Tuesday, August 26, 2014

Procedurally Taxing Blog on Statutes of Limitations with Respect to Tax Collected on Noncitizen Nonresidents (8/26/14)

Procedurally Taxing, the premier Tax Procedure Blog (in my opinion), has this great post that a number of readers of this blog may be interested in:  Boeri: Not a citizen, never lived or worked in the US? IRS will still keep your money (Procedurally Taxing 8/26/14), here.  Here is the teaser paragraph:
The facts of the case are as follows, and I have lifted much of this from the Federal Circuit Court of Appeals holding.  Mr. Boeri was an Italian citizen who was never a citizen of the United States, never worked in the United States, and never was a resident of the United States. Mr. Boeri was employed by GTE and Verizon for over thirty five years (located in Italy, Brazil, Argentina, and the Dominican Republic).  In 2003, Mr. Boeri accepted a voluntary buy out, and received close to $250,000 in two payments in March and August of 2004.  In those distributions, Verizon withheld around $70,500 in US income tax withholdings, Social Security tax, and Medicare Tax.  There is no dispute that Mr. Boeri was not originally liable for those taxes.  In March of 2009, Mr. Boeri filed non-resident income tax returns for 2004, seeking a refund of the taxes withheld by Verizon…And you can imagine where this was headed.
Click on the  link above for more.  I could not state it better than the author, Stephen Olsen; indeed,  without even trying, I could state it  much worse.

The discussion  is really technical, but for a person who may not be subject to the jurisdiction of the U.S. to tax, the discussion could be very important if there is any way that the IRS ends up with that person's money in the guise of a tax.

This is all to emphasize that statute of limitations to pursue claims -- whether in a tax context or otherwise -- are important.  Valid claims in any context can be cut off by statutes of limitations.  Pay attention.


  1. Jack - For the SDOP filing, we will be filing for 2010, 2011 and 2012 and paying the 5%penalty and interest.

    How about the previous years? Are they open for audit or they considered closed? Do we have to amend them too? Also in the SDOP Certification, should the supporting nonwillfull statements be relevant only for the 3 years or all the open years?

    Many thanks!

  2. Get out your ukelele and sing along with Elvis. I changed my “Moodys Blue” parody into “Townsend Blue” for you. Hope it helps with what I know is a frustrating exchange with Jack Townsend (aka now “Townsend Blue”, in reference to a certain “blue pill” symbolizing the “blissful ignorance of illusion”). Furthermore, we all admire you and Jack doesn’t know “jack sh*t” about the FATCA attack and its ultimate blowback.

    Townsend Blue

    Well it’s hard to be a victim

    Of the FATCA system

    That’s changin’ all the time

    Though I’m sure I’m gonna win

    Townsend won’t give in

    Gets stranger in my mind

    Yeah it’s hard to figure out

    What it’s all about

    But it’s rotten through and through

    It’s too complicated maybe

    So colour him shady

    Townsend Blue

    Oh Townsend Blue

    Tell me am I gettin’ through

    I keep hangin’ on

    Try to show you’re wrong

    But I never do

    Oh Townsend Blue

    Tell me who I’m talkin’ to

    You’re like a cloudy day

    And it’s hard to say

    What’s drivin’ you

    Well when reason comes he’s wincing

    For reason is convincing

    That he needs to think again

    His arguments unwind

    Just like a ball of twine

    On a spool that never ends

    Just when I think he will concede

    His articles proceed

    To show he cannot bend

    To change his view

    It’s too complicated maybe

    So colour him shady

    Townsend Blue

    Oh Townsend Blue

    Tell me am I gettin’ through

    I keep hangin’ on

    Try to show you’re wrong

    But I never do

    Oh Townsend Blue

    Tell me who I’m talkin’ to

    You’re like a cloudy day

    And it’s hard to say

    What’s drivin’ you

  3. Jack Townsend • a day ago

    “Your points are excellent policy points. I again urge all readers to
    make their policy points in forums where someone might be able to move
    the issue forward.”

    Okay Professor Townsend, would you be so kind to direct us to forums
    where someone might be able to move the issue forward? You are in the
    loop with these so-called policy maker/shapers, so how can we get in
    contact with them?

    We are not anecdotes. We are not myths. We are real people with no
    voice in congress and our lives are being destroyed because of it. So
    Jack, if you have an ounce of compassion inside you, please help us get
    in contact with the right people.

