Canada: Face The FATCA: US Citizen Living Abroad? The IRS Wants You To File

Last Updated: November 5 2014
Article by Frank Casciaro

Since the global economic crash of 2008, the Internal Revenue Service (IRS) in the U.S. has been trying to find other ways to generate income and much needed revenue. One avenue they are pursuing aggressively involves trying to stem tax evasion by U.S. citizens who are purposely hiding their funds in offshore accounts.

According to data received by the Washington-based International Consortium of Investigative Journalists and released through newspapers around the globe, some 120,000 companies and trusts are hiding money in offshore accounts. The leak made headlines around the world this April and it reaffirmed to the IRS that it's on the right track. In fact, the names of 4,000 Americans were on the list.

The IRS realized there are a lot of U.S. citizens living outside the country who are not reporting all their income and assets — and this goes beyond uber high net worth individuals and families. A little background: the U.S. Internal Revenue Code requires all U.S. citizens (including Green Card holders) to file a U.S. income tax return to report their worldwide income regardless where they live. They are also required to file foreign asset disclosure forms to report their worldwide assets including bank accounts, shares in foreign corporation and interests in foreign trusts.

In order to make sure they do, the U.S. government passed the Foreign Account Tax Compliance Act (FATCA), which requires U.S. citizens living abroad to file Form 8938 Statement of Specified Foreign Financial Assets along with their income tax return (which came into effect in 2011). Form 8938 is a sister form to the Report of Foreign Bank and Financial Accounts (FBAR) form, and requires that in addition to reporting all your foreign bank accounts, you also have to disclose other foreign assets. These can include all the financial bank account information you have already reported, foreign life insurance plans, stocks, securities and interest in private equity funds, for example. In effect, as a U.S. citizen living in Canada, you must now disclose any type of investment asset and interest you own that is located outside the U.S. on this form.

For single U.S. citizens living outside the U.S., the Form 8938 is required when they own specified foreign assets that had a fair market value (in aggregate) of more than US$200,000 on the last day of the tax year or more than US$300,000 at any time during the tax year.

For married U.S. citizens living outside the U.S. (who file a joint return), the Form 8938 is required when the couple own specified foreign assets that had a fair market value (in aggregate) of more than US$400,000 on the last day of the tax year or more than US$600,000 at any time during the tax year. Based on the thresholds listed above, the Form 8938 illustrates that the target group of this form is not just millionaires purposely hiding funds in offshore accounts.

If you are not complaint with Form 8938, you may face a minimum penalty of $10,000. There is also a maximum additional failure of up to $50,000 which applies if the IRS requests this form and you fail to comply. What's more, if you underpay your tax as a result of a transaction involving an undisclosed specified foreign financial asset, you may have to pay a penalty equal to 40% of that underpayment.   For criminal violations, the penalties are much steeper.

The deadline for filing is the same as your U.S. personal income tax return including extensions. 

FATCA also requires foreign financial institutions to report information regarding their U.S. citizen client directly to the IRS. Foreign financial institutions that fail to comply face a 30% US tax penalty on their own total investment earnings from all of their own U.S. holdings.  Foreign Financial institutions and foreign governments are uneasy about providing information about their clients and citizens and fear FATCA could hurt cross border trade. As a result, many, including Canada, have made their concerns known to the U.S. government. Still, as Canadian banks have subsidiaries and huge investments in the U.S. they are following through and making the required disclosures to the IRS. Some Canadian financial institutions even have new policies where they are not taking on any new clients that are U.S. citizens because they don't want to deal with the U.S. flexing its muscle in Canada—where it really has no jurisdiction.

In order to encourage compliance, particularly for the majority of U.S. citizens who may not have realized they had to disclose investment assets, the IRS announced a new amnesty program. Since September 1,2012, U.S. citizens living in Canada can file delinquent U.S. income tax returns and foreign reporting forms without being assessed penalties. To qualify for the program, you must have resided outside the U.S. since January 2009; not previously filed a U.S. tax return for the 2009 tax year or later; the tax balance on each U.S. income tax return filed under the program cannot exceed US$1,500; and you must have low compliance risk. If you qualify, you will have to file delinquent U.S. income tax returns for the past three years and delinquent FBAR forms for the past six years, as well as payment for income tax owning and related interest charges.  A completed questionnaire must be submitted with the tax returns and forms.

Face The FATCA: US Citizen Living Abroad? The IRS Wants You To File

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Frank Casciaro
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.