Authors: Dean Smith (PhD, CFP, TEP, CPA, CA, RWM; Partner), Hunter Moore (CPA, Iowa);
Warming up for the 2025 Tax Season
A new year brings us all new opportunities and uncertainties. However, one routine with which we can find comfort is our tax responsibilities. As we burrow out from our winter dens, it’s important to consider filing and payment obligations In today’s discussion, Cadesky U.S. Tax will walk through court rulings, procedural changes, and executive orders that may impact your United States filing requirements.
FBAR Enforcement
On January 7th, 2026, The U.S. Court of Appeals for the Second Circuit weighed in on its interpretation of willfulness in the context of FBAR omissions. In United States of America v Juan Reyes and Catherine Reyes, the Court found that the taxpayers had willfully failed to report their holdings in Swiss bank accounts. The defense’s argument relied on the fact that Mr.Reyes was a dual U.S. – Nicaraguan citizen.
This brings into question, “What is willful?” Internal Revenue Manual (IRM) 25.1.1.4(1) defines willfulness as “a voluntary, intentional violation of a known legal duty.” In plain language, “You knew the rules and did not follow them.” However, the IRM acknowledges that “a good faith misunderstanding” is an adequate defense to show a taxpayer’s actions were not willful. “Good faith”, in this context, translates as “Did you expend a reasonable amount of effort to ensure you’ve complied with the law?”
The Court pointed to several actions the taxpayers undertook to showcase mens rea (put simply, as a voluntary violation of a statute). For instance, the taxpayers instructed the Swiss bank to send statements to a friend in Spain and paid the bank a premium fee to not send statements to a U.S. address. It doesn’t take a deep legal understanding to identify the issues in this instance.
This, nonetheless, presents an opportunity to refresh yourself on the FBAR filing requirements. If you had authority over financial accounts with a value of at least $10,000 USD at any point during the year, its likely you have a filing obligation.
For clarity, the threshold is determined on an aggregate basis, NOT an individual account’s value.
IRS Payment Modernization
Since the advent of the current administration, the IRS has seen significant changes. We’ve witnessed substantial reductions in force, at least six acting commissioners, and a commitment to digitize payments to and from the Treasury. While all have an impact, taxpayers are directly impacted by the updated payment method.
President Trump issued Executive Order (EO) 14247, Modernizing Payments To and From America’s Bank Account, on March 25th, 2025, which required the IRS to begin phasing out paper refund cheques for individual taxpayers. From said EO, the executive branch cited efficiencies and cost savings as primary drivers; not to mention that only 7% of individual refunds were received via cheque.
What, however, does this mean for you? Essentially, you should consider establishing a U.S. bank account. In Canada, many banking institutions offer USD denominated accounts. This is NOT sufficient. Instead, one should make certain the account is maintained by a U.S. registered bank. For example, BMO and RBC operate a foreign subsidiary which is governed by U.S. banking regulations. Additionally, prepaid debit cards and digital wallets may also suffice if they have an American Bankers Association (ABA) routing and account number.
Of course, no regulation is complete without exceptions. In this situation, taxpayer relief is limited to the following:
• Extreme Geographic Hardship
• Mental Impairment
• Religious Objections
• Estate & Decedent Accounts
While enforcement has not begun, the IRS has signaled their intent to require payments be remitted electronically. Who knows, maybe crypto refunds and payments are next?
Overreliance on the “Mailbox rule”
IRC §7502, colloquially termed the “mailbox rule”, is a legal standard that deems a return or payment is timely delivered when provided to a mail carrier. No recent changes have been made to the statute, but a United States Postal Service (USPS) procedural change raises the issue of timely filing and how Canadian residents should interpret the guidance.
The December 24, 2025 modification notes that postmarks will not necessarily be applied on the day of receipt. Instead, the USPS will do so when the parcel is received by a distribution center or retail unit. If a taxpayer is filing on a deadline day, they can request a manual postmark be applied when dropping it off at a local Post Office. While this is likely inapplicable for Canadian residents, it’s important to understand how the “mailbox rule” applies in an international context.
Fortunately, the IRS honors §7502 internationally and for private couriers. If taxpayers utilize Canada Post, one should ensure the parcel is marked when dropped off. Alternatively, taxpayers should ensure they receive a time stamped receipt when employing a private courier. Unfortunately, pre-dated postage is not strong enough evidence to show the carrier took possession on the listed date.
Oh “BOI”, is this not over?
After making its initial splash, Beneficial Ownership Information (BOI) reporting lived in a never-ending state of limbo. Court decisions, Treasury rulings, etc., kept the topic alive and ultimately led to a significant watering down of the legislation. Cadesky U.S. Tax’s March 2025 article, The CTA: An Interim End to a Never-Ending Saga, summarizes key points for consideration and is ultimately the prevailing view until final rules are released. However, movement continues.
In National Small Business United v U.S. Department of Treasury, the 11th Circuit Court of Appeals found the legislation constitutional. What impact does this have? In practical terms, nothing. The final interim rules issued on March 21st, 2025 remain as the controlling guidance. However, we are anxiously awaiting Treasury’s final release and will keep you abreast accordingly.
Now that we’ve walked through some 2025 considerations, it’s time to compile your pertinent documents and make your plan for the upcoming filings.
How Can Cadesky U.S. Tax Ltd. Help?
Please feel free to reach out to us at usadminsupport@cadesky.com for questions on your filing requirements and how you can remain confident you’ve complied with your U.S. obligations.
