many US multinationals with tax headquarters here. This would allow effective retaliation by the US, which the Swiss government wants to avoid at all costs. Swiss citizens with US personhood are analogous to restaurant owners and workers during Covid-19, expendable in the name of a dubious greater cause. My friend says that whilst my legal arguments are sound, the political reality is no judge will overturn the current injustice.
My advice to people in Switzerland based on discussions with my lawyer friend is identical to what people have written on this website. I am a dual Swiss/US citizen. I open a bank account with my Swiss documents, which do not include place of birth and I refuse to identify as a US person. The banks have the requisite paper trail showing they followed the process and one can avoid having one’s information sent to the IRS. I am lucky that I can bank here without any problems.
I have refused to renounce because the fee is extortionate and I can effectively circumvent FATCA. I have US-investments in the stock market under my wife’s name, who is not a US person. Investments on US exchanges require the Swiss customer to waive his rights under the Banking Secrecy Act. Fortunately, the double taxation treaty between Switzerland and the US means the capital gains in the US are tax-free. The US withholds 30% of dividends, but one can claim back the other 15%. Using my wife as a proxy works for me, but this option is unavailable to many people.
The other reason for not renouncing is that my father in the US has incurable cancer and I travel every three months to spend time with him. Fortunately, I can enter the US at present, despite the COVID hysteria. I obtained US passports for my children and I took them and my non-US person wife to the US for Christmas to see my father. The ‘Homeland Americans’ state how wonderful a US passport is because the US government will protect its citizens outside the country. I obtained a special authorisation from the US embassy for my Swiss wife to travel to the US, as permitted under the Presidential Proclamation closing the US to people in the Schengen area, along with an ESTA authorisation. Unfortunately, the Homeland Security (what a misnomer) computer systems were down, so we were stuck on the floor waiting for hours at Zurich Airport because the airline could not obtain permission to allow my wife on the flight. Thankfully, we made it onto a later flight, but the US bureaucracy compounds travelling with young children. We also had to wait for about an hour upon landing whilst Homeland Security decided whether to admit my wife. Mercifully, I did not have to make it clear to them that we do not intend to stay in the USA. We enjoy a great life in Switzerland with better quality of governance and much lower effective tax rates. I do not want to deprive my children of living in the US and I wanted to minimise the headache of flying there during these crazy times, so I obtained US passports. I liken the US government to a psychotic ex-girlfriend. One never knows what kind of crazy overreaction she might produce. Perhaps I should just renounce after my father dies and I no longer need to travel to the US. A part of me wants the finality despite always having circumvented FATA. However, another part of me does not want to pay the fee out of principle.
I apologise for the digression. In closing, the Swiss banks are forwarding information about all US persons, not simply those required under the FATCA IGA.
Thanks for the interesting report. I expect that this is common practice in many countries, but it may be the case that Canada’s access to information laws give ordinary citizens more power to dig into this.
I tipped off one journalist here who will hopefully report on this soon.
If you want to renounce but refuse to spend your own money on the ridiculous fee, this year and this year only you have the option to claim the stimulus benefit and enjoy the irony of the US government paying you to cease being a citizen.
We know that Japanese banks are doing the same. I reported this’d fact as learned from my FATCA letter from my bank several years ago.
@RonHenderson Thanks for your suggestion and for the excellent work you do. I read many of your informative and helpful comments on a FATCA thread in a Bloomberg article. You are correct that the parasitic tax compliance industry frightens ordinary people into unnecessarily paying expensive tax preparation fees.
In my view, the only US persons outside the US who should file tax returns are those working internationally on a temporary basis who have assets in the US and plan to return to the US. The US companies who send these people abroad usually provide them with Big Four tax services to handle the onerous filing requirements. Non-US citizens who live outside the country and do not have assets/income derived from the US should refrain from filing and ensnaring themselves in the mess.
I have applied for the US stimulus payments just to do my small part to help bankrupt the empire :). Affording the extortionate renunciation fee is not a problem, but the principle of paying an extortionate fee annoy me Whilst I have avoided FATCA, filing US tax returns, etc., a part of me just wants the closure that comes with no longer being a US citizen. At a certain point, I plan to be more vocal in real life and I simply want to be rid of this US citizenship albatross. I hate having to lie to my bank, although it is a necessary evil.
