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.”
Cool. Now we can waste the morning dealing with hundreds of moronic comments going on and on about “tax cheats” and blaming Trudeau. Almost as bad as any COVID story I’m expecting.
You learn something new every day… I didn’t realize that banks aggregate accounts to reach the $50,000 threshold. Obviously I didn’t read that part of the IGA. If I have three accounts at $20,000 (US dollars) then all three are required to be reported – similar to FBAR?
I do now wonder if banks are reporting registered accounts, though there is no designation of account type in the data. This would be a good follow-up question for Elizabeth Thompson to harass banks with.
Notice that the banks say that they report all to the CTA so that the aggregate can be computed and the CTA says its the banks responsibility to aggregate the account balances so it treats all accounts reported to it as reportable.
If one has accounts in more than one bank, how would any one bank know of these accounts held in other banks? IF they did know of some via transfers etc, how would they know thy balance in accounts held by other banks?
Why would the CTA assume that all accounts reported to it are reportable to the US?
I don’t think there’s any suggestion that accounts are being aggregated across different banks, only that they are being aggregated within banks. (So for example if I have 3 accounts worth $20k at TD, but also accounts worth $25k at BMO and RBC, I’d assume it’s fairly likely that TD has done the aggregation and reported their accounts, but whether BMO and RBC do anything depends on where they set their filter. It’s not coordinated.)
The CRA only acts as a conduit. They pass on what they receive, they do not look at the data (so they claim) nor do they have any authority under the IGA to determine what should or should not be sent, would be my understanding.
Hmm, that may be. For some reason I had the idea that it was aggregated totals. If the banks are sending say three accounts totaling $50,000 in value, then they would appear as 3 accounts under the reporting threshold, which would not indicate any wrong doing, beyond the fact that FATCA is wrong.
Technically there’s no wrongdoing if a bank reports one single account worth $5 – they are not prohibited from flagging accounts under the threshold.
True, technically. But if “technically” was all that mattered, then there is no purpose to the newspaper acrticle.
Once the CRA has one reported account, they know about all of them through T5’s. The CRA’s mission creep to condone the reporting of accounts <$50K has me wondering if it is capable of notifying banks of their US person account holders…Far fetched?
Indeed, no purpose from a “technical” standpoint, but plenty of purpose from a PR standpoint (one optimistically assumes).
Certainly anyone foolish enough to have disclosed their US person status to a bank should now know not be so foolish as to expect that any account – even a registered account, potentially – won’t be reported. I’m not sure how many folks actually fit in that particular Venn diagram, but if they exist, they should be warned.
Regarding the CBC article, surely I can’t be the only one who snorted out loud when a Conservative MP complained about this.
Re:
It’s not necessarily foolish. Many US citizens, real or alleged — especially the many who don’t have ties to the US — do not know about FATCA, or even that US has citizenship-based taxation (because no other country, save Eritrea, has it), or that having been born in the US could cause problems with one’s everyday life in Canada. So, they didn’t/don’t know to beware.
I agree with the part that if a person is reportable, they should expect any accounts to be reported. I went with that assumption since learning of FATCA, as it seems like the path of least resistance and most CYA for the banks. Still, whilst not surprised, I’m very glad Concerned Citizen got proof of it in his Access to Info Request.
Apologies, the use of “foolish” is mildly intemperate in regard to those who were not forewarned.
I do take some consolation from the obscure wording of the FATCA/CRS question now used by most Canadian banks: some variation on “Are you a resident of another country for tax purposes?” There’s a good chance that many people who know that they are dual citizens, or know that they possibly have US citizenship via parents or birth, will answer that question “incorrectly” if they don’t understand how the US tax system works. As long as bank employees don’t probe too deeply with a verbal question, all good.
Despite promising myself that I wouldn’t, I’ve been responding in the CBC comments. Question about this statement by the CRA spokesperson quoted in the article:
I went and had a fast look in the US-Canada IGA. I see no mention at all of any aggregate reporting requirement. All it says, quite clearly, is that accounts with value under US$50,000 are not required to be reported.
I’m a bit baffled by this. My hunch is that the CRA spokesperson did a fast Google search and got it confused with individual reporting requirements where aggregate totals would apply.
