This is cross posted from the RenounceUScitizenship blog.
This post should be read with a previous post: “The taxpayer, the IRS and the “professionals” – where to go from here“. This post will suggest why, given the IRS shift in policy on March 1, 2011 lawyers had difficulty advising clients whether to enter OVDI (2011). With the exception of the most extreme cases (clear tax evasion at one end vs. Ambassador Jacobson’s 70 year old Gramma at the other), lawyers neither trusted nor understood the IRS. They could not. This post will suggest why. At the outset, it is important to recognize that “hindsight is always twenty twenty” and during the desperate summer of 2011, nobody had the benefit of hindsight.
The facts and issues are summarized by the conclusion of Taxpayer Advocates directive to the IRS on August 16, 2011:
1. From the perspective of the taxpayer:
The decision to enter OVDI had absolutely nothing to do with taxes that may have been owing. It was completely driven by the perception of FBAR (and possibly other “information return”) penalties. It was the FBAR penalties that were the most fearsome.
2. From the perspective of the IRS:
OVDP (2009) and OVDI (2011) were programs that were designed for people who where using “offshore” vehicles to avoid or evade taxes. This is consistent with the stated objective of OVDI 2011 as stated in OVDI FAQ 2.
“The objective remains the same as the 2009 OVDP – to bring taxpayers that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws.”
Note that this focuses on the use of foreign entities to avoid or evade tax . Furthermore, the IRS has made it clear that another important objective was to bring taxpayers back into the tax system. (If you are thinking an amnesty is a good idea, I agree.)
The IRS assumed that anybody entering the program was a criminal and was admitting to being a criminal. Once entering the program a taxpayer was presumed to have acted “willfully”. (For those people OVDI was a pretty good deal.) Note that this focuses on the use of foreign entities to avoid or evade tax into compliance.
It is quite obvious that only criminals had any incentive to enter OVDI. For everybody else, it was a question of: Yes, I want to be in compliance. But, I can’t use OVDI.
3. From the perspective of the lawyers:
Part A – The Mind of the lawyer in 2009:
OVDP (2009) was NOT (at least at the beginning) a program that was understood to presume criminality. The lawyers understood the OVDP information, including FAQ 35, including to allow for the consideration of “reasonable cause” and “non-willfulness”:
“Voluntary disclosure examiners do not have discretion to settle cases for amounts less than what is properly due and owing. These examiners will compare the 20 percent offshore penalty to the total penalties that would otherwise apply to a particular taxpayer. Under no circumstances will a taxpayer be required to pay a penalty greater than what he would otherwise be liable for under existing statutes.”
S. 5314 of the FBAR is an “existing statute” that bars the IRS from imposing FBAR penalties if “reasonable cause” is demonstrated and the FBAR is filed. Furthermore, the maximum “non-willful” penalty is $10,000. Quite obviously the “non-willful” penalty of $10,000 or a complete abatement of penalties due to “reasonable cause” could be much better than 20% of the value of your assets.
Again: the lawyers understood “liable for under existing statutes” to include considerations of “reasonable cause” and “non-willfulness”. They counseled their clients accordingly.
Well, at least until March 1, 2011 …
On March 1, 2011, (two years into OVDP) the IRS simply began taking the position that FAQ 35 did NOT allow for considerations of “reasonable cause” and “non-willfulness”. This was interpreted to be a change in the rules and was characterized as a “bait and switch”. “Reasonable cause” and “non-willfulness” could be considered on an “opt out”. As you can imagine this upset a number of people. (Lawyer Asher Rubenstein has written a good analysis of this.)Taxpayers were understandably afraid to subject themselves to the perceived “IRS thuggery and arbitrariness” on an opt out. Non-willful taxpayers who may have had “reasonable cause” paid far higher penalties than they thought they would have to pay. So much for OVDP 2009. The IRS can do what it wants. Why would a taxpayer pay the non-willful penalty instead of “opt out”? Here is what the IRS said about the “opt out” option:
“If the offshore penalty is unacceptable to a taxpayer, that taxpayer must indicate in writing the decision to withdraw from or opt out of the program. Once made, this election is irrevocable. An opt out is an election made by a taxpayer to have his or her case handled under the standard audit process. It should be recognized that in a given case, the opt out option may reflect a preferred approach. That is, there may be instances in which the results under the applicable voluntary disclosure program appear too severe given the facts of the case. There will be other instances where this is less clear. In the latter cases, the Service will look to ensure that the best interests of the Service and the integrity of the voluntary disclosure program remain intact. In these cases, it is expected that full scope examinations will occur if opt out is initiated. It is expected that opt out will be appropriate for a discrete minority of cases. Moreover, to the extent that issues are found upon a full scope examination that were not disclosed by the taxpayer, those issues may be the subject of review by Criminal Investigation. In either case, opting out is at the sole discretion of the taxpayer and the taxpayer should not be treated in a negative fashion merely because he or she chooses to opt out.”
