Friday, September 16, 2011

IRS Promotes the Success of OVDI and Related Items (9/16/11)

As suspected, the IRS is promoting the success of the most recent offshore initiative -- OVDI 2011.  I will use this blog to post items in that general category, but encourage readers to post as comments any additional items -- pro and con -- that they think will be useful to readers.

The IRS promo piece is IRS Shows Continued Progress on International Tax Evasion, IR-2011-94 (9/15/11), here.  In the piece, the Commissioner claims major progress in global tax enforcement and getting back into the system.

My Editorial:  On the point of getting people back into the system, the truth is that the one size fits all approach kept many people out of the system and made many taxpayers cynical that good guys were being treated the same as bad guys.  Hopefully those taxpayers will get right in the system on a go-forward basis without serious repercussions from the past.  The truth is that most of those taxpayers who let by-gones be by-gones probably will never be bothered by the IRS and that could make those conscientious / fearful taxpayers who got into the program look and feel like dupes.  I think the system would have been better off with a more nuanced program.  A more nuanced program would have required more systemic resources but the additional cost would, I think, have been justified by treating bad actors worse than good actors.  (That's a relative scale, a continuum if you will, but I think the system would be better off with more nuance than the programs allowed.)  Just my thought, and really not trying to open up comments about the horrors of the system.  There are plenty of other posts where those comments are developed.

72 comments:

  1. Only 12,000 in 2011 OVDI ? and I am one of them ?

    What an honor and what a success of IRS !

    Keep using one size for all and one label (tax cheat) for all, IRS won't get any more dupes coming forward !

    Now, I just want to see how IRS will be able to catch those who are certainly smart/brave.

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  2. It really hurted me to see that only 12000 people came forward. I work in IT job and gave 30% of my hard earned money to US govt....

    i am in a shock to see such a low participation....feel stupid when 10 of my friends laught at me when they didn't enter the program....

    god, pls give me the energy...

    LAW SHOULD BE FAIR & APPLY TO ALL...

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  3. No worries ij. I am also one of those who IRS thinks is a "tax cheats" and part of the program. 12k number is low given the circles in which I roam.

    If average tax they got was around 500 million from 12k taxpayers,amount of tax I owe is less than 10% of the average.

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  4. A complete and balanced assessment of the initiative should also include data on the number of Americans giving up their citizenship as a result of their experiences/what they've seen with the program and the loss of tax revenue from these over the remainder of their lives to the system. For example, if x number of people have renounced typically and in the last two years, the number has risen to x+60,000, with an average income of y, one might conclude that the initiative led to a loss of (60,0000*their average income*their estimated remaining life span) for the system. Now that would be an interesting number because harsh enforcement now may cause others to leave the system at a faster rate, reducing future revenue.

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  5. As someone who has paid over $1M in taxes in the last 8 years, and had an old account in my birth country (I'm an immigrant) that led to tax due of around 6K over 8 years, I don't think I'm a 'tax cheat'. That being said, I don't think a less 'one size fits all' plan would have brought that many more people forward into VD.

    After all, thats what was supposed to be there in 2009 in principle (before FAQ 35 was withdrawn) and it only had 18K or so entrants, no more than 50% more. And even fewer people came in earlier years when it was possible to get off with essentially no penalty.

    We know a lot of people did Quiet Disclosures despite the IRS having said 'no'. For people who have some tax due and don't fall into clear 'reasonable cause' categories (expats living abroad for many years, recent immigrants), no more than 2 years of violations with little tax due etc, I certainly feel they should be asked to join the 'opt out' process of OVDI. We know the IRS can detect QDs for the most part, so it would most definitely lose credibility if it did not back its statements up.

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  6. Really bad guys and gals are easy to detect -- untaxed money in accounts, use of entities etc. But absent those obvious badges would it be easy to pick out the good guy from the 'bad' guy ? Certainly almost everyone would claim ignorance of the rules and some would be genuinely ignorant, others not. Perhaps the opt out process will be more considerate of special cases and will induce other people into traditional VD. And certainly with FATCA and other tools such as subpoenas and summons and widespread publicity, it would be hard for people to claim ignorance in the future.

    or maybe those who came in should assume they paid the premium for peace of mind, which may elude people still out in the cold until the SoL expires

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  7. I closed in the OVDP at the end of last year. It was a nightmare frought with delays and IRS errors. Today I almost crapped in my drawers when I got a strange looking envelope from IRS. It was a survey form regarding my disclosure and had 10 questions on it pertaining to activities of the financial institution that held my funds. They even included a prepaid envelope for me to send it back in. How considerate! The cover letter politely reminded me that cooperation was part of my agreement for IRS to accept my disclosure. I think the point is that the process is going to go on and on. I wonder if eveyone who closed in OVDP is getting this survey? For those smart or maybe not so smart individuals that decided to keep their heads down... watch out cause the boogie man is looking for you. They are definately targeting banks which may lead to your discovery if a bank should buckle to pressure. As much as the entire shakedown sucked, I am glad its over for me I think! Hopefully all you 2011 OVDI folks will get done in the next couple of years. Supposedly, they still have to close 20% of OVDP participants. Lots of luck! Anyone know how much a one way ticket to Somalia costs?

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  8. I encourage those who don't feel that the characterization of Tax cheat applies to them, and don't like it, email the reporters that just throw up the easy headline to match the IRS narrative. I did 4 last night, and got one response this morning, which is a 25% response rate. That is higher than my calculation of the IRS FBAR compliance rate when compared to the universe that probably should be filing them. I am betting that it is still in single digits. I would love to know.

    If anyone has any insights as to the most recent numbers of FBARs filed, please share. The last one I heard was a 2008 number of 345,000 as reported by Senator Levin. If you add 30,000 that Shulman is claiming came forward in the OVDP/OVDI to this number, then does that mean we still have less than 400,000 filed? Compared to the millions of Expats and Immigrants alone who might have a filing obligation, the compliance rate doesn't seem that high to me. Surely the IRS has done the math on this, but isn't sharing in its press releases. Do your own estimate as to what you think the compliance rate is. What is your guess? < or > 10% ??

    btw, I hope the QD's make it under the radar. I can not fault them if their risk tolerance was higher than mine. It doesn't seem fair, but fairness doesn't mean I want ill for them. I do not wish for them what I endured If the IRS was really looking for improvement in compliance, it should have encouraged that approach at some level, and let it be, rather than the "all are cheats" approach that it took. The draconian, non discretionary nature of the OVDP/OVDI probably has the effect of keeping more out of the system them bringing them in, but I am making assertions without any stats to back me up, so I could be wrong.

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  9. 'A complete and balanced assessment of the initiative should also include data on the number of Americans giving up their citizenship as a result of their experiences/what they've seen with the program and the loss of tax revenue from these over the remainder of their lives to the system'

    But most of those people likely weren't filing tax returns (expats etc.) or had very little tax due because of foreign tax credits, so that in a way does not lead to a fiscal loss. The issue is not financial, but the human cost to the people involved -- does the punishment match the infraction. For people who are not big time tax evaders, no.

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  10. Apparently the OVDI was so successful that FinCEN no longer has the manpower to process paper FBAR forms:

    http://www.journalofaccountancy.com/Web/20114587.htm

    "The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) on Wednesday issued a proposal to mandate that almost all FinCEN reports required under the Bank Secrecy Act (BSA) be filed electronically as of June 30, 2012... FinCEN expanded the system in August to support individuals filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR)... Those reports would be included in the e-filing mandate."

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  11. 'i am in a shock to see such a low participation....feel stupid when 10 of my friends laught at me when they didn't enter the program....'


    Presumably, you joined for peace of mind and to put that behind you, so you should try to be content with that. Did you feel nervous and scared before you joined ? Do you feel better and less stressed now.

    Your friends may be more risk tolerant, but we know the IRS isn't stopping right now and is going on to more countries and banks. Maybe they will be unlucky and be caught, or maybe not. Anyone who 'laughs' at this is definitely .. deluded. After all, who would have thought back in 2009 that the IRS would turn its attention to India.

    I remmeber last time the preliminary numbers were 7500, then they increased. Maybe that will happen this time as well, as the IRS catches up with last minute filings and picks up some quiet disclosures .

