UPDATE: An earlier version of this story stated that banks had started sending some financial information but due to ongoing litigation, part of that process may be on hold. A federal court in Vancouver will hear a challenge on the rules in early August. Government counsel responded to that challenge by saying that “has not yet exchanged information with respect to Reportable Accounts.”

The Canada Revenue Agency said in a statement to CTV News: “In accordance with the legislation in Canada that implemented the intergovernmental agreement (IGA), financial institutions in Canada with reportable accounts were required to begin reporting to the CRA by May 1, 2015. The exact amount of information collected is still being tabulated, and is therefore not available at this time. The exchange of information between the CRA and the IRS pursuant to the IGA is required to begin by the end of September 2015.

“In line with the May 1, 2015 legislative deadline, Canadian financial institutions with reportable accounts have been providing relevant information to the CRA. Given the ongoing litigation, the CRA is unable to comment further.”

-------------------------------------------------------

As of July 1, Canadian banks were required by law to send financial information on U.S. and dual U.S.-Canadian citizens to the Canadian Revenue Agency (CRA).

But what does the agreement under the Foreign Account Tax Compliance Act (FATCA) really mean for dual citizens? Here’s what you need to know:

What is FATCA?

On July 1, 2014, Canadian banks began searching for clients who are U.S. citizens under FATCA. As of Canada Day this year, Canadian banks were able to begin handing that information over to the CRA.

With the new agreement in place, if there is information that suggests a banking client could also be an American citizen, the client must now prove they’re not American or their information will be passed on to the CRA, who will then give it to the IRS.

The intergovernmental agreement aims to improve tax compliance of U.S. citizens, according to Canada's Department of Finance.

Why are Canadian banks doing this?

They don't really have a choice.

U.S. citizens must file tax returns to the United States, no matter where they live, according to the Canadian Bankers Association.

Under the new agreement, financial institutions in Canada now report relevant information on accounts of U.S. person to the CRA which will, in turn, exchange the information with the IRS.

The U.S. believes their citizenship has value, said Steven Flynn, a tax lawyer from Vancouver, B.C. And he means that literally.

"The United States is probably the only major country in the world that will tax its citizens on their worldwide income," Flynn told CTVNews.ca. "It catches a lot of people."

Will banks be sending my information to the IRS?

That depends on whether you’re a U.S. citizen or not, and don't be quick to assume you aren't.

According to the U.S. Citizenship and Immigration Services, a person who has an American parent automatically becomes a U.S. citizen at birth no matter where they are born, said Greg Boos, U.S. immigration attorney in Bellingham, Wash. This has left some Canadians unaware that they're dual citizens, he said.

But if you discover you are an American and the banks find out, your information will be sent to the CRA, and the IRS may give you a call next year.

If Americans fail to report their income to the IRS, Flynn said that they could face penalties ranging from $1,000 to $100,000 per violation.

A woman drops her federal tax return in the mail slot at a post office in Palo Alto, Calif. on April 15, 2008. (AP / Paul Sakuma)

What if I don't want my U.S. citizenship?

You're not alone. In the past few years, the number of American-Canadians giving up their citizenship has risen from 400 people per year to about 5,000, Flynn said.

Canadian citizens who want to give up, or renounce, their U.S. citizenship must have all their taxes up to date first, Boos said.

They can then make an appointment to renounce at a U.S. consulate, but the appointment wouldn’t be for another six months, he said.

In response to this increase, the U.S. Department of State's renunciation fee increased by five times from $450 to $2,350 last year, Boos said.

"So many people are coming into the United States to renounce their U.S. citizenship that they now have to make some money off of it because they're dedicating a lot of resources to it," he said.

But there is another option.

Those wishing to relinquish their U.S. citizenship must prove they have committed an "expatriating act," which includes accepting a foreign (in this case, Canadian) government job, joining the Canadian Armed Forces or, for naturalized citizens of Canada, swearing to American officials under oath that they came to Canada with the intent of giving up their U.S. privileges.

Are there other issues dual citizens should be aware of?

The issue of what it means to be a U.S.-Canadian or dual citizenship has been in the headlines across Canada recently with the approval of Bill C-24 last month.

Under the law, Canadians who have -- or are eligible for -- citizenship in another country can have their Canadian citizenship stripped if they are convicted of certain crimes including fraud to obtain citizenship and terrorism offences.

A number of human rights and immigration groups came out against the bill, including Amnesty International that said the bill violated Canada's charter.

So what should I do now?

Before walking into a consulate and getting rid of their U.S. citizenship, both Boos and Flynn recommend dual citizens meet with a U.S. tax consultant.

Each situation is different, and a consultant will be able to explain whether the IRS will be looking for your tax return in 2016.

"It can be a very scary thing," Flynn said. "But FATCA is forcing people to realize that they don’t have to be a U.S. citizen anymore."