Would you opt out under these circumstances?
This is bettered described by Taxpayer Advocate in the following language:
“On March 1, 2011, more than a year after the 2009 OVDP ended, after learning that examiners were spending the time to compare the 20 percent penalty to what would be due under existing statutes, the IRS “clarified” its seemingly unambiguous statement in FAQ #35.
The March 1 memo directed examiners to stop accepting less than the 20 percent offshore penalty under the 2009 OVDP regardless of whether a taxpayer would pay less under existing statutes, except in narrow circumstances. Even in those few cases where the IRS was supposedly still applying FAQ #35, it generally did not consider reasonable cause and assumed the violation was subject to the maximum penalty for willful violations unless the taxpayer could prove that the violation was not willful.
Thus, in the absence of evidence, taxpayers who would be subject to the lower penalty for non-willful violations (or given a warning letter or overlooked) outside of the program would be subject to the 20 percent penalty inside the program. Moreover, the IRS did not provide any guidance to taxpayers regarding what evidence they could use to establish non-willfulness or reasonable cause.”
But the story gets even worse. This great IRS “bait and switch” took effect on March 1, 2011. This means that taxpayers who had been processed prior to March 1, 2011 DID have the benefit of “reasonable cause”. This exacerbated the level of unfairness. From that moment on the IRS made it clear that it simply could not be trusted. As proof of that, AND THIS IS A BOMBSHELL (assuming this to be true), according to the results of a request under the Freedom of Information Act (are you ready for this):
“According to the IRS, all of the 3,000 applications to the 2011 OVDI came in after the 2009 OVDP deadline and before the IRS’s announcement of the 2011 OVDI on March 1, 2011. IRS response to TAS information request (July 13, 2011). Thus, it appears that the 2011 OVDI may not have received any significant number submissions after the IRS’s reversal became known.”
In case you missed this, the March 1 shift in IRS policy appears to have made people reluctant to enter OVDO 2011.
Part B – The mind of the lawyer in 2011:
The IRS “bait and switch” of 2011 made people very distrustful of the IRS. It underscored the IRS presumption that OVDI was a program designed for criminals. That didn’t mean that other people couldn’t participate. But, it did mean that participation in OVDI 2011 meant that you were knocking on the door of the IRS and presenting yourself to be a criminal. Hence, it is reasonable to expect that you would be treated as a criminal. Of course you could always opt out and be subjected to the “standard audit”.
Why would any poor U.S. citizen living outside the United States who didn’t know about and couldn’t imagine that an FBAR requirement existed get involved in this. To add to the ridiculousness, if one entered OVDI 2011 the taxpayer had to calculate their own penalty and include a check. This reminds me of:
– if the Chinese government shoots one of its citizens the family has to pay for the bullet (maybe the Obama administration should consider this next time they kill a U.S. citizen abroad);
– Jesus being forced to carry how own cross to the crucificion.
How could any lawyer recommend that anybody but a tax evader enter this program? (If you are a lawyer reading this please comment.)
4. From the perspective of Taxpayer Advocate – Calling in the Cavalry:
Now back to the OVDP 2009 AKA “The Great IRS “Bait and Switch”. But, if you really want to fight the IRS you need somebody with the legislative authority. Believe it or not (and like most of you I had never heard of this until recently) there is a “Taxpayer Advocate in the IRS”. (The IRS probably views Taxpayer Advocate as a tumor inside the IRS.) In any case, Taxpayer Advocate agreed that the change in the IRS position with respect to FAQ 35 was a classic “bait and switch” and cried foul! they wanted to help the taxpayers. Now Taxpayer Advocate has a couple of “big sticks” available. They are “Big Stick – TAO” and “Big Club – TAD”.
Big Stick – TAO: Taxpayer Advocate Order: This usually is used in relation to single taxpayer
Big Club – TAD: Taxpayer Advocate Directive: This is used to correct a more general problem.