I suspect one sinister motive behind FATCA’s enactment is the USA’s desire to implement de facto capital controls to prevent people from moving money outside the US once the fiscal mismanagement in the US becomes self-evident. Admittedly, most ‘Homeland Americans’ regard the US as the apotheosis of civilisation and perhaps would not shift assets abroad. Nonetheless, I firmly believe preventing Americans from withdrawing money is one of the primary reasons behind FATCA.
In 2016, I visited Russia and China and I tried to open a bank account with my US passport purely to see how the banks reacted. The three banks where I attempted to open an account all told me that I could not because of FATCA. Once the US’s political enemies like Russia and China signed up to FATCA, any resistance was futile. It amazes me that neither China nor Russia pushed back on this, especially because rich Chinese and Russians hide large sums of money in the US to avoid paying taxes and to protect themselves from political risk.
My FATCA letter from my bank in Japan says that they will report all accounts despite the law’s $10,000 balance threshold. That is the policy reported by the Japan’s Bankers’ Association.
Again, if banks are reporting accounts that collectively total the reporting thresh hold, then they are not reporting accounts that do not need to be reported. The information received does not indicate if this is or is not the case. Might be making a stink over nothing.
Looking at the US-Canada IGA, there is no mention of aggregation or cumulative account totals. The $50k threshold applies to individual accounts only. It’s not clear to me at all what the CRA spokesperson is talking about, actually.
We’re all clear that banks are “allowed” to report what they want. It appears very clear from the language of the IGA that they are not required to report anything under the $50k threshold. If there is some rule in there about aggregate account value, I can’t find it.
It does not matter what the law say, it only matters how the law is reacted to. Japanese banks are also not required by FATCA law to report all accounts, yet they do.
Okay, digging through the IGA I can see language about aggregation of accounts but I’m still not clear on the context – nowhere does it specifically say that accounts need to be aggregated to reach the $50,000 reporting threshold. Weird. Will read deeper.
Yes, again, we all understand that banks are not prevented from reporting whatever they want to report. We’ve known this for years. That is not the issue here.
Okay, so why dig through the IGA? Seems like a complete waste of time.
Why repeat yourself endlessly?
History shows the evolution of discussions on the dangers of FATCA to be the following.
A: The law requires X. If you do not meet the conditions for X, no need to worry.
B: It doesn’t matter what the law says, it matters how banks will react to the law. They will report all suspected US Persons.
A: Your paranoid.
Time passes and many who may have been able to take action to protect themselves don’t. Who wants to be paranoid?
A: Banks are reporting those who not meet the conditions for X. This makes no sense. Why are they doing that?
Those who listened to A find themselves trapped when they might have been able to escape.
Repeat.
We have long suspected that Canadian banks were reporting lower-value accounts. Now we have confirmed it. This is a useful thing to know. It’s not particularly shocking or surprising, it shouldn’t change anyone’s behaviour, but at least we have it on paper.
I don’t think anyone here has ever seriously recommended the approach of reporting one’s self as a US person then carefully keeping bank balances under $50,000 to prevent their being reported. It’s far easier for most Canadians to simply not disclose their US person status.
The aggregation business is a sideshow. I’m just slightly surprised to have a learned a new FATCA-fact so I’m going to dig a bit deeper. The IGA is not long, and if wasting personal time is a concern, I’ll do it tomorrow while billing a client.
Final comment on this oddness. Looking at Annex I of the IGA (and ignoring pre-2014 accounts for simplicity’s sake) we see this on the subject of reportable accounts:
Moving further down to VI Special Rules and Definitions, we see this paragraph about rules for aggregation:
Okay, IANAL, but I read this as follows:
1. Banks are not required to report accounts with value below $50,000. However, they may do so if they wish.
2. When banks report a US person’s accounts, the are required to aggregate them to provide a total balance, assuming that their computer systems are up to the task.
What this does NOT mean, in my inexpert reading, is that banks are required to aggregate customer’s accounts and report them if the total value exceeds $50,000. (Analogous to how FBARs work.) Am I wrong?
If I am not wrong, what was the CRA spokesperson on about? Was it just a convoluted way of saying banks can report whatever they want, which we know already?