In this video clip, Terry Ritchie updates Rob Carrick on the IRS crackdown on Americans who live and work in Canada but haven’t been filing their annual tax returns. There is serious documentation required by U.S. tax authorities regarding financial holdings. Last September, a new program was introduced for Americans living and working abroad: the Offshore Volunteer Disclosure program. Of the 5 to 7 million Americans who live/work abroad, only 740,000 actually filed a Financial Bank Account Report (FBAR) in 2011.
While only 18 parties have been criminally prosecuted for hiding assets, clearly there is a large percentage that doesn’t know what to do or where to go for advice. Every situation is different, but it’s important to talk to a specialist who understands these issues. Next year, when the IRS imposes the Foreign Account Tax Compliance Act (FATCA), traditional banks in Canada must comply and provide information. Following this, it will be harder to fight reasonable cause. For most Americans working in Canada, there is a Foreigner Income Exclusion imposed on employment income. This, plus the use of foreign tax credits, generally means there are no taxes owed, but the proper documentation must be filed with the IRS to be in compliance.