On August 16, 2011 Nina Olsen (the head of Taxpayer Advocate) issued a TAD against the IRS. (It is the most well written and well organized analysis of this issue that I have been able to find. Read it. You will learn a lot.) But, for those of you who do NOT want to become “OVDP Historians” the TAD of August 16, 2011 really says:
IRS you have cheated. You duped taxpayers into entering OVDP because they thought they could raise arguments of “reasonable cause” and “non-willfulness” without doing an “opt out”. You are like a slimy salesman who does a classic bait and switch. We are directing you (because we have the authority) to give taxpayers the benefit of “reasonable cause” and “non-willfulness” without an “opt out”.
In “Taxpayer Advocate Speak”, Taxpayer Advocate directed the IRS to:
“Immediately direct all examiners that when determining whether a taxpayer would be liable for less than the “offshore penalty” under “existing statutes,” as required by 2009 OVDP FAQ #35 (described below), they should not assume the violation was willful unless the taxpayer proves it was not. Direct them to use standard examination procedures to determine whether a taxpayer would be liable for a lesser amount under existing statutes (e.g., because the taxpayer was eligible for (a) the reasonable cause exception, (b) a non-willful penalty because the IRS lacked evidence to establish its burden to prove willfulness, or (c) application of the mitigation guidelines set forth in the IRM) without shifting the burden of proof onto the taxpayer.”
Well hey, the IRS, like most big bullies, is always up for a fight. They are not going to be kicked around by Taxpayer Advocate. On August 30, 2011 they issued their response. When you can spend the taxpayers money on the finest lawyers that money can buy, you can come up with a pretty good response. Actually I congratulate the IRS on their choice of lawyers. Whoever wrote their response did a good job. Actually, a very good job. I recommend it to you – an excellent example of lawyering. (Also a good example of why people don’t like lawyers).
Without boring you with the $750 per hour details, the response of the IRS was:
No, no and more no. FAQ 35 does not allow for the consideration of “reasonable cause” or “non-willfulness”. If you don’t like it then, you just opt out!
So, the stage has been set for a big brawl – featuring one division of the IRS (the good cop) versus another division of the IRS (the bad cop). We need a referee to settle our differences. Who is this referee to be? Yes, you guessed it – the IRS Commissioner himself – Douglass Shulman
5. The Perspective of Doug Shulman:
Or rather, what’s a poor IRS Commissioner to do? He is required to settle this fight by January 26, 2012. So, keep your eyes and ears open! This dispute is of great interest to lawyers, accountants, taxpayers, the good cop. the bad cops and everybody else. It is no surprise that this has been the subject of:
– a great thread on Jack Townsend’s blog; and
– a fascinating article in Tax Notes
He has two options:
1. Side with Taxpayer Advocate the “good cop”
2. Side with his own people the “bad cop”
As “Just Me” explains neither option is desirable for Mr. Shulman. So, what should he do? The answer depends on his “long term” objectives. If his “long term” objective truly is to bring people back into the tax system he will side with “good cop”. If his objective is something else, then he will side with the “bad cop”. Neither decision would surprise me. To date, Commissioner Shulman has given little indication that he understands most U.S. citizens with foreign bank accounts are NOT criminals. That does not bode well for the “good cop”. As a recent blog post at Roth CPA (by the way this is a great blog) noted:
“It’s not encouraging that the decision rests in the hands of Commissioner Shulman, who hasn’t lifted a finger to intervene in a process that has infamously treated Americans abroad and U.S. residents with foreign accounts as presumed criminals, hitting minor and harmless violations of obscure rules with absurd fines.”
I suspect that Mr. Shulman’s perception of this may be that:
One the one hand, Mr. Shulman states that:
“Collecting additional revenue for past misdeeds – as important as that may be – is not the main consideration here. It’s equally important that we’re bringing U.S. taxpayers back into the system…back into compliance… so they properly report and pay their taxes for years to come.”
http://renounceuscitizenship.wordpress.com/2011/11/09/bringing-u-s-taxpayers-into-the-system/
and on the other hand:
“… the biggest problem with the administration of the OVDP was the deeply entrenched view of the IRS that the people who entered the program were tax evaders. Lack of consistency also proved to be a problem for OVDP participants, especially those who sought refuge from penalties under FAQ 35 …”
– a lawyer quoted in the Tax Notes article
A decision in favor of Taxpayer Advocate could be the first step on a long long road of restoring some trust. The IRS simply cannot function without it.
