Canadians should be told if their banking info shared with IRS, says MP

The Canada Revenue Agency should notify Canadian residents when their bank account information is being shared with the U.S. Internal Revenue Service, says the NDP's revenue critic.

Pierre-Luc Dusseault says informing Canadian residents their information is being sent to the IRS could prevent others from landing in the same predicament as Jeffrey Pomerantz, a Vancouver area man facing a $1.1-million lawsuit for failing to file a form reporting his bank accounts outside the U.S.

Dusseault said there could be more lawsuits because of the "large number" of files regarding Canadian bank accounts being transferred under an intergovernmental agreement between the U.S. and Canada.

The deal was negotiated in the wake of the U.S. adopting the Foreign Account Tax Compliance Act (FATCA).

"I would emphasize again the need for the CRA to notify Canadian taxpayers when they transfer their files to the IRS, a foreign government department," said Dusseault. "This notification may avoid that kind of situation."

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Canada's Privacy Commissioner Daniel Therrien has already recommended that Canadian residents be notified when their bank account information is transferred, Dusseault pointed out.

In September 2016, the CRA shared information about 315,160 bank accounts — double the number it shared a year earlier in the first year of the agreement.

However, Revenue Minister Diane LeBouthillier's office said it is the responsibility of individual banks to let clients know if information about their bank accounts might be transferred.

"The legislation implementing the Canada-U.S. Intergovernmental Agreement (IGA) requires that Canadian financial institutions communicate with account holders of pre-existing accounts if there is information suggesting that they are a U.S. citizen or resident (e.g., their client file contains a U.S. contact address or phone number,)" said spokesperson Chloé Luciani-Girouard.

"These clients would therefore be on notice that their information may be exchanged with the U.S. Internal Revenue Service."

CRA will respond to requests

While the government has no plans to inform people whose bank account information has been shared, those who want to know can contact their financial institution or the CRA, Luciani-Girouard said.

"The CRA will respond to any request to confirm whether information relating to a particular individual or entity has been reported and provided to the U.S. under FATCA. To date, fewer than 10 such requests have been received by the CRA," she added.

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The information-sharing agreement was in the spotlight Thursday following a CBC report that Pomerantz, a dual Canadian-U.S. citizen, is being sued by the U.S. Justice Department for $860,300 US in civil penalties, late payment penalties and interest.

While Pomerantz filed income tax returns to both Canada and the U.S., the Justice Department said he failed to file a Foreign Bank and Financial Accounts report to the U.S. Treasury's Financial Crimes Enforcement Network (FinCEN) for three tax years.

During those years, Pomerantz had accounts with the Canadian Imperial Bank of Commerce and in Switzerland with Sal Oppenheim JR & Cie, in addition to a corporation in the Turks and Caicos Islands, the U.S. Justice Department said in its lawsuit.

In a separate case, Pomerantz is challenging an audit by the IRS.

Court challenge

Lynne Swanson, part of a group challenging the bank account information sharing agreement in Federal Court, said the Pomerantz case is an example of how the bank account information agreement can make some Canadian residents vulnerable.

"I don't think they should be transferring any information. Period. Full stop," she said.

"If they are transferring it, of course, they should be telling people that they have transferred it and what they have transferred. But I don't think they should be transferring anything."

Elizabeth Thompson can be reached at elizabeth.thompson@cbc.ca