Canadian banks in trouble following IRS crackdown

20th December: Canadian financial institutes are in a fix following recent crackdown by the Internal Revenue Service.

Meanwhile, there is some relief for Americans in Canada.

IRS criticized by Canada financial institutes—Financial institutes of Canada are complaining against tougher regime announced by the IRS. They allege changed rules governed by the 2010 FATCA(Foreign Account Tax Compliance Act) will not only be extraterritorial but also highly costly and breach of privacy.

An uneasy calm prevails in financial institutes of Canada since many of their US customers have dual citizenship. As per the legislation, such clients are nothing but spies of IRS.

Taking a cue from the concerns of financial institutes of Canada and Europe, Douglas Shulman, commissioner of IRS, promised to sort out such issues in a practical manner. There has been an open revolt against such rules of the IRS from European financial institutes as well.

No wonder, many of them including some big names like Commerzbank, Deutsche Bank and HSBC are have already begun weeding out US customers.

New law- a threat to US-Canada trade—It is being feared that such a rule would jeopardize trade between the financial institutes of Canada and the US.

<blockquote>Compliance with the rules of FATCA will make it difficult for Americans and Canadians since only a handful of banks would be ready to cooperate with them.</blockquote>

The CBA (Canadian Bankers Association) is posting a set of questions and answers on its official website to provide help to Canadians but it is aware of the fact that the guidelines are subject to change any time.

Under the new US IRS rules unleashed Monday, thousands of American taxpayers will have to provide details about the foreign stock holding, life insurance policies and even pensions. And global tax experts feel this as a serious legal threat to American taxpayers living in other nations having liberal privacy rules.

Aim of new IRS rules—IRS rules will affect thousands of taxpayers although the exact figure is a bit difficult to predict right now. The agency issued nine pages of detailed instructions to be followed by taxpayers while filling a new form along with tax returns for 2011 due on 15th April, 2012.

New IRS rules are aimed to warn tax dodgers. So, many of those likely to get caught by these rules would be first-generation Americans and even foreigners. Moreover, legitimate tax payers may also get involved.
Many unsophisticated people having global ties are getting hit by the IRS rules, admits a New York lawyer, Richard Luthmann.