You can expect an update on or around January 26, 2012. Until then, keep thinking about the obligations of U.S. citizenship!
Thanks very much for this contribution and for you excellent analysis of the problem. This is very useful.
A very very good analysis, I think, but then as I often say, I am Just me so my analysis is suspect! I have been wrong too often on what I thought the IRS would do, logically speaking. I will be referencing this post in an email I am about to send to my Reporter/Journalist list Thanks for taking the time, energy, LCUs and brain power to articulate it so well.
That is a really brilliant article. Thank you. I was one who followed the progress of the 2011 program and was discussing it with friends and acquaintances here in Paris. Even without all of the details being known a lot of people smelled a rat and after the IRS pulled a fast one in March everyone recoiled in horror. No way was anyone going to go anywhere near a “compliance” program after that. And at these point I’m not even sure people would believe in an “amnesty.”
That is how low trust is at this point.
Does anybody else see similarities to witch hunts and/or Mccarthyism?
Go Nina!
Open letter to Commission Shulman.
Do the right thing! Affirm the TAD. Begin the process of restoring some trust in the IRS. If there is any grace, fairness and justice left in DC, then that is what you will do.
Nina’s position is exactly correct, and I would bet my filed FBARS that a survey of your OVDP examiners would support her findings.
Just man up and admit it. In designing the VDP, no one at the IRS considered the consequences for benign failures of the Minnows: Expats around the world, or immigrants who have come to America but didn’t understand the world’s most complex reporting requirements. You were just anxious to net the UBS evader Whales. You did nothing to inform immigrants that they had any FBAR obligations at their visa issuance, or citizenship ceremonies. You did everything you could to frighten Expats. Filing their FBARs going forward, and doing quiet disclosures to become compliant was not an option. Once a Minnow became aware of their failure, they had no choice but to enter the OVDP and be subject to a 2 year grinding process. To do otherwise, was a willful act, and heaven knows you don’t want to do that! Letters appealing to your office that you find a way to separate Whales and Minnows at the front end of the process rather than in an Opt Out at the end, went unheeded.
Well, now you have the TAD. Please deal with it in a manner that will restore some respect.
Let’s face it. You have had to back track several times in changing your VDPs. Changing some FAQs on the fly here, adding technical adjustments for smaller threshold accounts amounts there, as you began to realize you were netting lots of Minnows just trying to be compliant. Still, you did not correct your press releases leaving the media impression that you were catching more Whales than I think you did. But then, without a FOIA, I don’t really know.
You have allowed your program to be called an amnesty. If compliance was your objective of this amnesty, I do think it has failed. If you really wanted to bring all those Expats and immigrants into the fold, then you should have conducted a VDP the way Canada does. See link below:
bit.ly/wPKJ6z
“The VDP allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information… without penalty or prosecution….the taxpayer will have to pay the taxes or charges owing, plus interest. However, the taxpayer will not be subject to “penalty” or prosecution ….”
Now compare that to your most recent VDP. – 27.5% penalty on 8 year highest aggregate of all accounts and FMV of assets, plus interest, plus a 20% accuracy penalty for tax underpayment!
And you wonder why Expats overseas and new immigrants to America aren’t all that excited about your proposals, and why some immigrants are just silently leaving, and Expats in Canada are mobilized to oppose FBARS and FATCA.
The core problem with the VDPs and new FATCA policies is the US system of citizenship taxation combined with your over-the-top enforcement. Even the Economist in a recent article called “Dutchman Trapped,” noted. “America’s unusual requirement that its passport-holders pay it tax no matter where they live gives many qualifying residents good reason not to apply.”
Good “reason not to apply”, indeed!
You now have expats like me, combining voices with US immigrants in a duet chorus of warnings to new aspiring skilled immigrants, “Don’t do it! Don’t take any action (immigration, marriage, adoption, or US investment) that could trap you into becoming a “US person”. The cost is just too great!”
I just issued two today! Was that the goal?
Bottom line, the last 3 years of VDP jihad with the addition of FATCA, has done serious harm to the US reputation around the world. It is resulting in very negative press while most in Kansas are oblivious. Now is the time to start a trend reversal.
Please show me that you haven’t lost the plot!