I know that, according to the rules, renunciation does not free one from one’s US tax filing requirements, but no one enforces this on a practical level. I am someone who would exceed the exit tax threshold, although I can simply transfer them to my wife beforehand and none of what I have is in the US. Anyway, I think the relief and disentanglement are probably worth the fee. We plan to have one more child and I will let it have its US citizenship and keep quiet about it. Aside from this and visiting my father, I have no need for the US passport. Thanks for your help.
@ByeByeUSA
You are absolutely correct, literally not one single person with another citizenship who does not have US entanglements (assets, income sources, business interests, strong family connections or plans to move) need file US tax returns.
As you undoubtedly know from the highly amusing TIGTA report posted here, the IRS does not follow up on renunciations, and it appears that 40 percent of those who do renounce never bother filing form 8854.
I too am in the queue to renounce, though it has less to do with the opportunity of doing it for free than it does with some personal factors: a possible move to Europe where the US birthplace could be problematic, and elderly parents who are convinced that the IRS will one day devour my share of their estate. I decided that it was ultimately simpler to procure a CLN than to persuade them otherwise. Obviously no intention of filing post-renunciation.
@ByeByeUSA
A dual-citizen child born outside the US is in a good position. I initially regretted my decision years ago to register my child’s birth with the US consulate (we had no idea about the tax business at the time) but now I’ve come to see it as a positive. With nothing but a CRBA and a one-year baby passport, that is a very minimal footprint – they are well and truly off the radar. Obviously those records are not available to CBP because they’ve never matched up the biographical details on the Canadian passport – no problems entering the US. But the citizenship is always in the back pocket and easily “reactivated” if a good opportunity to work or study presents itself. The key then is not to have previously made a bunch of investment decisions with negative US tax consequences, should one need to come into belated compliance.
@Ron Henderson: I liken the incompetence and corruption of the US public administration to Italy, except that the Italians are thinner and have a far better sense of fashion. Before I left the US, I was actually in the tax preparation business. The IRS has an elaborate system of amassing data and employs computer algorithms to find incongruences to decide which people to audit. For example, if someone claims to earn only $50,000 per year, but the bank says he paid $70,000 in interest on a $2 million house, the computer might target those people. Similarly, the IRS might scrutinise people who claim charitable deductions that are disproportionate to their income. Small businesses, people on very high incomes, people whose tax situations change materially, and Earned Income Credit recipients have a higher likelihood of an IRS audit.
Nonetheless, the IRS lacks the resources to enforce tax rules as stringently as it might want. Most cases of people targeted by the IRS involve angry ex-spouses or business partners reporting them to the IRS rather than the IRS proactively uncovering unreported income. People outside the US are beyond the scope of the IRS, unless they engage in serious misconduct or go out of their way to antagonise the US government. I read an article online about a couple that left the US for Central America who were advertising their services to help people evade US taxes, but ended up extradited by the US government. They were only US citizens or else it would have been much more difficult to extradite them.
I decided to obtain US passports for my children because this was the most practical way to have them see my father in the US. I use a third party service to handle my mail from the US embassy, as I do not want anyone from the US government knowing my whereabouts. My wife would like me to renounce for similar reasons to why your elderly parents. She is afraid that I might end up arrested when entering the country for not filing tax returns. Once we are done having kids and my father dies, I will go through the renunciation process for peace of mind.
A kindred spirit. I renewed a US passport from a temporary address in Europe, and possibly – oops – transposed a few digits of the SSN. Then continued using my Canadian passport to enter the US so it was basically pointless insurance.
I have now advised many people to make their very best effort at giving the demanding bank an SS number. It’ll be close enough to correct for the bank.
I also remark to people how easy it can be to accidentally mix up numbers when you’re completing a form.
Lucky you. I had to provide my bank with my SSN card. They have a photo copy of that, my passport one alien registration card and MY NUMBER(the Japanese SSN on steroids number) on file.
Not all of live in countries where we look like the natives and share a common language.
Some of us actually are the natives.
Good to see this discussion, and I very much appreciate the efforts of those who have contacted CRA about the unnecessary reporting. It’s bad enough that FATCA is being complied with at all.
Today’s CBC article about this by Elizabeth Thompson: https://www.cbc.ca/news/politics/tax-fatca-canada-u-s-1.5957194