Implementation of FATCA has intensified scrutiny on non-compliance
TORONTO, July 30, 2014 /CNW/ - With the implementation of the Foreign Account Tax Compliance Act (FATCA) and the ongoing efforts by the IRS to raise awareness of the US tax reporting obligations on holding foreign financial accounts, PwC is encouraging US citizens living in Canada to participate in one of the offshore voluntary compliance programs.
FATCA requires financial institutions and corporations to report to the IRS if any of their employees or clients are US citizens living in Canada, putting non-compliant US citizens in danger of discovery. As a result, on June 18, 2014 the IRS announced modifications to its offshore disclosure programs, with the intention of encouraging individuals to come forward and report their accounts and assets and mitigate risk of penalty or prosecution.
To avoid repercussions, PwC advises the following:
Determine citizenship: In some cases, non-resident Americans are unaware of their citizenship. An individual's US citizenship is dependent on a variety of factors, including age, parentage and acts of expatriation. However, dual US-Canadian citizens, including Canadians who are unaware that they also hold US citizenship, may be required to comply with IRS filing requirements.
Assess program eligibility: One size does not fit all when it comes to voluntary disclosure, and it is crucial for US citizens to work with a tax advisor to determine which category they fall under.
Most individuals can follow the 2014 Streamlined Filing Compliance Procedures, which apply to those who may not have been aware of their filing requirements and did not willfully fail to report their accounts. In the majority of cases, individuals who fall under this program are required to report three years of tax returns.
The 2014 Offshore Voluntary Disclosure Program (OVDP) is designed for individuals who are concerned that their failure to report income and disclose foreign financial assets might be viewed by the IRS as wilful and wish to mitigate substantial penalties and possible criminal prosecution. The voluntary disclosure period under OVDP is the most recent eight tax years.
Comply now to avoid penalties later: Time and money spent on compliance now can save US citizens from audits and penalties in the future. In many instances, citizens reporting for the first time find that they owe little or no taxes, but simply need to disclose income and assets. Coming forward before being investigated significantly mitigates the risk of penalties and provides individuals with greater clarity on their responsibilities to the IRS.
New IRS relief for US citizens living outside the US
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SOURCE: PwC (PricewaterhouseCoopers)
For further information: Emily Abrahams, T: +1 416 814 5734, Email: emily.r.abrahams @ca.pwc.com; Kiran Chauhan, T: +1 416 947 8983, Email: [email protected]