I just got a letter 3800 from IRS, that is a warning letter on my failure to report foreign bank accounts. Even though I recommended $650/year FBAR penalty myself to make it up the tax loss for the closing years after opting-out. IRS decided to issue a warning letter under my examiner's recommendation. I have been lucky to have both examiners who have been treating me with dignity and professionalism.
Here are some facts of my case, 12 years US resident with offshore assets peak at 68K plus 50K registered retirement plan. Total tax loss to IRS is around 2K during these years of ignorance. I was such a fool that I even did not claim tax credit on Schedule M in 2009 but IRS corrected my return and gave over $800 back to me.
Here is my time line.
Package submitted in April 2011, revised in July 2011 on PFIC.
First contact by an examiner in Dec. 2011,
Full package of bank statement was sent in Jan. 2012 upon request.
Form 906 arrived in July 2012, and request of opting-out letter was sent a few days later.
Letter 3800 arrived today (Sept. 14, 2012).
IRS is moving fast than we have expected, and they are fair to minnows with good facts (I think my facts are good).
By the way, I do all these on my own, and I certainly have learned a lot through this process.
I would like to thank Just Me, Moby, Anon123 (my dear brother, I hope you are doing fine and keep healthy), Sleep Well (Sleeper) who was the very first few encourage me opting-out, and many other anons ---
Jack, I also want to thank you to let me to contribute your blogs -- I am one of the most out-spoken. It is my hope that we make this process as open as possible to benefit taxpayers, the general public.
Now, it is time for me to move on, and good luck to allIn a subsequent posting authorizing me to post his information as a separate blog entry, ij said:
Jack, no problem, and please to post it as a new entry, any English correction is appreciated. Just want to make sure that minnows who have good facts should consider this is an example.
Fear factor plays a big role to most minnows (including myself when I entered the program with a full payment of in lieu penalty even before 906), however, in my own experience, IRS agents are very reasonable and they do listen and look at facts.My brief comments on ij's journey through the process:
- I agree with ij that the fear factor has played too prominent a role. I do blame the IRS for some of that, but also I think some fear / risk factor is built into the process because of the nature of the penalties and the fact-specific nature of the inquiry upon opt out.
- I am encouraged for others in the process or considering joining the program that the IRS agents involved both during the consideration inside the program penalty structure and then upon opt out (maybe the same agent) acted professionally and reasonably. I had expected that the IRS agents would be reasonable when presented with good (at least relatively good) facts.
- It is still critical for persons considering opting out to be realistic about their facts and how they will be assessed on opt outs. Good facts will achieve a good opt out result, as ij found out. Bad facts could achieve an unsatisfactory result. It is important to project how the particular facts and circumstances will be assessed on opt out. The IRS has not given adequate guidance in making that projection, but with good counseling you will be better equipped to make a good decision. And, hopefully, the IRS will come out with some guidance in the future (I have no reason to believe the IRS will, but I can hope, for as Alexander Pope said, "Hope springs eternal in the human breast"); in the meantime, persons approaching or at the opt out decision point should look at all of the anecdotal data (including ij's) to assist in making the decision. For that reason, I strongly urge readers with results of opting out to provide as much information about the result and process as they feel comfortable sharing, so that others can learn from their experiences and the fear factor can be mitigated..