FATCA is the Foreign Accounts Tax Compliance Act, F.A.T.C.A.
Agreements have been signed between Canada (and many other countries) and the United States whereby the banks in those countries will disclose the information about the Americans with accounts held at the banks. Now ultimately, they will be in a big matching exercise for the US treasury.
A couple of things for you to check to stay compliant;
- Check your Canadian bank accounts (plus any other non-US accounts) been reported on the schedule B on your IRS federal tax return (1040)
- Check your FBAR – (Foreign Bank Account Reporting) forms have been filed, and does it all match up with what the banks are saying to the department of justice?
The Foreign Bank Account Reporting (FBAR) forms are not part of FATCA but have been required since the early 70’s. Strictly reporting requirement – you just disclose the information about the bank, the name, address and account number and the highest balance. That’s it.
Many people are concerned because money flows in and out of their accounts. Perhaps they took a car loan or borrowed some money, maybe they got a salary transfer to go and pay rent…and so there’s a high balance that immediately disappeared. That’s not a concern, there’s a paper trail on it. You just have to report it. Not reporting has very harsh penalties that start at $10,000 and can include criminal penalties. So, it’s a good idea to stay in compliance.
There is one more very important form. Depending on your marital status, the filing status and where you are living in or outside of the US, there are filing thresholds for an additional IRS form called the 8938 that disclose the high balance, and this goes with the tax return. If you don’t have an obligation to file the tax return, you don’t have to file the 8938, but you do have to file the FBARs. So, make sure to disclose to the preparers and your tax contacts exactly what’s in the accounts because, again, failure to file this form can lead to harsh penalties.