  4. Note to Jack Townsend: Don’t fret, Jack…
    it’s not just Americans. This is one Canadian who doesn’t admire you
    either. I’ve never had reason to get out a green card, nor would I even
    be considered a US person were it not for my wife (who is also
    considering dumping her US citizenship). Why the hell should I have to
    open up my bank accounts to your meddling IRS? Considering the fact
    that the US considers the flimsiest reasons to convey US person-hood
    (not United States citizenship) good enough to base IRS taxation upon, a
    lot of innocent Canadians who have NO reason otherwise other than
    marriage are considered ‘US persons for tax reasons’ If that’s the
    case. Why not enslave the entire world and make everybody US tax
    persons? Oh…wait, that’s what you’re trying to do.

    Too bad, so sad. All the IRS is going to get out of me is a middle finger. Come ‘n get it.

  5. Well, this is interesting. I offered
    the following comment on Jack’s site in response to his claims that the
    US would protect data passed to it by foreign governments (doubtful) and
    that non-US banks have the wherewithal to untangle complex US citizenship issues (as if). He binned it. Ho-hum.

    An appeal to stringent privacy laws offers no
    reassurance. There are constant calls from the senate to share FBAR and
    general tax information among other government agencies, the Lerner case
    is a strong indicator that the IRS has ‘gone rogue’, and congress has a
    long and dishonourable track record of disregard for its treaty
    obligations (FATCA and HEART are both treaty overrides). Nobody outside
    the US can now trust it to abide by its own privacy laws, whatever they
    may be. This is what happens when a government continually chips away at
    its obligations under international law.

    And on your touching faith on the ability of a Canadian bank to
    unravel the minutiae of US citizenship laws from decades ago in order to
    determine the correctness, or otherwise, of a claim of non-US status, I
    call shenanigans. Why would a Canadian bank, or any non-US bank, or for
    that matter any US bank, spend countless hours disentangling the mess
    that is both historical and present US citizenship law rather than
    simply taking the easy option and passing information on the US for them
    to decide?

  6. Townsend would have told Rosa Parks to stay at the back of the bus, ’cause that’s the law.
    What would happen to Rosa in today’s US atmosphere?

  7. Following the logic that only those who are openly defiant re civil
    disobedience are to be admired, I wonder what advice Jack would have for
    those victims of US extraterritorial CBT and financial reporting – who
    like minors and those deemed legally incompetent the US prevents from
    renouncing (the only remedy he prescribes for those abroad who bear the
    burden of CBT). They do not have the agency or power or resources to
    disobey on their own behalf (though the current online FBAR instructions
    say that CHILDREN should file their own!). Where is their remedy? Is he
    advising that they or their parents come out to the IRS, obliterate
    their own and their family savings (ex. RESPs for education, RDSP and
    disability benefits), take the IRS to court, or go to jail?

  8. In the War of 1812, the Loyalists who shot at the Americans invaders were considered the enemy by people like Townsend.

    We are the new Loyalists. So far our protest to the invasion of 2012 has been peaceful.

  9. ” What would happen to Rosa in today’s US atmosphere?”

    As black women defying the law in America today, Rosa Parks would
    probably be arrested by a heavily armed SWAT team operating out of
    armored personnel carriers. You can see these militarized cops in the
    media coverage of Ferguson, Missouri.

    She might face the risk of being killed by police as well. Recently,
    an unarmed black person, Eric Garner, died after being placed in an
    illegal “choke-hold” by the ever vigilant New York City Police

    Mr. Garner’s crime? Suspicion of selling loose “un-taxed” cigarettes on the street.

    In Garner’s case, the penalty for a petty civil offense was summary execution by the police.

  10. Jack Townsend doesn’t strike me as the
    most inspiring guy in the world to talk about, so I won’t have that much
    to say in this thread. However let me say that in talking about
    juries, I feel that we are talking about the wrong thing. We should
    instead be talking about (and, ultimately, rejecting) extradition.
    Before a Canadian ever faced a jury in the US, they would first need to
    be extradited. One of the fundamental principles of extradition is that
    the alleged crime must be a crime in both countries before extradition
    can be considered. Canada has no equivalent to CBT.

    So I would certainly hope that if someone were accused of US tax
    evasion based solely on CBT–ie no other ties that might justify
    classification as a US resident and US taxation–that Canada would refuse

    Has there ever been a case where Canada has extradited someone to the
    US to face tax evasion charges where the alleged tax liability seems to
    arise solely from a CBT issue?

  11. Jack Townsend wrote: “I will just say that Rosa Parks did her civil disobedience in the open.”

    Then according to Jack’s logic African American slaves should have
    just stood there in shackles and “do their civil disobedience in the
    open” because being a runaway slave would not be admirable.

