Tax Articles
US Foreign Bank Account Reporting Reaches into Canada
John McCrudden
Brampton Board of Trade
Aug 2009
The US Internal Revenue Service confused Canadian individuals and companies doing business in the US, along with this country’s tax specialists, when it recently released a new version of Form TD F 90-22.1 – Report of Foreign Bank and Financial Accounts (FBAR). This new form presented expanded filing requirements that included “a person in and doing business in the United States.” Many interpreted this to encompass virtually any Canadian individual or corporation that conducts any type of business in the US.
Until this year, a FBAR only had to be filed by a “US person,” which was defined as “a citizen or resident of the United States, a domestic partnership, a domestic corporation, or a domestic estate or trust.” The US Treasury has long required US persons to file a FBAR to report any financial accounts they have in foreign countries when the total value of those accounts exceeds US$10,000 at any time during the calendar year. The information collected through FBARs enables the government to combat money laundering and income tax evasion. The form is completed on a calendar year basis. Thus for 2008 the new definition was to become effective on June 30, 2009.
There was a great deal of uncertainty with the new requirements in terms of determining when a non-US person actually had an obligation to make a FBAR filing. Essentially, this change to the instructions could have required thousands of Canadian residents and corporations to disclose their Canadian financial accounts – or risk severe penalties.
To address this uncertainty, on June 5 the IRS suspended foreign bank account reporting for non-US persons – on a temporary basis. In coming months, the IRS is expected to provide more guidance regarding FBAR requirements for future years. Given that the US has some of the most complicated financial and tax filing requirements in the world however, Canadian enterprises conducting business in that country should pay careful attention to ever-changing FBAR and other tax requirements
John McCrudden is a senior tax manager of BDO Dunwoody LLP (www.bdo.ca) who specializes in US tax. BDO, one of Canada’s leading accounting and advisory firms, helps entrepreneurs and family businesses succeed. You can reach John in the Mississauga office at (905) 270-7700 or JMcCrudden@bdo.ca.