Thank you
FBAR_Compliant
#WillShulmandotherightthing? 8 days left to affirm Tax Advocacy Directive to treat Minnow Expats & Immigrants fairly bit.ly/y11z7J
Thought I would post a question and answer from Jack Townsend’s blog… 4 days left for Shulman to affirm the TAS TAD!
The question…
AnonymousJan 20, 2012 09:55 AM
Just Me:
What happens if TAD is tossed out ? Are we at the mercy of one person in this great democratic country in the world ? There is no one who can come to rescue the Minnows ?
The slight thought of this creates the high blood pressure.
My Answer:
Just MeJan 21, 2012 04:32 PM
Anonymous Jan 20, 2012 09:55 AM
“What happens if the TAD is tossed out?”
In the short term, nothing. Things proceed as they are with no changes to any VDP programs, or at least that is how I see it.
In the longer term, either the Commissioner has to report his decision to Congress, or Nina can take the issue to Congress herself. I am not sure which is the technically correct answer, as I have heard and read it expressed both ways, but that is my understanding. I could be wrong. (Maybe I should research it more.)
If it does go to Congress, then it gets visibility on the subject, but does Congress do anything about it?
Given their “broad-brush” views of anyone having an Offshore account as a Rich evader is shown by how poor ole Romney is getting negative press right now without any knowledge of his compliance status.
Then, there is the provincial view of Expats as expressed in this comment by well known Homeland Offshore Tax cheat Charlie Rangel, I have little hope they will do the fair and right thing.
“I hope that one day we will just publish the names of people that America has given so much to and that they care so little about that citizenship that they would flee in order to avoid taxes.”
Implication: If you are an Expat, you must be fleeing to avoid taxes.
Poor Charlie didn’t even understand the IRS rules he was writing and voting for. His failure to report his rental income on his offshore condo got him censored. Not sure what his IRS penalty was, but bet it was less than yours!
Of course, now he has learned, and probably regrets that statement, still there are those in Treasury that probably think like this…
“If you’ve gotten your riches from America, you should pay your fair share of taxes. These expatriates are really like economic Benedict Arnolds.”
– Leslie Samuels, Assistant Secretary for tax policy, U.S. Department of the Treasury
and there are more classic statements in similar veins going back years, but will give it a rest.
As for Immigrants to America, it is all your own fault for not reading those 77,000 pages of tax regulations before you applied for your Greencard! Or, so their reasoning would go.
They feel no responsibility at all to work with Immigration and provide full disclosure offshore tax rules with every Visa Application and Citizenship ceremony. The SEC has stricter disclosure provisions on Corporations for financial products with less complex rules than the Tax laws. But never mind. They didn’t even enforce those either.
So, for the IRS, “bait and switch” OVDP actions (intentional or not), and education via fear and prosecution is SOP, There is only the TAS standing in the way. They would just as soon ignore Nina, and I am sure that the underlings that designed the OVDP program are probably lobbying Shulman strongly to “Not affirm.” Let’s see what he does. Will be interesting. 5 days left until January 26th.
So, that is what you are up against.
Remember, Shulman calls all his VDPs “highly successful” Hard to back away from his public statements. From his end of the hunting rifle, looking down his narrow field scope, I am sure that he sees it that way. You are experiencing what the deer feels.
PS, You might warn your potential immigrant friends back home what to expect before they come to America. If they have any assets or skills, the Offshore tax issues (and penalty regimes) might take some of the gloss off that Visa application.
What wasShulman’s reply eventually? Is there any link or discussion about that posted anywhere? Do inform.
~ A minnow who didn’t know she was one.
@Minnow-to-be
He has never bothered to reply. At least nothing has been made public re a reply. Shows the arrogance of the man.
Welcome to IBS
@Minnow-to-be Welcome to Isaac Brock
There was a Tax Notes write up about the lack of response…. It is only available by subscription, but here was the summary that Jack Townsend add to his news feed…
Wesley Elmore, Shulman Won’t Formally Respond to Taxpayer Advocate Directive on OVDP, Olson Says, 2012 TNT 34-6 (2/21/12)
This article reports the following:
1. IRS Commissioner Shulman has no plans to respond to the taxpayer advocte directive (“TAD”) regarding OVDP.
2. There is some confusion regarding whether Commissioner Shulman is required to respond.
3. Apparently Commissioner Shulman is not required by law to respond except to recommendations in the Taxpayer Advocate’s report to Congress; a separately issued TAD does not require a response.
