April 03, 2009 07:30 ET

KPMG: Canadians May Be Subject to Surprise New US Financial Reporting Requirements

If You're Travelling to the US for Business - Beware of FBAR

TORONTO, ONTARIO--(Marketwire - April 3, 2009) -

Attention: Crime, Business, and Travel Reporters

Canadian companies, their employees, and individuals who do business in the United States may be surprised to learn that they may be required to report detailed information to the IRS about their Canadian bank and financial accounts as early as June 30, 2009, if the accounts' value exceeds US$10,000, according to Jim Yager, Head of International Executive Services, KPMG.

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 not more than US$500,000 and imprisonment of not more than 5 years, for failure to file a report or supply information and for filing a false or fraudulent report. No filing extensions are granted. Thus, the filing deadline for 2008 is June 30, 2009.

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.

Individuals 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," says Yager.

"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," says Yager.

About KPMG

KPMG LLP, a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm affiliated with KPMG International, a global network of professional firms providing Audit, Tax, and Advisory services. Member firms operate in 144 countries and have more than 137,000 professionals working around the world.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss cooperative. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

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