They often refer to themselves as minnows. They are -- or, in some cases, were -- Americans who reside abroad and who had undisclosed bank accounts in their local jurisdictions. In an attempt to become compliant, some found themselves entangled in the offshore voluntary disclosure programs (OVDPs) that were intended for larger and more culpable taxpayers.
Some were U.S. taxpayers who intentionally hid money from the IRS in foreign bank accounts. Some continue to hide assets. But not everyone who entered the 2009 or 2012 OVDPs or the 2011 offshore voluntary disclosure initiative (OVDI) was intentionally concealing large sums and purposely evading tax.
The stated objective of the offshore disclosure programs was to bring taxpayers "that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax" into compliance. However, the language in the FAQs for the programs appeared to apply generally to anyone with an undisclosed foreign account, regardless of circumstances.
U.S. citizens who have moved abroad and have bank accounts there often may not fit the profile of a tax evader. This set of taxpayers typically faces unique and diverse filing and reporting challenges. Those who wish to be compliant frequently have limited access to professional assistance and have difficulty determining the appropriate tax treatment of specific foreign accounts. Since the UBS scandal opened the floodgates of offshore enforcement in 2008, those taxpayers have sometimes lived in fear of owing large, and perhaps financially devastating, penalties for unwitting compliance mistakes. Some taxpayers have legitimate reasons for owning foreign bank accounts, and their failure to declare them was merely negligent, as National Taxpayer Advocate Nina Olson has pointed out.After that, the author presents some real world taxpayers who have journeyed through the process, often with many twists and turns, but usually with what appears effort and angst which, in my view, are not compelled by systemic revenue imperatives. The IRS has appeared slow to correct as these glitches in the offshore initiatives began to present themselves.
I hope the IRS is listening / reading. I also hope that readers encountering similar situations will find some hope and strategies for action.
P.S. I have not had time to read the article in sufficient detail to collect my thoughts and present more detailed analysis succinctly here. I will be back later.