U.S. voters are facing what seems to be the most divisive election in its history. Many believe they are being faced with choosing between the lesser of two evils. Given the choices and potential outcome, there is some chatter that Americans may be looking at moving north to Canada. While the Canadians were very accommodating 40+ years ago when U.S. draft dodgers migrated to Canada to avoid the military conflict, Canadian officials have made it very clear the border will not be so porous this time around—Americans may have to live with their elected officials whether they want to or not.
Ironically, with one presidential candidate promising to build a wall on the southern border of the U.S. to keep out immigrants, the neighbour on the north is suggesting they will be offering American’s the similar restrictions, just without the physical barrier. They have been very clear that they will not just open the gate and let Americans waive their passport as they drive through.
But even if you do renew your passport, pack up the family, and get Canada’s approval to cross the border, there are additional considerations U.S. citizens and residents must take into account when attempting to flee the leadership of whoever winds up in the White House—FATCA.
The Foreign Account Tax Compliance Act (FATCA) requires that any U.S. citizen with more than $10,000 must file annual disclosures listing the maximum exchange-rate value of each account they held during the previous year. Non-compliance can result in steep fines and possible jail time. You may think that these types of tax laws only affect the very wealthy, but it’s been shown that the majority of individuals negatively affected by FATCA include an estimated 8.7 million “average” Americans living outside the U.S.
The reporting requirements are not only tedious and costly for expats, but also for the foreign financial institutions who must report U.S. account holders to the IRS. FATCA requires foreign financial institutions (“FFI”) to report to the IRS accounts owned by, or for the beneficial interest of U.S. taxpayers; failure to do so results in a 30% withholding tax on certain payments.
If you are an American considering seeking potential greener pastures in the north, or anywhere outside the U.S. for that matter, after November, it would be in your best interest to contact an international tax expert before your move.