Canadians Warned Over US Reporting Requirements

by Mike Godfrey, Tax-News.com, Washington

14 April 2009

Canadian companies, their employees, and individuals who do business in the United States may be required to report detailed information to the US Internal Revenue Service about their Canadian bank and financial accounts as early as June 30, 2009, according to KPMG.

The firm has warned that failure to comply or fill in the FBAR (report of foreign bank and financial accounts) form on or before June 30 of the following year may result in civil and criminal penalties, including, in certain circumstances, a fine of up to USD500,000 and imprisonment of up to five years.

KPMG said that the IRS does not grant FBAR filing extensions, meaning that the filing deadline for 2008 is June 30, 2009.

An FBAR form must be completed if the value of the accounts exceeds USD10,000.

Although this FBAR form has been required for years, the IRS recently expanded the definition of "US persons" who must report to include certain individuals who are neither citizens nor residents of the US and to certain non-US corporations. The change applies for reports due for the 2008 tax year.

However, the current rules are unclear: Canadians who only sporadically conduct business in the US or who go there occasionally to meet with customers or business associates are not considered to be "in and doing business in the United States." Additionally, a non-resident alien who visits the US to manage personal investments and conducts no other business is not "in and doing business in the United States."

"The IRS has provided very little guidance, so it is not clear at all when a Canadian person traveling to the US on business would be subject to these rules. Since it is likely that thousands of Canadians do regularly travel there on business, many of them may potentially be faced with these rules," said Jim Yager, Head of International Executive Services, KPMG.

"We are hopeful that the IRS will provide more definitive guidelines and limit the seemingly broad scope for a Canadian individual or company to fall within these provisions," he added.

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