Wealth Professional – U.S. clients aren’t in the clear, warns Toronto advisor

Matt C. Altro was recently interviewed for a a follow-up article on after the publication of the story titled “Watch out! FATCA’s on your doorstep, warns Toronto advisor,” both of which appeared in the online publication of Wealth Professional. In the follow-up article, Matt addresses that despite the recent Canada/US agreement, advisors and US citizens living in Canada still need to become wary of their situation and become compliant as soon as possible. The article can be found below or at this link and includes information on the new agreement between Canada and the US with regards to FATCA.

U.S. clients aren’t in the clear, warns Toronto advisor

SOPHIE NICHOLLS
Wealth Professional
February 11, 2014


The wolves may appear to be at bay with a deal over FATCA reached last week between Canada the U.S., but your clients are not entirely in the clear, warns one Toronto financial advisor.

On the advice of Matt Altro, CEO of MCA Cross Border Advisors [affiliated entity of Altro Levy LLP], Canadian advisors should weed out their clients who are U.S. citizens and begin making the necessary preparations now – well beyond the July 1 deadline, when the new U.S. tax law comes into effect around the world.

“Advisors can look at this as a wake-up call. It’s why they need to find out whether their clients are U.S. citizens or not,” says Altro. “I suggest advisors communicate directly with their clients … so they can at least inform them of their obligations or refer them to someone who can.”

Referring clients to qualified third-party service providers – including accountants and lawyers – may be necessary to deal with complex tax filings and other investment disclosures subject to IRS scrutiny. “The tax filing is just the tip of the iceberg when it comes to what a U.S. citizen needs to know … there are a series of income tax traps they (clients) can fall into if they are not informed,” Altro says.

Initially, the Foreign Account Tax Compliance Act (FATCA) raised alarm in Canada, as Canadian financial institutions would have been required to report information on account holders who are U.S. residents and U.S. citizens directly to the IRS, potentially violating Canadian privacy laws.

Under the new deal, Canadian financial institutions will report information on accounts held by U.S. citizens directly to the Canada Revenue Agency (CRA), which will exchange the information with the IRS, adhering to existing provisions and safeguards, and the privacy act.

“It is definitely a good thing that Canadian financial institutions don’t have to carry this burden …,” says Altro. “As far as the individual – U.S. citizens in Canada – it is another step in the direction that this is happening. The net result is that the IRS has access to their information.”

Another positive outcome from the deal, Altro notes, is the exemption of accounts including Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Fund (RRIFs), Registered Education Savings Plans (RESPs), Registered Disability Savings Plans (RDSPs) and Tax-Free Savings Accounts (TFSAs).

“This is potentially a good sign because right now accounts like TFSA and RSPs, while they may be exempted from FATCA, they are not recognized as a tax-free savings vehicle by the IRS,” says Altro. “They (the IRS) never had a position on it … that potential obstacle may be removed for Americans living in Canada down the road.”