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  12. Meanwhile, US based Indian organization continues its efforts to get relief for middle class Indians (after meeting IRS delegation)

    http://timesofindia.indiatimes.com/nri/us-canada-news/NRI-body-seeks-relief-on-US-penalties-on-foreign-accounts/articleshow/10004071.cms

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  13. If anyone has the email address of the so-called reporters who regurgitated the nonsense that the IRS spewed please share. Maybe someone with half a brain could carry out some true journalism and report on the story of those 12,000 hapless souls.

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  14. To Anoymous...September 16, 2011 3:24 PM

    "Anyone know how much a one way ticket to Somalia costs?"

    With the coming of Son of FBAR, FATCA, the Internal Revenue Services will soon be changing its name, I think. Currently under consideration and being focus group tested are ERS, for External Revenue Serivce, URS, for Universal Revenue Service, or borrowing from the pro wrestling theme - WWRS, for World Wide Revenue Service. I think I see a good story here for the Onion.

    As the IRS asserts its Tax dominion on "US persons and entities" around the world. someday, they will find a way to tax the last Somalia goat herder, by classifying him as a "US person" since he received US food aid in the last drought.

    So hold off on that one way ticket. It will not be a refuge! The WWRS will soon be opening an office there. :)

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  15. Here is a link on Phil Hodgens blog to the survey form IRS is sending to people that closed earlier. I got one yesterday. Clearly they are ramping up to target more banks worldwide. Phil refered to it as fishing with dynamite.

    http://hodgen.com/wp-content/uploads/2011/09/IRS-undisclosed-financial-accounts.pdf

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  16. To Anonymous September 17, 2011 12:11 AM

    You know, it isn't that hard to find them, so not necessary to publish all the ones I have found over time.

    Bloomberg. Often the email address are published at the bottom of the article. When I sent it to both the reporter and editor listed there. I got back an email copied to their entire Tax team.

    Reuters, you just have to go to their contact us page, and if you see an email hyperlink that looks appropriate, just right click, copy address and paste into your email client. I have found their standard email protocal is name based, so it is First.last@thompsonreuters.com or if that doesn't work, send to the person listed for Tax issues, and reference the Reporter name and story.

    NYTs is harder to get actual email addresses, but they have a email link for specific reporters, and I used that. You just click on the reporter name at the top of the story, and that takes you to a page with all their stories and a link to email this reporter.

    For AP, which is a Press Release rehash mill, in my opinion, I just wrote to their info email address with story references and employee name. info@ap.org

    and of course, often other news or opinion stories have comment sections, and I always use them, trying to be reasoned and not too inflammatory, as you do want to be taken seriously and not just dismissed as an anti-tax nut!

    I stay away from Fox or MSNBC. I am not partisan, and I fear they would just spin this story for a political objective, and while that might get attention, in some conservative circles with opposing Liberal narratives, I do think it might poison the well for reasoned discussion of the unintended consequences. I would rather stay with trying to get the mainstream attention, at least for now. That is just my approach, and others might see it differently.

    Anyway, hope that gives you some ideas of actions to take. If more of us did that, rather than just bitch on these specialized and very good blogs, some attention might be raised. I am not into Facebook or Twitter, but those avenues might work too. However, and I know what the fear is, that as you try to raise awareness anonymity might disappear. By nature, those joining the OVDI/OVDP are adverse to risk generally and adverse to publicity risks specifically. Me too! Even if you are guilty of nothing, there is a certain embarrassment that comes being caught in this net. Also, there is the natural fears of IRS retribution, which might be over rated, but fully I understand that concern.

    For that reason, you might consider working via an organization, like American Citizens Abroad. I have joined them, and sent a contribution to help with their FATCA repeal lobbying efforts. They have been a very good advocacy source that is trying to reach out to media with our story. I think by Monday they will have a new press release on their web site, and will do a mass emailing to all media in response to the recent spat of "tax cheat/dodger" stories.

    http://www.aca.ch/joomla/index.php

    If anyone knows of a generalized Immigrant type of Organization, that advocates for US Immigrant issues, that might be another avenue.

    Even if you are not Indian, the National Federation of Indian American Associations (NFIA) is very much interested in these issues, so you reach out to them at http://www.nfia.net/

    I am sure others have additional ideas and sources.

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  17. "Only 12,000 in 2011 OVDI ? and I am one of them ?"

    yeah. talk about it. I am another one of those 12000.
    HSBC india had about 7500 account holders of which
    only 1250 had filed FBAR's. That means just HSBC India had close to 5000 account holders that were possibly non compliant.

    I look like an ass to myself or a big failure written on myself whenever i stand before the mirror. between lawyer fees, penalties etc i am looking at 300k

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  18. To Anonymous Sep 17 6:12 PM:

    Tell me about it.

    First the Government trapped me into committing an offense that I did not intend to commit (i.e. by not publicizing the FBAR rule esp to immigrants like myself).

    Yet I decided to do the right thing (or so I thought) and joined the OVDI inspite of the hefty totally out-of-proportion fines it entails. But as I collect information to start working on my amendments (I have filed for extension), I am shocked by just how difficult and painful the whole process is.

    Anything for "peace of mind"...I had thought. But I am in a worse mental state after joining the OVDI. Not to mention that I will also be a pauper at the end of it.

    For starters, getting all information from 8 years ago has been a nightmare of sorts. Then there are so many grey areas on how different tax situations will be treated and how penalty will be computed. Even the OVDI Hotline folks don't give me unequivocal answers to many of my questions.

    My CPA tells me that I should be very careful and not come across as hiding anything. Well, I have no intention to hide anything (because I have no skeletons to hide) but given that there is no one answer to many situations - I am stressed out thinking I will state something wrongly and will be considered fraudulent. So much for peace of mind.

    Finally, there is this uncertainty on how much penalty I will have to really pay OR will I be forced to "opt-out" and deal with more uncertainty.

    You would think they will make it easy for people to do the right thing. But this one is shaping to be nothing but super stessful.

    And to make things worse...we probably have to wait 2 years for a closure (if there will be such a thing). Somebody mentioned about lost LCU (Life Credit Units). Its unbelivable I will be spending 2 years in a limbo of sorts while life will pass me by.

    Is it all worth it?

    I am seriously having second thoughts.

    For 10 years I loved this country, worked hard as an immigrant and celebrated my rewards. My only brush with the law was a speeding ticket.

    Then this FBAR thing came from the left field and turned my life upside down.

    I don't see America quite the same way now. I feel cheated and duped by the Government that I thought was the most fair in the world. Now I seriously don't see myself living here for the long term.

    I feel I am having to pay for America's budget deficit problem. Nothing else explains this one-size fits all OVDI policy.

    It is sad that there is not one story in US media on how this FBAR thing is ruining lives of families like mine. And why don't I hear of any lawsuits?

    To add insult to injury - the media is branding me a "tax cheat" for having done the right thing.

    The bottomline is I am looking at a penalty of about 100K for no reason other than ignorance of a law that was poorly advertised and (from what I understand) barely enforced until 2-3 years ago.

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  19. "To Anonymous Sep 17 6:12 PM"
    I have become a raving lunatic ever since i joined this OVDI and every waking hour (which is 23 hours BTW) this is consuming me. To compound it all i applied GC for my parents 2 years back.
    They are 80 years of age and i am unable to concentrate in my work. Sometime i feel i should just pack my bags and leave. Unfortunately (sad i say that) i have a wonderful family with 2 young kids and packing is not an option. I am one of those walking deads ever since i join this program. I feel i should have taken my chance, packed and left which would have been no worse than joining this program.

    Sometime doing the right thing can be the wrong thing to do.

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  20. To Anonomous September 18, 2011 3:09 AM

    Boy do I feel your pain, and I can not offer any hope that you won't be scarred from this process for life. Commissioner Shulman has no idea how this is damaging America's reputation. Sadly, it is as caustic as our unwelcome war interventions around the world.

    I encourage you to reach out to reporters with your story, and overwhelm the Examiner with your passionate letters like this post. Hammer home your non will nature, and don't let up. Send a letter to Commissioner Shulman, your Congressman and to any immigrant organization that might represent your interests. If you are Indian, I would definitely contact Global Organization of People of Indian Origin (GOPIO) and National Federation of Indian American Associations (NFIA)

    Play close attention to your CPA's advice. I didn't have one for the process, but I have found more is better. It establishs your credibility. Give the IRS more detail than they want, and even point out things that you may have missed in your amendment filings. Doing all those amendments is not easy, and after I did them, I audited them again, trying to look at them with an auditor's eyes, and pointed out my mistakes. As complicated as the Tax system is, it is easy to make mistakes. CPAs too!!! So overwhelm your Examiner with paper work, and pay attention to what your CPA says, you can't be a minimalist here.