4. Despite his nonresponse, the Commissioner and the Taxpayer Advocate met and had what she described as a “good meeting.”
5. The Taxpayer Advocate is not giving up the issues presented and suggested that the TAD requires a more formal response. The article notes:
Olson said the TAD came about because the IRS was treating everyone participating in the OVDP with a “one-size-fits-all” approach that assumed they were “all people trying to rip off the federal government.” The IRS should recognize that there are different categories of taxpayers in the program and should clarify what taxpayers in each of those categories should do under the program, she said. For example, taxpayers with no tax liability or minimal liabilities should be told to “go and sin no more,” while taxpayers who show reasonable cause or who meet a non-willfulness standard should be allowed to opt out of the program, Olson said. She added that she believed some examiners were trying to provide taxpayers with such options before the March 2011 memo was released.
Thank you @Just me for posting this information here.
@ Emma
Welcome to you from just plain Em! I haven’t seen your name before but then I’ve only been here since late March. You’ll find tons of info and loads of support from this great site.
Hi just plain Em! :). I am a new minnow who is afraid of entering the ocean and but also afraid of getting caught in the net on shore.
@ Emma
You are among many minnow friends here — some getting themselves “schooled” in the ways and means of the IRS — some providing commiseration for fellow minnows — some providing posting articles and insights for everyone’s benefit — some gearing up for battle against the injustices of the IRS’s all-encompassing big net — some sharing their experiences as they find themselves being mistreated as though they were tax-evading whales. If you feel comfortable sharing your story by all means do — mine and others are below in the Participant’s Stories section.
@Emma…
If you are a new minnow visiting here trying to catch up on this “situation”, it is not an easy one. There is a lot of hyperbolic rhetoric out there by practitioners about what you have to do. Be very careful of whose advice you take. The pursuit of knowledge in these arcane areas does consume you after a while. If you are trying to decide the best course of action related to compliance, then you might start with the Drudgery. That will help you build your knowledge base in a systematic way, I hope, so you make good informed decisions.
http://isaacbrocksociety.com/2012/01/28/the-ovdi-drudgery-for-minnows/
Good luck, and welcome aboard.
@ Emma
Good advice from Just Me. You are probably reading like mad right now but when you come up for air we all hope you will pose some questions to see if the collective brain here can help — it often does. I’m working on my solutions and would never have known what steps to take had it not been for advice received from Brockers.
Thanks @Em and @Just Me for your words of advise. My problem right now is deciding between a CPA and an attorney. Have come to know of a CPA who has handled about 70 other cases last year alone and has said that there might be various ways to go about it. Attorneys are exorbitant and I have no idea how many hours are going to be put in it and if at some later point I can appoint one. I am mad that after having been honest and paying my dues to the ocean and the river, I am still to be fished out by the ocean for forgetting to give them their share of it and also for not having told them of how many dues and how many schools I had associated with…how can that be fair for one who was just trying to be honest!! Have never stepped outside the line in my life and this is just scary and maddening at the same time.
@ Emma
I’m not sure where you are at but I live in Canada (my big sin — didn’t know I was supposed to hand in my green card via form I-407 many years ago) but the fear subsided once I got it through my head that Canada, at this point, will NOT collect FBAR penalties for the USA and I don’t intend to cross the border anyway. For others it is much harder. Try not to panic — words of hindsight because I did that very thing but I’m okay now … mostly just still mad at the injustice. Good luck!
@Emma…
Take your time Emma. You are under no deadline. Neither of those choices may be right for you. If you decide to enter the OVDI, and frankly for Minnows I am not recommending it, but each has to make their own decision based upon their facts. It really is a fact dependent decision.
The key point if you decide to join, you can do it yourself. You don’t have to pay exorbitant additional costs, be it CPA or Attorney. I know, as I did it myself, but if you read my story you might reconsider why you would want to put yourself through it. They are unyielding inside the program, and there is significant IRM discretion outside it. It is not a foregone conclusion that you need to enter. Set aside all hyperbole from Practitioners and the IRS about penalties and threats.
http://bit.ly/y5NQr4
I would dare bet, that the CPA just processed those 70 without asking the question if it appropriate for them to even be in the program.