  12. More contemplation on Jack Townsend’s
    concerns that we “expats” are doing our civil disobedience in hiding as
    opposed to “good American” civil protesters who do it out in the open:

    When Rosa Parks refused to give up her seat on the bus she was in a
    public place, on the bus, with dozens of other people. She could hardly
    have avoided performing her act of civil disobedience in public. It was
    where she was and where her stand needed to be taken.

    When African Americans were refused service at the Woolworth’s lunch
    counter they were in a public place. While it is true that, as opposed
    to Rosa Park’s act this was a planned demonstration, it was a public
    situation that these individuals chose in order to draw as much
    attention as possible to their cause.

    In our case, we find ourselves accused of not filing tax returns to a
    government to which we do not believe we owe a dime. Filing taxes is
    generally a process undertaken at one’s desk in one’s own home entirely
    sequestered from the prying eyes of the general public. Therefore, the
    act of not filing them is equally private.

    Jack Townsend is trying to carry water in a very leaky bucket.

  13. If Jack Townsend had lived in the 19th century he would have defended the
    legality of slavery. Why? Because the law is the law. Heck, he probably
    would have been a slave owner himself.

  14. And to Jack I say:

    you have been a bit liberal in the past using the word “bullshit” – it’s
    time to respon that your understanding of civil disobedience is exactly
    that. Shame on you!

  15. I didn’t choose to mention this, but there are a lot of Americans who
    think that those who fled to Canada did do something right and
    courageous. There is a lot of dissent on that subject–or perhaps
    Townsend never watched MASH or All in the Family. And you are
    right–those of us who are activists have been out in the open with our
    protest and I certainly am. He should have at least exempted me from his
    criticism, since I was very much out in the open about my civil
    disobedience (without giving details, to be sure).

    But one thing is for sure–with Americans like Jack Townsend around, I am getting really sick of my former country.

  16. Earth calling Jack Townsend: Expats don’t have duly elected
    representatives in US congress and they don’t live in the same society
    as homelanders. What law school did you say you are teaching at?

  17. Jack Townsend not having any opinion about CBT tells me all I need to
    know about him – that he doesn’t wish to judge laws for their morality.
    This makes him less than human, IMO. Maybe he’s a robot.

  18. Jack Townsend distorts reality by
    pretending the situation is ‘simple’, when the existence of his very
    blog and teachings are all about how complex US tax law is:

    “…If those people don’t want to pay the costs, then they can
    renounce. Pretty simple. But the U.S. does not force renouncement on any
    one. They may their own decisions. If U.S. citizens living abroad want
    to renounce for whatever reason they choose, then that is OK with me and
    with the U.S. Government, so far as I know. Just renounce and be done
    with the U.S. Pretty simple. And fair.

    But don’t keep your U.S. citizenship and not pay the dues required….”

    We and he knows that it is far from ‘pretty simple’. And not even in
    the same universe as ‘fair’. And that the exit provisions make it
    abundantly clear that it is NOT ‘alright’ with the US government to
    renounce. Otherwise they wouldn’t have enacted laws which have the
    effect of strip searching everyone before they ‘leave’.

    “Dues required” make US citizenship into a rarefied club which only
    those inside the US can maintain. Like an exclusive gentleman’s club. A
    commodity which only some people can afford. A commercial transaction –
    you pay and we let you have it. A capitalist view of citizenship. No
    grand ideals, no concept which transcends the economic realm. No
    philosophical musings involving ethics, or justice. Apparently, US
    citizenship is something to be bought and sold. If we inherited it via a
    parent or birthplace, we must pay to keep it or pay to excise it. If we
    can’t afford the installments, our assets will be levied and seized to

    And as usual, absolutely no logical or reasoned rationale for why US
    citizenship requires “dues” and “membership” to be paid, wherein all the
    rest of the globe – the majority in population, territory and time
    honoured practice do NOT treat their citizens as the US does. And, our
    NON-US country of residence provides services to us where we reside and
    pay taxes, whether we are citizens or not.

    US tax law is obviously a worldview and ideology, akin to a religion
    as practiced by gurus who must believe without question. Questioning it
    is wrong, seditious, traitorous, ungrateful, criminal, etc.

    And civil disobedience apparently must pass muster by a practitioner
    of the status quo who says that if we aren’t willing to be publicly
    crucified or stretched on the rack, our protestations are illegitimate
    and thus our claims of harm are not worthy of objective examination.