    Keep yourself open to the TAS option, if Opt Out doesn't seem viable, and even in the Opt Out the TAS could assist. Read Jack's blog here

    http://federaltaxcrimes.blogspot.com/2011/08/taxpayer-advocate-service-to-smooth.html

    Good luck and best wishes, truly. Let's hope it doesn't take 2 years, but I note, that after 2 years still 20% of the OVDP is not closed!! I have walked in your shoes as have many who read these blogs. We can't let go! :)

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  21. American Citizens Abroad (ACA) just posted a good article on their web site. See link below and share it.

    It is titled FBAR SCAM.

    Although ACA charter and focus is American expat directed, this article has a lot of relevance for green card holders residing overseas, and Immigrants here now facing the harsh realities of the OVDI program which is using the FBAR as a bludgeoning tool for revenue extraction. It should resonate with many Minnows who are feeling the harsh and unjust characterizations by the IRS and in the media where they are just lumped together collectively with the Whales as Cheats, Dodgers and Evaders.

    Required reading, I would say.

    http://www.aca.ch/fbarscam.pdf

    I understand that a news release will follow.

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  22. To Just Me:
    Do the OVDP/OVDI cxaminers go into every line item in the bank statements?

    I ask this because I am having a tough time recognizing transactions from years ago. Also, how do you prove that something is a gift from relatives and not an income (I have several of them over the last 8 years ranging from $200 to $9000).

    To Anonymous September 18, 2011 8:26 AM :

    I could have written your post. I am living like a zombie as well ever since I stepped into this OVDI den. I am totally unproductive at home & work. I am not sure how long my health will hold up in these circumstances.

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  23. To Anonymous September 18, 2011 1:25 PM

    "Do the OVDP/OVDI examiners go into every line item in the bank statements?"

    No, I don't think so. However, in a civil audit resulting from an Opt Out, they will. Or at least the probabilities are much higher.

    I too had that question and problem, as I was reviewing old bank statements. I spent the better part of two weeks going over them line by line and trying to remember and document ever last deposit, what it was and where it came from. It was not easy to do. Our memories do fail us.

    In the end, I don't even think my Examiner looked at them, or at least I never got a question on a specific item like “what was this” or “what was that”. I did feel very confident of my position and assertions I made during the process, and as a result of my efforts, I was well prepared should a question arise.

    Admonition: Attention to detail now, will serve you well later.

    If I had to have gone through a Civil Audit, I was totally ready. Probably because, I didn’t realize that this initial examination wasn’t really a civil audit until months later after the actual review started. Then it dawned on me, when we started talking about an Opt Out and having to do a civil audit. By this time I had already provided everything but my blood type, so with all the initial prep work I did, there was nothing more to fear in that regard. To quote W, "Bring them On", was my opinion after that extensive effort.

    There was one other benefit of doing this detail work now, as it helped me identify a couple minor mistakes I had made on my 1040x amendments. I pointed these out when it came time to calculate tax adjustments on the form 4549-A. I think that helped establish my credibility and help the Examiner to see I was genuinely not who they were looking for.

    Regarding proof of gifts. At this stage, I wouldn't worry too about the proof of the gifts. You will have time later if it is necessary, and if they are what you really say they are. I would just document what they were, even if at this stage it is more for your record then for their examination.

    Here is what I did with my statements. Maybe it is helpful. I highlighted the various deposit items in different colors depending on the category of the deposit, and then created a legend on the first page that make it easy for an Examiner to look at if they wanted. Also, months later it made it easier for me. That is because what ever you are doing now, you might have to reference a year from now, so make it clear for you, if no one else. Memories fade.

    Again, to restate, my impression is, that they didn't give my bank statements any extensive review, (maybe others have a different experience), but since I had gone to the effort of such detail, they accepted what I was saying in general summaries.

    In the end, with no discretion, no matter how credible I came across as being, the Examiner couldn't help much anyway in mitigating the ridiculous uniform 20% penalty. It wasn’t until later when the TAO from the TAS entered the picture, that things changed dramatically for the better. Still in many ways, every interaction with your Examiner by word or record documentation is the opportunity for you to sell yourself as the Minnow, and that might serve you well later in an Opt Out summary guidance the Examiner will have to write for the Management Committee review.

    BTW, during this time, I was unemployed, and my wife was working. I am not sure how I would have done it, if I had a job and family to attend to. I felt like a Zombie too, so can imagine that you are a Zombie on steroids! I really feel for you! Take care of your health by getting out and getting some exercise occasionally to clear out your mind. You will come through this, but right now you are in the middle of the hardest part.

    Hope this helps. Hang in there.

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  24. Just Me:

    Thank you for your detailed response. Your posts are helping me gain some insight into this other "black hole" that I seem to have unwittingly thrown myself into.

    Every strand of my body is stressed out at the moment. Never felt so helpless in my life.

    Thanks again.

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  25. To Anonymous September 18, 2011 6:48 PM

    Happy to help out if I can. I know it must seem like a “black hole” to you right now, but trust me, you will emerge back into the light. This particular “event horizon” will not totally reduce you to elemental particles spread through out the universe. It will get better, and visibility will improve once you get over this particularly difficult stage. I know it must be stressful to the extreme. It was for me, and I didn’t have a family and job to worry about at the same time.

    You probably don't need me to say this, but focus on what you have and not what you are going to lose. At least this particular OVDI drone strike isn’t destroying your village home in a remote mountain valley and killing your family, which is small comfort, I am sure.

    In the end, I really have to believe, it might not be as severe as you think now. I am so sorry you have to endure this hassle, and it is shameful what our government is doing to its subjects in the name of revenue collection. It is a monstrous bureaucracy oblivious to the harm it causing. I really respect you for doing what is right even if it feels like the wrong decision now. If it is any consolation, remember there are a lot of Minnows that have been on the processing conveyor belt before you. Some were turned into fertilizer and paid the penalties out of fear, but some found an off ramp. Also, you have the benefit of an Opt Out procedure that was not there for those entering the OVDP 2 years ago. It took the IRS 20 months to come up it, and it does hold out hope for you that those who were tossed onto the fertilizer pile in the 2009 OVDP did not have. By the time you get to the Opt Out point, I just have to think there will be a lot more clarity on how Minnows are being treated. If there is any fairness and justice in this convoluted IRS world, it will not evolve around Maximum penalties possible. There will be discretion and more reasonable results. That will still not pay back the LCUs you are expending now, and the emotional toll will be real and unrecoverable.

    One additional comment. Even though the IRS seems only to be a pain inflicting Monster, there are still humans that will process you. It may surprise you that a number of them “get it” and might do the right thing by helping you get to a better result via a good recommendation to the Management committee in the Opt Out.

    Below is a link for you. This situation is not the same as yours, but you might read this blog post about a “Damsel in Distress” to restore some hope that humanity at the IRS still exists. Even though the Monster gave birth to a horrible creature called the OVDI, many of the hand maidens have feelings and empathy.

    http://hodgen.com/damsel-in-distress-a-vdp-success-story/

    Bottomline. Don’t just roll over and accept that ridiculous 25% penalty, unless you were actually a fraudulent and complicit Whale engaged in a tax evasion scheme. Then take your medicine and go quietly back into the ocean depths! Otherwise fight the IRS tendency to lump and classify you with the Whales anyway you legally can, and if you aren’t getting satisfaction at the end of the process, I will say what I have said before, definitely contact the TAS. They are an independent organization created by Congress and placed within the IRS just to help folks solve problems with the IRS. They, more than anyone else, will do the right thing by you! At least that is my experience.

    Read this:

    http://www.irs.gov/advocate/article/0,,id=212313,00.html

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  26. I hate to sound condescending, but I really don't think anyone in OVDI 2011 should be stressed over matters such as old accounts that are hard to track down, occasional unexplained minor transactions several years back, complicated matters of tax law (PFICs) or the like. As long as you've been open and complete in your submissions, the worst they can do is to audit you fully, and in that case you should have full audit protection rights. And if concerned about immigration status, I doubt that would be an issue since these records are supposed to be confidential.

