FATCA / FBAR question

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CalGreenCard
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FATCA / FBAR question

Post by CalGreenCard »

Does anyone have any feel for how difficult it would be for a dual US-Canadian citizen--if they ever move back to Canada--to open an account with a Canadian bank once FATCA fully goes into effect?

If someone has had no accounts of any kind--no RRSP's, brokerage accounts, savings/chequing accounts--in Canada in many years--is FATCA going to make it very difficult for that person to re-establish themselves financially in Canada in the future? At the moment I'm not asking about anything more than opening a bare bones savings and/or chequing account?
Taxpoor
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Post by Taxpoor »

I doubt if FATCA is going to have anything to do with you opening a bank account in Canada when and if it is implemented.
nelsona
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Post by nelsona »

I would not be so optimistic. Banks already cringe at dealing with US taxpayers now.

Will it be impossible to open a bank account in Canada if a USC? Of course not. But expect fees and restrictions.
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Hirider267
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Re: FATCA / FBAR question

Post by Hirider267 »

[quote="CalGreenCard"]Does anyone have any feel for how difficult it would be for a dual US-Canadian citizen--if they ever move back to Canada--to open an account with a Canadian bank once FATCA fully goes into effect?

If someone has had no accounts of any kind--no RRSP's, brokerage accounts, savings/chequing accounts--in Canada in many years--is FATCA going to make it very difficult for that person to re-establish themselves financially in Canada in the future? At the moment I'm not asking about anything more than opening a bare bones savings and/or chequing account?[/quote]

Why would you show your US Passport/GC or ANYTHING while opening a Canadian Bank account? Your Canadian Passport or Citizenship Card would be enough to open an account in Canada and that's it. Why present anything other than your Canadian credentials in Canada?

Does a dual Citizen use the US passport with a Canadian Visa to enter Canada? NO. They use your Canadian Passport. I think the para above is logical extension of this.
CalGreenCard
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Re: FATCA / FBAR question

Post by CalGreenCard »

[quote="Hirider267"]Your Canadian Passport or Citizenship Card would be enough to open an account in Canada and that's it.[/quote]

Really? A Canadian passport shown as the primary form of ID attracted considerable suspicion the last time I opened a bank account in Canada--in May 2001 when it looked like I would be moving back to accept a job in the bank's neighborhood. Eventually they did open the account but they were clearly suspicious--and this was BEFORE 9/11 and BEFORE FATCA--I doubt it would be any easier now. In the end I worked only briefly for that company and moved back to the US--and eventually closed the account.

There are many things that might attract suspicion even if one doesn't go out of one's way to advertise the fact that one is moving back from the USA. The other ID that one shows--eg driver's license, credit cards, etc--might be from the USA even if the passport/ citizenship card is Canadian. Of course one could possibly wait until one acquires more Canadian ID before opening a bank account but it could be a serious hassle trying to start a job/get a place to live without a bank account.

Plus the initial deposit for someone moving back might be a US$ cheque--to be followed soon by a larger wire transfer originating from the US.

And the absence of any kind of Canadian credit history--neither good nor bad--in a middle aged person who has been Canadian from birth is also likely to raise eyebrows.

I have no immediate plans to move back. But the recent "disabling" of my Canadian SIN card (discussed in another post) plus a lot of talk of FATCA has definitely made me wonder if I'd have difficulties.
nelsona
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Post by nelsona »

Please don't use quotes people, they don't work.

Hirider, banks already are supposed to ask if you are a uS citizen, it will get worse with FATCA. They will now ask as part of any new account process, believe me.

FATCA is not logical.

Som "difficulties"? No. Expense. yes.
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CalGreenCard
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Post by CalGreenCard »

Thanks for the reply nelson.

When you say that banks are "already" supposed to ask if someone is a US citizen, is there a Canadian law that requires this (given that FATCA won't come in until 2014)? Is this required for a basic bank account (eg savings/chequing) or only for a securities account (where securities regulations might come into play)?

Are there specific cases already of Canadian citizens/residents--with a full range of Canadian ID--being refused a Canadian bank account because of a refusal to supply a US SSN?
nelsona
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Post by nelsona »

FATCA is not a securities issue, it is an IRS issue. ANYONE who pays a US taxpayer anything has to withhold funds for IRS, unless they have an exemption or waiver, otherwise THEY become liable for penalty.

That is why they ask for W-8 or W-9, even now. FATCA will require MORE from the institution. The cost will be passed to you.

As to anyone being "denied" a bank account? Probably -- but the eact details would need to be known.
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CalGreenCard
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Post by CalGreenCard »

Hmmm...there's something in this analysis that must be missing. There are many times when funds change hands between two individuals in the US between US persons--let alone abroad--where no W-9 or withholding takes place. For example, someone tips a waiter/waitress or pays for the services of a doctor, lawyer, or accountant.

There must be some further requirement beyond just "paying a US taxpayer" that is triggering these requests.
nelsona
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Post by nelsona »

Ok, cal, let's not get carried away. You are not an institution or business when you pay your doctor. But when an institution pays YOU, they need to withhold. the doctor has to withhold taxes from her receptionist, for example.

Its called back-up withholding. Certain types of income require back-up withholding. Particularly when one of the parties is foreign.
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CalGreenCard
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Post by CalGreenCard »

OK--so I follow that we are talking about payments made by any kind of "institution" to an individual. But I guess I'm still not quite getting the concept here--as it presently applies (ie assuming no FATCA yet).

Have a look at the following account application:

https://www.investorsedge.cibc.com/ie/pdf/7779.pdf

Let's say a dual Canada-US citizen fills this out but presents plenty of Canadian ID--
eg Canadian passport, Canadian provincial driver's license showing a Canadian address, Canadian SIN card--so there are no obvious US person indicia.

Now our dual citizen gets to the following line on the form:

"US Social Security No./T.I.N. (required if U.S. citizen)"

For the sake of discussion, let's turn a blind eye to the bank's obvious error in preparing this form: a US citizen would never have a non-SSN TIN.

Now our dual citizen really should be providing a SSN at this point. Here they have two choices: they can either disclose their SSN--or they can not disclose it.

If they don't disclose it, there is no way that the bank can do backup withholding because there are absolutely no US indicia. If the person eventually fails to file an accurate FBAR or return, they may eventually be in trouble w/ the IRS. But there is no way there would be any backup withholding.

And if they DO disclose it, there won't be any backup withholding because they've come clean with their US status and the bank can make whatever report to the IRS it is required to make.

So in NEITHER case does backup withholding come into play--hence my confusion when you say that this is all about backup withholding?
nelsona
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Post by nelsona »

FATCA is not about withholding, W-8/W-9 is. And institutions can pay dividends as well as interest.

FATCA is about disclosure. It is about cross-referencing bank records and personal income tax and foreign account reporting.

I wasn't making analogies between what W-9 and facta do, I was merely stating that banks currently have obligations toward IRS for taxpayers, and that it will be worse with fatca -- and that worse means.

Remember that US taxpayers already must report their accounts, so IRS has a records of which institutions have accounts. FATCA will be a more diligent cross-check from the institution side. expect a fee.

--30--
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