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Why Is It Important For Canadian Expats To Disclose Foreign Based Accounts to the IRS?

John McCord’s article focuses on the IRS (US Internal Revenue Service) policy that taxes the worldwide income of US residents. Many US residents are unaware of this policy and the law that requires the disclosure of the majority of foreign accounts, as they are subject to US taxation. Disclosure rules also apply to Registered Retirement Savings Plans, pensions and bank accounts. In order to enforce these policies the IRS is aggressively pursuing civil and criminal penalties for noncompliance and maintains close communication with the CRA (Canadian Revenue Agency), references the FBAR (Report of Foreign Bank and Financial Accounts) and, beginning in 2013, will enforce the FATCA (Foreign Account Tax Compliance Act) in order to do so. FATCA will focus on the compliance of foreign-based accounts and increase communication with foreign financial institutions in order to identify US residents who do not report their foreign-based accounts. For both Canadian Expats and US residents with foreign accounts, McCord stresses it is critical to consult with a cross-border financial advisor in order to ensure compliance and identify the right solution that may include tax, legal and investment professionals depending on your personal situation.

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