    [ And I would venture to suggest that maybe OVDI was right for someone who is stressed out over the process -- presumably it would be worse to be stressed out for several years, wondering each day if that day's mailbox was going to bring an IRS letter.]

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  27. 'To compound it all i applied GC for my parents 2 years back.
    They are 80 years of age and i am unable to concentrate in my work.'

    Remember that once your parents become GCers they will be subject to US tax reporting rules and FBAR requirements as well. Pensions etc. may be taxable, depending on treaty. And if assets held abroad are declared, they could be counted for Medicaid/SSI etc.

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  28. I do not need Medicaid or SSI. So long as they can keep what they earned and have that is more than enough.

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  29. Good advice for the parents: Forewarned is forearmed.

    I have to say what has been said before, if the IRS really wanted to publicize the FBAR and all the foreign tax and accounting reporting requirements for newly arrived Immigrants, a summary of these issues would be part of the Immigration package each and every new Immigrant receives. Why in the hell they can't do this simple thing? WHY? I am not an immigrant, but if I was arriving on the US shores, I would want to know this immediately!

    If these ridiculous rules are the rules we have to live by, and they are, then our IRS Bureaucracy needs get off their arses and do a better job advertising its requirements. Just saying you have a web site, and you to Twitter is a joke!

    If the FBAR is SOOOO IMPORTANT, it should have been front and center on the 1040 since the days the enforcement was delegated from FINCEN to the IRS. Messages about its requirements should have been with every IRS mass mailing like stimulus checks and every Social Security notice sent out. It should be part of the Citizenship test for that matter. If you really want to reach Americans, it should be part of the NFL scoreboard announcements! Alright, I joke on this one. But you get the point. I am sure you can come up with more.

    There are so many ways to increase compliance rates (if that is your objective) and get a message out without just resorting to heavy handed Maximum FBAR penalty procedures, threats of criminal prosecution, or using this ridiculous OVDP and OVDI. Nudges often work better than hammers at producing increased compliance in the masses. It is just stunning that the only advertising tool they think they have is prosecution and fear. They apply draconian penalties as the first option to increase compliance with the defense, it is your requirement to know. There was that check box, and that was enough. Yes, and there was that software “conditions of use agreement” what I am sure all IRS agents read and affirmed before they updated their Adobe PDF software. What a lame effort that is at justifying their advertising outreach failure. To hang everything on that as the rationale of why we can assert Maximum penalties is “your choice of descriptor here!” It was a failure, and now many undeserving are paying an extreme price because of that failure.

    The IRS essentially did nothing for years to notify “US Persons” that something had been delegated to them, and that all had better pay attention and come into compliance as "we are coming after you". Instead they mis-characterized everything as the Rich hiding in Secret Accounts, and allowed the lazy and duplicitous press do their fear mongering for them, when in actuality, this has become a world wide effort with 140 countries now, to enforce that which had not been enforced before.

    I am glad I am FBAR compliant now, but I am very resentful about how the IRS went about it. That is not the way you want your customers to feel about your products, if you hope to have more of them in the future. Some are voting with their feet right now, a very predictable UC (unintended consequence), and that is sooo wrong. Where is a real ROI of this OVDP/OVDI project that includes UCs? I bet Shulman has not analyzed one. Just trumpeting $2.7 Billion is meaningless, without factoring in the cost. In fact, none of the recent stats tell you anything significant about compliance rates or success. They are single numbers with out context and mean nothing. When it comes to 30,000, the only thing Shulman is admitting is that they know more is more, but if "more" isn't "much" compared to the universe that "should be", you have a problem. He has a problem, because either he doesn’t know, or at least he isn’t telling us in public. It is GAO or FOIA time.

    ..and I am preaching to the choir, so I will stop.

    ReplyDelete
  30. American Citizens Abroad (ACA) sent out an email to Bloomberg over the weekend in response to their story headline "Tax Dodge Crackdown". I have reproduced for you below... Maybe there are some themes here you can use in your emails to the press.

    Dear Sirs,

    As Executive Director of Americans Citizens Abroad (ACA), the Voice of Americans Overseas, an organization that represents and advocates for the 5.2 million Americans working overseas, I read with great interest your article claiming the IRS's recent success in bringing in 2.7 billion dollars of tax revenue from off shore accounts.

    What your rarticle failed to mention was that for every criminal tax evader that has come into the system, many more innocent hard-working Americans are trapped by the system. ACA fully supports the governments efforts to eliminate tax evasion however, the current policies are not the tools to achieve this end, they are discriminatory and contrary to the very precepts of our legal system.

    Current IRS regulations assume that everyone holding a financial tool outside of the United States, no matter if they are working overseas or are a bona-fide resident of another country, is guilty of tax evasion. The proof of burden is on the person living overseas to prove themselves innocent. This is evidenced by the fact that non-willfull penalties (human error, omission) for failure to report an account on a FBAR begins at $10,000 or 20% of the value of the account -- whichever is larger. Errors of omission for U.S. citizens for state-side tax filing "omissions" are no where near this level and one could argue that these penalties are in direct violation of the 8th Amendment of the Constitution.

    ACA has collected over 100 testimonials from individuals whose have been affected by short-sighted IRS policy which now assumes that the OVD programs are new tax collections devices so much so that they believe that they can count on an income stream from these programs for many years to come. This is simply unrealistic as it does not take into account change of behavior, perhaps one of the most unfortunate being that many Americans overseas are simply renouncing their citizenship. The brain-drain of qualified professionals currently working in overseas markets has never been taken into consideration.

    The OVD programs have never tried to distinguish between the stay at home Moms who never filed FBAR reports for accounts that she had co-signatory authority on, the dual national who sold foreign property and paid tax to a foreign government unaware that this also required that this could be a taxable event for the US, the business man who listed income incorrectly in the wrong columns of his tax return - refiled and got a tax credit but also a bill of $1 million for failure to file FBARs.

    These people are not criminal tax evaders but they are the "success" stories that Mr. Shulman is touting. For a truly fair reporting of the success of the Voluntary Disclosure Program this part of the story must be told. By ignoring the abuse of this system you are only reinforcing the ill-conceived notion that Americans overseas are not productive, hard working citizens and you do a disservice to a key constituency that creates jobs through exports and supports the U.S. economy.

    ACA would be more than happy to share with you our testimonials and background research on this issue. Please feel free to contact me at, info.aca@gmail.com.

    Regards,

    Marylouise Serrato
    Executive Director ACA

    ReplyDelete
  31. If the FBAR and offshore accounts are so important to the US Government, they should be on the immigration forms too, especially for people who are entering the US on work visas.

    ReplyDelete
  32. 'This is evidenced by the fact that non-willfull penalties (human error, omission) for failure to report an account on a FBAR begins at $10,000 or 20% of the value of the account -- whichever is larger. '

    No, non-willful penalties are 10K, no 20%.

    ReplyDelete
  33. Anon:

    "First the Government trapped me into committing an offense that I did not intend to commit (i.e. by not publicizing the FBAR rule esp to immigrants like myself)."

    Did the Government also trap you into not declaring any income in these accounts on your tax returns ?

    ReplyDelete
  34. I bet Shulman isn't trumpeting this positive press he is getting in Canada...

    http://hodgen.com/is-this-the-ovdi-tipping-point/#comment-1878

    btw, for the skeptical, that think the media is not interested, they are interested in Canada, and I have now got some positive responses from Reporters in the US that I have reached out to with unsolicited emails. Sometimes someone reads them.

    ReplyDelete
  35. ACA has just recently sent out this press release to all its media and journalist contacts.

    September 19, 2011
    CONTACT: Marc Destito, Public Affairs Director
    +41 22 340 02 00
    info.aca@gmail.com

    IRS Traps Innocent, Hard-Working Americans in Criminal Tax Probe.

    Recent media reports touting the success of the IRS's Overseas Voluntary Disclosure (OVD) Programs in seizing $2.7 million in tax revenues fails to mention that of the 12,000 "tax cheats" captured, hundreds are innocent Americans living and working overseas.