    I doubt that famous practitioners of civil disobedience applied to
    the authorities for official approval before commencing their campaigns
    of protest.

  19. Isaac,

    I did not bin the one you mentioned. The service providers algorithm sent it to the spam box. Now, the others did come into the pending box this morning. I have decided to delete them because, as you know, they are simply rants against the citizen based taxation system and against me. I think that other readers will get the flavor of your comments from the above comment. They are really all just variations on this comment.

    Again, I urge those of you who want to rant, please do it in a more appropriate forum. This is a federal tax crime blog intended to deal with the system we have -- not the system that some of us might prefer.

    If you have something helpful to say for persons trying to navigate the system we have, I will approve your comments. I will not approve rants and ad hominens.

    Thank you,

    Jack Townsend


  20. Of course I forgot, as a part time practitioner excuses need to be always available.
    Oh that is so sad... the one about the Townsend blue should attract many people who are trying to navigate the system !

  21. Lol....of course this post is no rant about CBT ??

  22. That must be infuriating. Even more so since it appears he lost his claim against the pension fund for the negligent withholding.

  23. I think you are missing the point of all these posts - and it was just a small "PG" selection - the "R" rated I left out. There are a lot of Canadians that think you are SCUM !!
    If I were you I would avoid traveling to Canada for a while until the dust has settled.

  24. ChiTownTaxAttorneyAugust 27, 2014 at 11:17 AM

    One commentator on Procedurally Taxing asked whether the taxpayer might have a contract or other action against Verizon, and apparently a suit was filed at some point.

    As one who is often shunned at the Annual Bar Steer Roast because my second area of practice focus is legal malpractice, I have to say I'd be looking at the attorney's, too. There is a comment the Taxpayer was pro se. If that is the case, he's out of luck, although I'm certainly not feeling sorry for him. That's a lot of money to let 3 years run by and not even hire a lawyer.

    I certainly echo the Professor's admonition to watch SOL's very, very carefully, whether they are actual limitations or limitations on damages that might have some equitable mitigation possibilities. The later is, at best, a pain and expensive to correct. In Illinois, blowing an SOL is considered per se malpractice and you don't even need an expert to testify. We use a "new case" intake form to and checklists for SOL's immediately, including for refund claims, and received a nice malpractice insurance discount for the effort.

    So what I will add to the Professor's sage advice is always look outside the box for remedies. Again, I don't know what happened, but Verizon and the IRS and Tax Court attorney's would have been very high on my radar.

  25. GottaloveUStax1, I have not followed this post. What exactly happened to the person who lost his claim against their pension fund for negligent withholding?


  27. My client just received a document from a Swiss bank entitled "Secrecy Waiver." The waiver requires her to consent to the bank disclosing her personal account and releases Graubunder Kantonalbank from any obligation from the Swiss banking secrecy. She was told by the bank representative that she had to sign the waiver in order for her documents to be effective under the Streamlined Program. I have already submitted her Streamlined Procedure documents.

    I believe the bank is trying to protect it self against any claim of breach of the Swiss Banking Secrecy.

    Has anyone's clients received such a document? Has anyone heard of a requirement of having to comply with the bank's request to get protection under the Streamlined Procedure?

    I do not believe she has to sign this document, but would like others thoughts.


  28. 1. There is no requirement that you give a secrecy waiver.

    2. The bank can avoid its own penalty pursuant to the provision in the U.S. DOJ Swiss bank program for the following (the following is a quote from the program, but I have added numbering (1), (2) and (3) to highlight the different ways the bank can get relief):

    The determination of the maximum dollar value of the aggregated U.S. Related Accounts may be reduced by the dollar value of each account as to which (1) the Swiss Bank demonstrates, to the satisfaction of the Tax Division, was not an undeclared account, (2) was disclosed by the Swiss Bank to the U.S. Internal Revenue Service, or (3) was disclosed to the U.S. Internal Revenue Service through an announced Offshore Voluntary Disclosure Program or Initiative following notification by the Swiss Bank of such a program or initiative and prior to the execution of the NPA.

    The bank will get no relief under (1) because your account was an undeclared account. The bank possibly could get relief under (2) if you executed the secrecy waiver and the bank discloses to the IRS. The bank could definitely get relief under (3) if you provide the bank proof that you have become compliant by joining one of the authorized Voluntary Disclosure programs after notification from the bank.