Like I have said, you have to do your own drudgery, so please don’t willing get onto the fish processing conveyor without being fully informed. Once on, they will scare you into not getting off, or Opting Out, and frankly that may be the best option for a Minnow. However, if you are going to Opt Out, then the question is, why get on in the first place? You need time to mull that over, and be sure you know all the nuances of the program and your Options. A limited consultant good OVDI attorney, with a proven track record might be worth the money once you have enough knowledge to make it a collaborative affair. But again, you do not need to pay them to do clerical work, or even represent you in the program. Save them for the Whales!
So, Please,Please, Please, I implore you, read more as I suggested, as I think you will find that many minnows that got caught in that net have some sights and views of why you should not go there. This has nothing to do with being honest, or doing what is right, it is about good risk assessment to minimize the pain this will cost you.
I am readinggggg as much as I can and trying to gather all the info I can. All I can see and think of is this. Have lost sleep and appetite already and all I can think about is this. To be or not to be!. @Em, Am not a Canadian, but an immigrant who foolishly did their taxes themselves all these yearsss…..
@Emma
I second what JustMe says. Do NOT enter OVDI unless there is a very specfic reason to, that is based on an analysis of your facts.
The vast majority of these “cross border professionals” are simply in the business of just getting people into OVDI. Once in,the “opt out” is the only mechanism available to you. I have talked to a number of lawyers and accountants about this. Incredibly, many of them will just try to get you into OVDI without even considering your facts. Now, I am not saying that are ALL bad (but I think some of them are for sure). Some of thelm are afraid that to NOT recommend that you enter OVDI means a “circular 230” (don’t worry what that is) violation.
In my experience (and this may not be a big enough sample) I have found that the lawyers are much quicker to try to get people into OVDI than the accountants.
In any case, OVDI (the small number of exceptions disregarded) is a great deal for the lawyers and a great deal for the IRS. It is the worst possible thing that could happen to you.
If you want to read about some other options:
http://renounceuscitizenship.wordpress.com/2012/03/09/u-s-tax-compliance-the-costs-of-compliance-the-costs-of-non-compliance-and-how-to-choose-a-lawyer/
Promise that you will NOT enter OVDI without really thinking this through and analyzing your specfici facts!
@ Emma
Taxes should be doable by yourself but the IRS complexity goes beyond even the experts’ expertise sometimes. You are not foolish, just another minnow who did her best. Even Nina Olson, a taxpayer advocate, says 1040s are nearly impossible to get 100% correct. Don’t beat yourself up about this. Keep reading, with deep breathing breaks, and see if a plan begins to form. Many of us have been through the lost sleep, lost appetite, phase but with minor relapses we are pulling through. Remember the IRS is looking to reap a huge feast from the big whales and small fry like us aren’t as appetizing to them. The penalties are absurd of course and the bad press for pounding on innocent minnows would further tarnish the IRS image.
@Emma…
Well, then you definitely need to take your time. I do think that a certain group of Practitioners and CPAs are especially preying on new immigrants (or old ones for that matter.) as it is easy money for them. I see it in all the postings from immigrants asking questions on Jack Townsend’s blog (excellent blog) which the links in my Drudgery piece take you to. Your group’s plight is totally unrepresented in any media stories, but I know the OVDI is having significant impacts on you. If the IRS ever would release stats on the OVDP / OVDI programs, I think we would find a high percentage of Immigrants who have been ground into fertilizer by these programs that Shulman now trumpets as success. Fear drove them into the IRS net. They should have never been there in the first place, and the IRS should have used a catch and release program, not an oil extraction process.
I wished it wasn’t soo hard for you, and I really do feel for you, but take your time with the readinggggggg. It took me, with English my sole language, a long time to digest the understanding of all this complexity.
Thanks @Renounce, for weighing in. Immigrants who post here need our special attention and direction otherwise they are just fodder for the processing mill. It is shameful how the IRS is conducting its programs.
Although, am not a new immigrant, was doing all the paperwork myself. :O. Am not even a permanent resident(just one who is resident bec of substantial presence), let alone US citizen. My taxes due after deducting taxes paid at the source of income, might come to be minimal, it is that FBAR that is the main culprit. Would not have minded paying the fines for late taxes and interest – it is the big chunk of my hard earned, tax paid money that they want, that maddens me.
@ Emma
Well if FBARs are the main problem (I didn’t do any either — and won’t) then you deserve to be mad and I wish I were wise enough to advise you. There are others here who are more experienced who will offer some suggestions I’m sure.