    ACA fully supports efforts to eliminate tax evasion, however, current IRS policies using tools intended to prosecute organized criminals, terrorists and drug dealers on ordinary Americans in a clear abuse of government power. ACA has received dozens of complaints from Americans who are bona-fide residents overseas citing prosecution for errors or omissions on the Foreign Bank Account Report (FBAR) form. These individuals face penalties that begin at $10,000 per occurrence or 20% of the value of their bank accounts, whichever is higher. Additionally, the burden of proof rests on the filer who is assumed guilty until proven innocent. The IRS is actively enforcing these penalties even on Americans who possess no criminal backgrounds and have not been engaged in suspicious behavior. (Should journalists wish to speak with any of these individuals, ACA can furnish interviews upon request. Contact information below).

    The OVD programs do not distinguish between criminals and bona-fide overseas residents. That means Americans selling exports abroad who need ordinary financial accounts to function or stay-at-home moms who co-own accounts with their foreign born husbands are treated the same as terrorists and drug lords. In one case received by ACA, a businessman listed his income in the wrong column of his tax returned, refiled and actually received a taxcredit....in addition to a filing penalty of $1 million for being unaware he was also required to file an FBAR.

    These individuals are not criminal tax evaders but they are the "success" stories that IRS Commissioner Shulman is touting with the press in an attempt to raise tax revenue at any cost. More information on this can be found in ACA's latest report, "The FBAR Scam" atwww.aca.ch/fbarscam.pdf.

    For more information please contact:
    Marylouise Serrato
    American Citizens Abroad
    +41 22 340.02.33
    info.aca@gmail.com

    ReplyDelete
  36. Re: Minnows and Whales

    This is from an "Individual Taxes 101" textbook. It is on the first page.

    Individual income:
    Under 50K 50-100K 100-200K 200K+

    Number of returns:
    93790430 31984876 13457876 4535622
    65.2% 22.2% 9.4% 3.2%

    Amount owed (in billions):
    $87 $191 $229 $610
    7.8% 17.1% 20.5% 54.6%

    The percents are of the respective totals.

    If 3.2% of the US population are "Whales" (over 200K annual income), they contribute 54.6% of all tax revenue received from individual tax returns.

    Minnows (under 50K) are 65.2% of the population, yet they contribute only 7.8% of individual income tax revenue.

    If the OVDI was meant to catch primarily Whales, the statistics are highly skewed against such a fishing program.

    Second, if you scare the few 3.2% Whales out of the country, the IRS/US would lose 54.6% of the revenue from individuals.

    As individual income taxes represent about 50% of all federal income taxes, this would mean cutting most federal government programs and staff by 0.54x.50=27%.

    This possibility is something the US should consider very seriously. As seriously as harassed Whales consider leaving the US.

    ReplyDelete
  37. Thanks M for doing some statistical research. That really helps.

    In the context of the OVDI and the OVDP, the Whales by my definition are a little more specific than just those that have higher income.

    When I speak about Whales, I have meant those that were living on shore in the USA and "UBS active evasion types". There were the Whales I think were the targets of the OVDP when this all started. I suppose there were some higher income folks (expats?) who were just negligent, but not actively hiding funds in secret accounts. Maybe my analogy should be re-defined to “Great White Sharks”! to exclude those expats :)

    Now, by definition, the Whales we speak of are probably all higher income people and high net worth types, so maybe your analysis is close enough for government work, "as they say" and the best we can get unless the IRS releases comprehensive stats on who they netted.

    I really want to know, of the total 30,000 what was the number of Whales in that context? How many were the active "UBS evader types" that are in that total? What is left, is by definition what I consider "Minnow" by catch, and not the target of the effort to begin with.

    Frankly, when Commission Shulman says this...“My goal all along was to get people back into the U.S. tax system,” I frankly don't believe him. Maybe that is because I have become so cynical now, but I believe the effort, piggy backed as it was on the Justice Department’s UBS media attention, was a targeted one for those that were engaged with the active evasion schemes. Evidence: no off ramp created for by catch Minnow, and when it appeared that FAQ35 might provide relief, it was shut down. Revenue and confiscation from the GWSs of the world was the goal. Compliance was barely given a thought. Shake loose the money, and compliance will follow.

    So, Compliance, in a broad perspective way, was a secondary consideration which he is now saying was his goal all along? Really? If compliance, alone was the goal, I don’t think we can make any statistical inference that it was a success, given the limited stats provided.

    This statement now, in my opinion, is just a backward attempt to justify what he actually dragged up in the net. I think it surprised him. He shot an arrow, and is now painting the target around the penetration point. I just don't recall statements from him that described the effort in this broad of a brush when the OVDP started. My memory could be wrong, so I should do some more research.

    Of course, now, when I challenge intentions, I am just like those politicians, I disdain, that put the worst possible interpretation on another's actions, so as to mis-characterize them for political gain. Therefore, I am always compelled to say, I could be wrong. I want to be fair to IRS intentions. Maybe my brain is still suffering from pain distortions and has forever skewed my ability to be dispassionately and objectively analytical.

    I just would like to see the real, unvarnished numbers from this effort, so real analysis could be done, that would support or refute the claims of success. It would probably need to be done by someone who doesn't have a "axe to grind", which I freely admit I do. If I am wrong, I guess, I would just like to see some factual evidence, and not just some "success claims" unchallenged and parroted in the press.

    Just little ‘ole me, just wanting to know.

    ReplyDelete
  38. To Anonymous September 20, 2011 6:50 PM

    To your rhetorical question:

    I had taxes withheld and filed tax reuturns in the foreign country. That being said, it would not hurt me to pay any back taxes, interest and penalties that IRS thinks I owe them (as long as I am treated just like a regular American who owes back taxes on his domestic tax return).

    But this whole issue is about FBAR where penalties are outrageous and not based on your unreported income but on the maximum value of your accounts and assets.

    Given the maginitude of the penalty - it seems to me that the Govt treats FBAR as a serious issue right up there with murder, rape etc (ok I exaggerate but only a bit), so one would assume that the Govt will make some effort to publicize the law among the people who are most likely to inadvertently break the law (the immigrants). That didn't happen.

    ReplyDelete
  39. To Anonymous September 21, 2011 9:52 AM

    In my humble opinion, you are absolutely right.
    I am not an immigrant, but I understand where you are coming from.

    ReplyDelete
  40. Canada's Finance Minister Jim Flaherty has come out in the media against the OVDI and IRS plans to tax & penalize Canadians. Contact Mr. Flaherty's office to show your support and give him encouragement.

    Telephone: (613) 992-6344
    Fax: (613) 992-8320
    E-mail: flaherty.j@parl.gc.ca

    ReplyDelete
  41. That's great, but what about the rest of us innocent foreigners being targeted by the IRS? Governments and media in Australia, Britain, China, Europe, India, Russia, etc. should be doing more to speak out on behalf of their citizens who study, live, or work in the USA.

    ReplyDelete
  42. To Anonymous September 22, 2011 7:12 PM

    Citizens in those countries need to find their Flaherty Equivalent, and get him to start sending editorials to the NYTs, WaPO and WSJ.

    New Zealand, looks like it might roll over on FATCA, even though Kiwis recommend that they tell the IRS to "Stuff it" :)

    http://www.interest.co.nz/news/55283/government-not-necessarily-position-influence-us-fatca-revenue-minister-peter-dunne-says

    I haven't seen much in Australia, although in a Banking publication, the CEO of Commonwealth bank has been very vocal on the FATCA issue. Calls is a "particularly nasty piece of legislation" so there might be media interest there.

    Those are the only countries that I obliquely follow the news on.

    ReplyDelete
  43. I think the Canadian panic is way overblown. A cross border CPA said he had filed 1000 late FBARs and taxes for US expats in Canada over the last few months and had seen no problems. It need be added that these were law abiding Canadians with little to no tax due. The situation would likely be different if someone were a US resident and had filed US tax returns and neglected Canadian income. [But Flaherty wasn't defending people who had carried out tax evasion, just law abiding Canadian residents]

    ReplyDelete
  44. To Anonymous September 23, 2011 12:05 PM

    Well, for that CPA to say that, is like my CPA who basically told me the FBAR didn't matter. :) You should consider that he might be a little too early in his assessment of "No problems".

    Do you know how long it takes to just get a refund, let alone a response to a VD filing? So for a lot of Canadians, I hope he is right. but if he is, then those that filed the OVDI, will feel real duped, won't they?

    Come back in 6 months and see what he is still saying. BTW, surprised that a CPA is filing FBARs. Mine would not touch it. Maybe he was just skittish, for some reason.

