Yesterday, a Canadian court in Ottawa rejected a challenge to the lawfulness of mandatory requirements for filing FATCA issued by two dual Canadian-American citizens. This latest dismissal is a setback to the global progress toward repealing FATCA – or at least testing its legitimacy.
What Filing FATCA Means to Expats
FATCA (Foreign Account Tax Compliance Act) was enacted in 2010 and is a law that forces foreign financial institutions to report on the assets held overseas by American citizens. The bill was created to help the US find tax cheats – people purposely hiding money in order to evade taxation. However, the reality of the legislation is that it has made banking an unbearable headache for many Americans living abroad.
In addition to the reporting requirements of financial institutions, FATCA also increases expats’ mandatory reporting requirements. Expats who meet the thresholds must file Form 8938 each year to report on assets held abroad – or face steep penalties.
The thresholds for filing FATCA for single filers are met if you had $200,000 on the last day of the year or $300,000 at any point during the year. And, for married expats filing jointly, these double.
The Canadian Court Case
The recent court case was filed by two dual citizens who, though they were born in America, only spent a few years there as children and have lived in Canada ever since. The affidavit presented states that these expats have no real connection to the US and were unaware they were supposed to be filing FATCA and annual Federal Tax Returns. The court found that the plaintiffs’ case did not establish a violation of the Canadian Charter of Rights and Freedoms, and so, the case was dismissed. The particular right and freedom that was the focal point of this case was protection from unreasonable seizure of financial information, which the judge decided FATCA did not violate.
In light of the recent decision, these two plaintiffs could find their lives completely changed. If and when Canadian banks share their financial information with the IRS, they could find themselves mired in penalties and fees that assure financial ruin. Further, if they are unable to pay, their passports may be revoked, which could affect their jobs and lead to other devastating consequences.
Other Recent FATCA Developments
Critics of FATCA requirements have risen worldwide to express their opinions and draw attention to the incredible burden that filing FATCA presents to Americans living abroad. Expats living in France also filed a lawsuit recently challenging the legality of FATCA enforcement, citing discrimination as the reason for their suit. Unfortunately, days ago, that suit was also ruled in favor of FATCA. Though these decisions are doubtless disappointing for expats, they continue to raise the visibility of the difficulties expats face when living abroad. American politicians are beginning to take notice, too, of how unfairly the current tax legislation treats some expats. And hopefully, with more awareness will come more favorable legal outcomes for expats worldwide.
Greenback Can Help You With Filing FATCA
Greenback was created by expats and for expats! Our accountants understand the nuance of current tax law and can help make tax filing easy. Get started with us today.