FATCA agreement between Canada and the United States facts for kids
The FACTA agreement is a special deal between Canada and the United States. It helps the United States keep track of the money and finances of its citizens who live in Canada. This includes people who are US citizens but live in Canada.
Under this agreement, Canadian tax agencies share detailed financial information about these people with the American tax agencies. This helps the US government know about money held by its citizens outside the United States.
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What is the FACTA Agreement?
FATCA stands for the Foreign Account Tax Compliance Act. It is a law that started in the United States in 2010. This happened when Barack Obama was president. The agreement with Canada was signed in February 2014. At that time, Stephen Harper was the Prime Minister of Canada.
Many other countries have also signed similar FATCA agreements with the United States. These agreements affect all US citizens living in those countries.
Why was FACTA created?
FATCA was first created to find people who were trying to avoid paying taxes in the United States. However, it ended up affecting almost all Americans who live outside the United States. There are about one million Americans living in Canada.
The agreement includes many different types of people. This includes "accidental Americans." These are people who might be US citizens without even knowing it. It also affects their non-American family members and business partners. Even former non-American residents of the United States can be included.
How does FACTA work?
FATCA requires US citizens to tell the IRS about their bank accounts outside the United States. The IRS is the tax agency in the US. People must report the money in all their foreign bank accounts every year.
They do this by filling out special forms. These forms are in addition to other tax forms. US citizens must file these forms every year, even if they do not live in the United States.
The CRA, which is the Canada Revenue Agency, helps with this process. The CRA collects this financial information from all Canadian banks. Then, the CRA sends this information to the United States.
Will Canada help the US collect taxes?
The Canadian government has made it clear that the CRA will not collect US taxes from Canadian citizens. This is true if the person was a Canadian citizen when the tax money was owed.
Even though there is a tax treaty between Canada and the US that allows countries to collect each other's taxes, Canada has stated it will not do this for its citizens.
- Read the full agreement here