    ReplyDelete
  45. It would be interesting to know if filing a single FBAR triggers an audit. Logically, a CPA should do it, to comply with the current tax year at least. But if there are several large accounts on there, it would raise a flag as to them being that year's income, or else missing FBARs from prior years, which would trigger FBAR penalties.

    I am just a beginner, but I know of no other IRS form that asks you for your total assets, like the FBAR does. Second, it asks you to keep records for 5 years. Why? Because the IRS cannot get those statements, the accounts being overseas. They are basically asking the taxpayer to provide his own incriminating documents for a future audit.

    I can see why an expert would look at the documents wearily. Though a legal requirement, unless there was a lot of money at risk and a high likelihood of being caught, most filers would not mess with them.

    And I am not sure that should not be the general policy (doing nothing and saving one's sanity). Perhaps advertising the law that people must file them is not in their overall best interest.

    If they did not know it, they might not have gotten in the OVD trouble. Notice how many were misled with well-meant promises of "amnesty", even by naive tax professionals, who thought that the IRS will do the right thing.

    Little did they now that IRS stands for Internal Revenue Service.

    Second, looking at it logically, if the Offshore Voluntary Disclosure program was meant to bring in Offshore tax-evading "Whales", and instead brings in expats and immigrant Minnows, and the IRS defines an opt-out process (for them), logically they should all opt-out, just following the IRS' "advice". (Regardless of consequences afterward.)

    The IRS, like all accounting-related organizations needs a cost-benefit justification for audits, ie, the money brought in has to be more than the money expended on conducting the audit. Minnows would not be worth the expenditures.

    And vice-versa, the bigger the file you give them (Just Me :) the more money they have to expend spend reading it, which means the more they have to charge you for it.

    It does not seem this is how a government organization should behave, but it is common sense.

    ReplyDelete
  46. To M

    "And vice-versa, the bigger the file you give them (Just Me :) the more money they have to expend spend reading it, which means the more they have to charge you for it."

    Point taken, :) but I don't think they think that way, and nothing I have seen leads me to believe that common sense applies. If it did, they would have structured this whole program in the beginning differently to screen out the Minnows from the get go.

    For me, at least at the Examiner level, if they really wanted more money, they would have rejected the TAO and sent it up the appeal ladder. I am glad they didn't, obviously. I like to think it is because in the end, they recognized that their assertion of penalty inside the OVDP was over-the-top for the so called crime. Anyway, let me delude myself in thinking that.. LOL

    ReplyDelete
  47. "I am just a beginner, but I know of no other IRS form that asks you for your total assets, like the FBAR does."

    IRS Form 8854. And that's all assets -- house, car, furniture, underwear -- and not just financial accounts. Besides being indecently intrusive, it's just a complete PITA.

    ReplyDelete
  48. To Anon September 24, 2011 5:50 PM

    It is a pretty stunning overreach!

    I think you are talking about the new IRS form 8938, not 8854 which covers Expatriation Reporting Rules, No?

    But who is quibbling? Maybe you are trying to expatriate, but those that don't want to give up their US citizenship will still have to do some of that yearly, with the new 8938.

    ACA has commented on this in their publication titled...

    The FBAR Scam

    http://www.aca.ch/fbarscam.pdf

    This was pdf, was also referenced in a press release called:

    "IRS Traps Innocent, Hard-Working Americans in Criminal Tax Probe."

    See: http://www.aca.ch/joomla/index.php?option=com_content&task=view&id=486&Itemid=129

    ACA Quote: "Question the utility of the new IRS form 8938 under the FATCA legislation that requires Americans with foreign financial assets to list them and file this form with the 1040 starting with fiscal year 2011. This new form will, as with the FBAR, severely impact Americans residing abroad who by definition have foreign financial assets, subjecting them to another set of discriminatory penalties. It creates double reporting with the FBAR, but with different
    rules, and the complexity will significantly increase the cost of tax filing compliance. It is so complicated that one and a half years after passage of FATCA, the IRS has yet to produce the instructions for completing the draft form 8938. Will this additional filing bring in enough additional tax revenue to justify the administration cost to the IRS?"

    So, you have company amongst those that have been around obscure tax issues for a while. Please keep pointing these things out Mr. Beginner. We need as many middle class Americans being a little more active in opposition to these misguided IRS efforts, which basically are an assault on Middle Class Immigrant and expat Americans, under the ’guise of "Get the Big Rich Tax Evader" efforts as it is so often mischaracterized in what little media coverage there is.

    Cheers, and thnx for bringing this issue up.

    ReplyDelete
  49. I've expatriated by committing a expatriating act with intention of relinquishing my US citizenship. But the idea of filling out 8854 and final 1040NR for the last three years is so daunting I've decided not to do it--it is daunting because it will reveal that I'm not in conformity with FBAR because I've never filled out one of those forms, and the 8854 violates my constitutional right to security of my papers--and I'm not even a covered expatriate. So on Fifth Amendment grounds, I'm not going to fill it out. I figure, for what it is worth, that I'm not a damn American any more so it's none of the IRS' business what my assets are.


    All my assets are here in Canada, and I'll be damned if I'm going to tell the IRS what I have. So you folks who will pay 5, 15, 20, 25% of your wealth to IRS to make it clean, just realize there are people out there like me, who'd rather lose their citizenship than make clean with that criminal organization called the IRS.

    ReplyDelete
  50. "I think you are talking about the new IRS form 8938, not 8854 which covers Expatriation Reporting Rules, No?"

    No, I really mean Form 8854. Because I "expatriated" (not in any way a correct term since I was an LPR and not a US citizen, but the govt apparently makes no distinction) in May 2008 I'm covered by the old pre-"exit tax" rules. As a result I have to file a full US tax return plus a complete report of all of my worldwide assets -- that's form 8854 -- to the IRS every year until 2019.

    I'm not a US citizen, I don't live in the US, and I don't hold any investments in or have any other connection to the US. Yet am still bureaucratically hassled by the IRS, which sees fit to waste both my time and theirs with this utterly pointless and ridiculous reporting requirement for a decade, demanding information well beyond what ordinary folk would consider invasion of privacy.

    I'm also unable to visit the US for more than 30 days in any calendar year. And strictly, under the "Reed Amendment" I may actually be inadmissible to the US completely, simply because I had a certain level of assets when I left. Not, of course, that I have the slightest intention of returning to the US for any reason whatsoever in the future...

    ReplyDelete
  51. Poser: Did you get a Certificate of Loss of Nationality? I thought they don't issue it until you make peace with the IRS.

    ReplyDelete
  52. To Anon September 25, 2011 5:35 PM

    Boy, what can one stay to that? Between the two forms, everyone is trapped!! Thanks for the additional clarifications, as depressing as the commentary is to hear.

    Certainly understand you not wanting to return to the US for any reason. Why would you? America has just lost the plot!

    and Poser.... I saw your post over at Phil’s blog. Thanks for that Financial Post Link. I have re-posted it here.

    Here Mr Shulman, does this look like the face of the tax cheats you are after??.

    http://business.financialpost.com/?p=93636&preview=true

    ReplyDelete
  53. They should make an FBAR-EZ and 8854-EZ, etc. but my tax accounting teacher who's been practicing for 30+ years says that every time they try to make things less complicated they actually make them more complicated, and she wishes to heaven they would let things be as they are.

    ReplyDelete
  54. The Globe and Mail in Canada is sure being persistent in their coverage and uncovering the false narrative of the so called IRS “Success”, They are certainly right on target related to Expats...

    Another story tonight..

    http://www.theglobeandmail.com/report-on-business/irs-tars-law-abiding-expats-with-same-brush-as-tax-cheats/article2179482/

    Maybe the US media will begin to pay attention.

    ReplyDelete
  55. "Poser: Did you get a Certificate of Loss of Nationality? I thought they don't issue it until you make peace with the IRS."

