One million American citizens in Canada face double tax troubles. Max Reed explores these challenges in a spring series.
The United States has two tools with which to collect information on accounts held by its citizens, FATCA and FBAR. Lots of attention has been paid to FATCA, less so to FBAR (Foreign Bank Account Reporting). FBAR targets accounts that U.S. citizens own as well as accounts over which U.S. citizens have signing authority.
The ownership piece is pretty straightforward. U.S. citizens in Canada are obliged to file an FBAR form if they have an ownership interest in “foreign” bank accounts, those outside the United States, which have a cumulative value of US$10,000 or more.
In an extreme scenario, this would even mean that if you have 10,000 bank accounts that each have one U.S. dollar in them you would have to report all of those bank accounts.
The rules are more complex for those who have signing authority over accounts they don’t own. All U.S. citizens must report all foreign accounts worth US$10,000 or more, even those owned by non-Americans, over which they have signing authority – that is, the ability to move money in and out of the account – even if they don’t have a financial interest.
Many different types of accounts have to be reported: bank accounts, commodity brokerage accounts, accounts that hold securities, accounts with a mutual fund, and certain insurance accounts that have a cash value. The few exceptions to the FBAR rules are unlikely to apply to any Canadian institutions.
The implications of these rules can be maddening.