    The problem is that, if the bank seeks the proof under (3), some U.S. taxpayers are requiring the bank to pay for that proof. The U.S. taxpayer is not required to give the proof under (3) and thus can negotiate for some appropriate price -- perhaps a market price or perhaps recover of attorneys fees -- for the documents. Banks know that, so they would rather not pay.

    Accordingly, some banks are trying to get clients to waive their secrecy rights so that the banks can notify the IRS and thus, they hope, qualify for penalty relief under (2). The problem is that that can only work (if it works at all) if the U.S. taxpayer does something he is not required to do -- i.e., waive secrecy rights. Perhaps redundant, but let me repeat, the U.S. taxpayer is not required to waive secrecy rights. Of course, waiving secrecy rights will not hurt the U.S. taxpayer who joins one of the voluntary disclosure programs, but, since the taxpayer is not required to waive secrecy rights, it is in the same category as to the proof of joining the program. The taxpayer may seek a market price for doing something he is not required to do.

    So, you see, the bank is not doing the taxpayer any favors. The request to waive bank secrecy is solely to avoid a penalty on the bank for its own misconduct. Why give the waiver unless the bank provides an adequate incentive?

    Jack Townsend

  29. He lost his ability to claim a refund. Statutes of limitations are very important under U.S. law. The whole purpose of a statute of limitation is to grant repose from claims -- good claims and bad claims.

    Jack Townsend

  30. In a widely quoted article in the (London) Daily Telegraph of last week ("British families billed £500 – to prevent Americans dodging tax") http://www.telegraph.co.uk/finance/personalfinance/tax/11050777/British-families-billed-500-to-prevent-Americans-dodging-tax.html it's complained that UK accountants are charging their clients, British citizens with no contact, economic or personal, with the USA, for investigating their status. This has to do with UK professional ethics rules (Press release here: http://www.ccab.org.uk/PDFs/CCAB_Code_of_Ethical_Conduct_release.pdf with link to the draft code) whereby UK accountants are made enforcers of US (as well as UK) tax law, and not just because of FATCA. One result of this is that it is difficult for a person with possible US Person status to get advice other than "Just file OVDP". In real life, the US Government, let alone the IRS, does not know who its citizens are unless they hold valid US passports. Many persons born abroad of one or two US parents are not US citizens (parental residence requirements, an inconsistency with respect to nonmarital children, and IVF and the fact that the US is a major exporter of what is cutely called "genetic material" complicate the issue). AFAIK only the State Department and US Immigration Courts have jurisdiction over nationality issues and presumably the IRS does not have standing except where a person has "availed himself of an attribute of US citizenship) and a pre-1985 expatriating act isn't alleged. How can a firm of accountants be relied on, let alone charge for, such an analysis?

  31. To illustrate the surprises inherent in US nationality law and the disinclination of the IRS to involve itself in difficult (and, from a collection standpoint, probably unprofitable) cases I keep thinking of the wife of a friend, born in St. Croix to British (Caribbean, but British-citizen) parents who left St Croix soon after birth and lived her whole life in the Islands and then, from age 12, in London. As it happens, her career has been with a Big 4 accounting firm in an administrative capacity. When she married a Brit who wanted to open a business in the USA and applied for a visa she was astounded to find out she was, in fact, a US citizen (and, given her earnings level, he was able to get a spousal green card). She worked 7 years for the same accounting firm in the USA has now been hired by their British associate firm (as I understand it, the Big 4 are a kind of franchise, not a common firm like a transnational law partnership). The couple know (because I have told them) what their future obligations are as expatriate Amcit/green card holder. What is interesting is the disinclination of the IRS to involve itself in her prior life: FBAR, PFIC and all the rest. (Fortunately the UK-US treaty has a PFIC exemption for pension funds. But the British equivalent of a 529 Plan, a "Child ISA" is problematic.) I think in her case a fortuitous 7-year residence in the USA has run the SOLs tolled during her absence, including failure to file for foreign earned income exemption. I deal only in conflict of laws in these areas, and they are legion. With double taxation on account of inconsistent characterization (you've mentioned the resident/NRA issue; the Daim case and a bunch of trust beneficiary cases are others). What a mess US (exorbitant?) expatriate tax claims create: the tax treaties can't keep up. And the War Against Terror has led to some tax crimes being assimilated to terrorism, money-laundering and common-law fraud. And then there is extradition: Bruce Zagaris's excellent article is 11 years old already and overtaken by events http://digitalcommons.lmu.edu/ilr/vol25/iss3/9/ (Think of the white-collar defendants extradited from the UK to the US based on a treaty rushed into force ... to fight terror.)


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