    Actually, no not yet. I did go into the US consulate and let them know that I committed an expatriating act with the intent of losing my US citizenship. The State Department issues the CLN, not the IRS. The CLN is the necessary document to prove to the IRS that you've expatriated, and they require it before one files the 8854 (or whatever the expatriating form is). The only catch is that the State Department may (1) deny me expatriation, which would be a violation of my international and US rights; (2) charge me $450 for the CLN when it is finally issued (it's now been about 5 months--but I understand it can take 6 months or more--because it is the government we are dealing with after all)--I won't pay that under any circumstances. It is not clear, therefore, whether the $450 covers the oath of renunciation (which I didn't do because I committed another act whcih causes the relinquishment of the US citizenship--oath of citizenship, taking on foreign citizenship with the intent of relinquishing US citizenship). I think ever consulate has its own rules about the $450 fee; the one here didn't charge it to inform them that I had committed a relinquishing act. But I may find out that they want $450 when the consulate calls me to obtain the CLN.

    As for the expatriating forms, I don't see how the IRS can enforce it if your assets are not in the US. What liens or other punishments can they do against me? The Revenue Canada has already said they won't help the US for failure to file and not paying the expatriation tax or filling out the expatriating forms is not covered under the extradition treaty between the US and Canada. Furthermore, as far as I am aware, the failure to file the forms is not normally a criminal act (i.e., criminal failure to file requires a reasonable cause, and what would they base that on? I've not had that much income). So even if I went to the US to visit my family (believe me, I'm not going to the US for any other reason--used to spend $2,000 per year going to academic conference, trips to Hawaii, etc.), I probably won't have any issues at the border.

    ReplyDelete
  56. To Poser...

    Interesting story about the "Certificate". Thanks for some of those details.

    Kinda reminds of my concern that I needed an official "Zarpa" from Mexico, when I departed there in my sail boat headed for Galapagos. This was my first real off shore passage where I wasn’t just cruising along a coast line.

    The Zarpa, is an official certificate for port to port clearing. It was supposed to show that you have properly cleared out of one countries port, and can now be allowed into another country. Novice that I was then, I was really concerned, that if I did not have it to present in Port Ayora upon my arrival, they wouldn't let me in.

    Consequently, I went though a lot of hassle, and some expense in Acapulco to obtain one before I set sail. Mexican check out procedures for a small sail boat were almost as bad as for a Cruise ship, at least back then.

    Well, guess where that important Zarpa is now? Yup, still in my cruising paper work files, pristine and ready for framing!

    When I tried to show it at the next port, there was the puzzled look like "what the hell is this for?" LOL

    Never again bothered trying to get one again for my many offshore passages.

    Sorry, just couldn’t help reminiscing some, about the importance we place on official "certificates."

    BTW, and just an aside, back in the late 80s, there was one form that was ubiquitous in all ports everywhere in the Pacific Ocean. It was called the Coast Guard form, or other unfavorable terms by the French who at the time, refused to comply with the US government requirement to fill it out. Every government port was supposed to complete it and fax it to Hawaii. The US, exercising its dominion over the entire Pacific, was trying to track all small vessel activity everywhere, including my sailboat. I guess that was the Marine FBAR equivalent of the time. It really bugged me then, that even 1000s of miles from land and America, and upon entering or leaving any foreign port, the US government was trying to keep track my comings and goings. At least, during my stay in French Polynesia, they have some blanks in their record. God bless the French! LOL

    ReplyDelete
  57. Follow up "Just Me" and Poser

    A bit off the topic, but related to tax issue, I hope Jack won’t mind of this posting.

    By Chinese law, one loses his/her Chinese citizenship automatically as soon as he/she becomes a citizen of another country. A Chinese citizen does not need do anything for giving up citizenship.

    When Chinese go to their embassy or consulate (where passport can be renewed), they have to show the Chinese official that they have not yet naturalized to become US/Canadian citizen. This is easy here in US, as a resident alien always has a status (such as green card or H/J/F/B visa), as long as these status are still valid, the passport can be renewed. Once a Chinese becomes US citizen, the green card will be taken back by Immigration, so there is no more paper to prove his/her immigration status, so the embassy won’t renew the passport.

    It was a bit different in Canada back over 10 years ago; a resident alien has a piece of paper indicating his/her status, but this paper (such as landed immigrant status) won’t be taken back by Canadian Immigration even if the Chinese has become Canadian citizen. To prevent some Chinese take advantage of using Chinese passport while being a Canadian citizen, the embassy demands all Chinese citizen with landed immigrant status to prove that they have not become Canadian citizen. So each time a Chinese wants to renew passport, he/she needs Canadian Immigration to issue a letter to prove non-Canadian citizenship.

    Chinese government does not recognize a new born (born in US) US citizenship if both of his/her parents are visa residents in US (that means parents are not green card holders or US citizen). So the parents want to take the baby back to China, they can not apply for a visa for the baby to enter China by using US passport, instead, the baby will be given an entry permit. Once in China, the Chinese government will only recognize this baby as Chinese citizen.

    Here is the tax issue. When the baby grows up, he becomes super rich. US government still considers him/her a US citizen, so under US taxation. I do not know if there is a tax treaty between China and US. Assuming there is a treaty and Chinese government is supposed to enforce US tax law to US citizens living in China. What is going to happen to this US born (Chinese citizen only by Chinese government) taxpayer?

    I think the Chinese citizenship law will prevent Chinese tax authority to enforce US tax law on this person.

    ReplyDelete
  58. To all Immigrants or Nonresident aliens.

    I have a bit of irony to share, that I just discovered.

    The IRS is about to impose on US banks the new requirement to report interest paid on funds deposited by nonresident aliens back to their home country!!

    I suppose they are doing this, because they are trying, via FATCA, to get all world wide financial institutions to be IRS tax collectors, and maybe they are wanting to set a good example, or something. IE, What is good for the goose, is good for the gander.
    This unilateral action might help stem complaints by banks around the world about the cost and problems they will have implementing FATCA.

    Anyway, encourage you to read this article...

    One Congressman is trying to stop this effort.

    http://www.accountingtoday.com/news/Congressman-Tells-IRS-Back-off-Bank-Disclosures-60322-1.html

    and then download and read this letter by Congressman Charles Boustany, Jr., MD
    Chairman, Subcommittee on Oversight, sent September 27, to Timothy Geithner.

    http://waysandmeans.house.gov/UploadedFiles/Letter_on_NRA_taxation_final.pdf

    Here are just two paragraphs to tweak your interest, and I reproduce below...

    "As the Chairman of the Ways and Means Subcommittee on Oversight, I am writing regarding the Internal Revenue Service’s (“IRS”) efforts to require banks to disclose interest paid to nonresident aliens, IRS Notice of Proposed Rulemaking REG-146097-09 (“proposed regulation”). If the regulation were to take effect, it would not only run counter to the will of the Congress, but would potentially drive foreign investments out of our economy, hurting individuals and small businesses by reducing access to capital. I write to request that IRS suspend the proposed regulation.

    The proposed regulation requires U.S. banks to collect and report information on interest paid to nonresident aliens who deposit funds in U.S. financial institutions. As the Internal Revenue Code imposes no taxation or reporting requirements on this deposit interest, the proposed regulation serves no compelling tax collection purpose. Instead, it is my understanding that the IRS seeks this new authority to help foreign governments collect their own taxes abroad. While the United States continues to be a leader in efforts to fight international tax evasion, imposing unnecessary burdens on U.S. banks is the wrong way to address the problem.”

    If I were you, I would be writing this Congressman's office. There may be an ally there that is sympathetic to some of your plights, or some who would be willing to push back on FATCA which imposes these extreme requirements on all banks in the world!

    Anyway, the letter amused me, and it is very strange what I find amusing these days... I would bet that he has some Bank Lobbyist supporting his efforts!

    ReplyDelete
  59. So "...imposing unnecessary burdens on U.S. banks is the wrong way to address the problem”. But imposing the exact same unnecessary burdens on non-US banks via FATCA is? You really have to wonder sometimes what planet these idiots live on.

    ReplyDelete
  60. Just Me:

    As far as I know, the IRS hasn't the right to force such a regulation on US banks and this shows the utterly rogue nature of the IRS; they do not have the law on their side; this would be an usurpation of the legislative branch. But also, the current situation shows the hypocrisy of Congress, to impose one thing on foreign banks, and require the opposite from US banks. FATCA does not require reciprocity.

    http://www.cato-at-liberty.org/reckless-irs-regulation-would-put-foreign-tax-law-over-american-tax-law-and-drive-investment-out-of-the-united-states/

    ReplyDelete
  61. Poser and anon......

