The post is a comment responding to the blog post – IRS issues Fact Sheet For U.S. or dual citizens residing outside of the U.S., to which Petros commented :
They [the IRS] can’t be trusted when they talk about reasonable cause, because they don’t really indicate what reasonable cause is.
With Respect To The IRS:
The distrust of the IRS is richly deserved. Examples include their “bait and switch” (described above) tactics in the 2009 OVDI, There other examples of people being mistreated in OVDI. See:
The basis of the problem is a sense that the rules are not clear and even if they were clear one doesn’t know how they will be applied. The only thing one can be certain of – if you are an honest taxpayer, trying to come into compliance with requirements you didn’t know about it – is unfairness. But remember that OVDI is not premised on “reasonable cause”. It is premised on “criminality”.
With Respect To The Accountants and Lawyers:
Let me begin with this article:
In my opinion this is an “infomerrcial” to encourage people to enter OVDI without determining whether their circumstances justify it. OVDI was part of “Voluntary Disclosure”. That means entry into OVDI was not required. The media during the summer of 2011 portrayed OVDI as mandatory. The media wrote many articles about OVDI without understanding it.
Next, it is clear to me that this is not an issue of completing tax returns. It is an issue of how to get into compliance (or not) with the laws of the U.S. (however insane they are). For this, you need a professional that specializes in this kind of work. It is quite obvious that many people sought advice from people who were not specialists. They will pay a heavy, heavy price for the advice that they paid a fortune for.
We are now is a position where the lawyers/accounts are not trusted either.
So, the problem remains in a context where: people don’t trust the IRS (as you point out, one can’t be certain what reasonable cause is), people do not have confidence in the advice of lawyers/accountants. Yet, the IRS laws and procedure are so complicated that people need lawyers/accountants in order to know how to proceed (if that is what they want).
Finally, the issue of costs of compliance. Very few people have the money to pay professional fees.
Conclusion: Even though the IRS (in my irrelevant opinion) is attempting to solve this problem, it may no longer be solvable. The distrust of the IRS, the lawyers, and the accountants, coupled with the legal and accounting costs may be too much for people. But, remember that this Fact Sheet directed to taxpayers living outside the U.S.(the subject of the above article) is NOT the same thing as OVDI. Perhaps different treatment can be expected from the IRS if you enter through the door that reads “I didn’t know about the FBAR requirement” as opposed to entering through the door that reads: “Presumptive Tax Cheats Enter Here”. Once again – this is not intended to be any kind of whatsoever – whether legal or otherwise.
It would be good if some others would “weigh in” on this.