    It is amazing. I just shake my head in wonder. I will be writing the Congressman tonight. I will remind of the FATCA law that came out of the Congress he belongs in, and maybe point out the ridiculous way the IRS is administering these OVDI programs...

    And thnx for the link to the Cato piece. That has inspired 3 emails already, and one back to the author to encourage him to do more. He should add OVDI and FATCO to his You tube videos as other examples of other IRS actions run amuck.

    ReplyDelete
  62. join the honor list, here is Premier David Alward of New Brunswick, who is also in our OVDI 2011

    http://telegraphjournal.canadaeast.com/news/article/1444557

    As I always think no expat US citizen should pay FBAR penalty. My def offshore is always relative the the taxpayer's residency.

    ReplyDelete
  63. "I think the Canadian panic is way overblown. A cross border CPA said he had filed 1000 late FBARs and taxes for US expats in Canada over the last few months and had seen no problems."

    Your CPA source likely needs to wait a while longer before the trouble starts. As we know, the IRS moves slowly. The more pressure we can apply now by way of letters, emails, telephone calls, faxes, etc. will help shed light on the situation as it truly is and hopefully create some sympathy for all minnows, not just the Canadians.

    Try contacting the Internal Revenue Service Advisory Council (IRSAC) which conveys the public's perception of IRS' activities. Contact Ms. Lorenza Wilds at 202-622-6440 or by fax at 202-927-5253.

    Also try the Taxpayer Advocacy Panel (TAP) at 1-888-912-1227.

    Also try the IRS Oversight Board at tel. 202-622-2581, fax: 202-622-7944, & email: irsob@do.treas.gov

    Also try the Senate subcommittee on Taxation & IRS Oversight at 202-224-4515 or fax 202-228-0554.

    Finally, has anyone started an “2011 OVDI" Facebook page of some kind?

    Whether or not you’re in the 2009 OVDP or 2011 OVDI, contacting these people and politely expressing your displeasure will help us all!

    ReplyDelete
  64. Annon October 4, 2011 12:36 AM

    You are absolutely right in the need for some action by the victims of the OVDI. Although, most are fearful of retribution, and too busy trying to get their submissions done or assess their risks in an Opt Out.

    There still needs to some activism, and a little less passive victimhood, however, I do understand why the OVDIs are keeping their heads down. For every post here, would encourage you to at least send one email or make one contact with the press about problems of the VD programs and disproportionate penalties for Minnows that were not the Target of all these programs to begin with. Start by sending emails and encouraging those reporters that do write the stories in Canada to keep it up. Eventually, the reporters in the US will begin to notice. For instance, finally, a story came out on Global Post yesterday who is a partner to PBS News Hour. That doesn't mean they will do anything with it, but it does mean the profile has been raised and someone on the News Hour team has at least noted it.

    http://www.globalpost.com/dispatch/news/regions/americas/canada/111003/american-canadians-wanted-by-irs-taxes%20

    You all know reporters names in the media you probably follow or read, so send them an email, and do it regularly. Watch and listen to where they get their news tips and narratives from and work up the news food chain. They may not respond, but it does begin to put the issue into their consciousness.

    Since I am done with the OVDP, I have been sending out Emails and comments nightly and getting some nibbles of interest. I keep trying different strategies to attack attention, and they may or may not work. The chances are admittedly slim, and might have to go to NY and sit with the "Occupy Wallstreet" crowd to get a reporters attention! LOL

    Thanks for taking the effort to post those contacts and phone numbers.

    ReplyDelete
  65. New story out tonight on Reuters that Finance Minister of Canada, Flaherty has spoken to Geithner about tax issues..

    Good luck getting him to listen..

    http://www.reuters.com/article/2011/10/05/canada-usa-taxes-idUSN1E7941R120111005

    ReplyDelete
  66. And yet another one tonight...

    Is the IRS going to War with Canada...

    http://goingconcern.com/2011/10/is-the-irs-going-to-war-with-canada/

    ReplyDelete
  67. And there are a few more. Maybe the news will be picked up in the US press some day...
    Email them around. Pick out a reporter you know from what every media you follow and send these these. Instead of nightly prayers, this is what I do... LOL

    U.S. tax crackdown has Canadian financial firms on edge.

    http://www.ctv.ca/generic/generated/static/business/article2192258.html#ixzz1ZymmvGYS

    U.S. tax grab called extreme

    http://www.montrealgazette.com/news/grab+called+extreme/5508668/story.html

    and this... in the FATCA unintended Consequence category... from India Financial Times..


    Private bank clients urged to avoid U.S. securities

    http://economictimes.indiatimes.com/news/international-business/private-bank-clients-urged-to-avoid-u-s-securities/articleshow/10247625.cms

    ReplyDelete
  68. Just me,

    Expat US citizens have a moral ground to protest this excessive FBAR penalty. It is a just cause. I strongly support this effort.

    It is totally a different picture for immigrants (particularly long time US residents), and I don't any public sympathy.

    ReplyDelete
  69. Just me, ij et all
    I agree that we need to speak up and show our displeasure on how this OVDI is affecting expats
    and immigrants (long time and recent)

    ReplyDelete
  70. Well, ij...

    It is true, that maybe immigrants in the US will have a harder time getting sympathy, but that still doesn't mean that penalties are not too disproportionate for the “so called” crime. You still were not the VD target of the effort!! The IRS could have done a much better outreach to new Immigrants to help them know about the strange FBAR requirements, rather than just using a gotcha form to level heavy penalties now. It is just not good governance, and it is just wrong.

    Where I live, when the time came that I had to start reporting my foreign earnings, ie those earnings back in America, I received a nice letter from the Tax Department informing me of my responsibility. What a novel idea!! Advance communication. (No special form to file to some obscure office either) Did you ever receive anything like that from the US government, new as you were to America, and having natural language issues understand the strange IRS rule requirments? You are tri-lingual, and I am uni-lingual, and I still had trouble. The US needs to do a better job of “outreach”, but that word is not in their lexicon, or if it is, it must be synonymous with “Criminal Prosecution”. I think you have reason to be outraged that you are treated so abhorrently. I do note you friend back in China thinking Australia is a better place to immigrate to. He would be right in his analysis. He will still have to report on foreign earnings back in China, but there is no FBAR gotcha!!

    btw just saw this... Reuters has now picked up the FATCA story... 2 hours ago... This is probably coming from the Press Release mill, but some coverage is better than none!


    Private bank clients urged to avoid U.S. securities

    http://www.reuters.com/article/2011/10/06/us-wealth-summit-fatca-idUSTRE7943GX20111006

    and when I see these stories, they get forwarded to every reporter and news source email I have gathered. I must have sent out 35 last night.

    FACTA is not the FBAR issue, but the legislation did arise in 2010 after the so called success of the OVDP program and UBS efforts. Congress wanted to extend the reach for tax evaders and crack down. There is a narrative that ties the two together, so I keep hammering the FATCA issue, as when you back up to ask, how did we get to this obnoxious piece of Imperial legislation(?), it leads straight to UBS prosecution and the 2009 OVDP.

    ReplyDelete
  71. Just me,

    It has been a fashion for rich Chinese to have a foreign passport (US, Canada and other developed countries). It is not they want to live in foreign countries, rather it is a symbol of prestige. China is where they can make a lot money. Also it is a plan B to exit if things really go wrong in China.

    Given the US global taxation policy, plus FBAR etc, it seems too much to take for being a US expat.

    FATCA has no impact on me, as all my offshore (non-RRSP) are gone already (spending on child support/education and transaction to US). So the motive to join OVDI is more on the doing the right (guilty on small amount tax due), and wishfully expecting fairness from IRS (such as on RRSP).

    While I have no moral ground to protest for my own case, exposing what is like inside OVDI is a message to all -- if the squirrel should be honest to tell the bear for stealing food in the first place -:)

    ReplyDelete
  72. ij,

    I think you might not understand all the implications of FATCA. You would not be alone in this, so I am not trying to be critical. It does have impacts on you, you just don't know enough about it yet, to understand why.

    I would encourage you to read this article at Risk Net. You will have to temporarily subscribe to a one month free trial to access it all, but I think there are systemic risks inherent in this program will have some serious consequences in the US of A.

    I would post it all here, but it would take a couple postings... and I won't hog all the space...

    http://www.risk.net/operational-risk-and-regulation/feature/2109648/banks-fear-fatca-raises-operational-systemic-risks

    ReplyDelete

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