I received this from Just Me:
First of all I am sure you have already seen the spat of stories about the VDP, so won’t belabor it here.. However, earlier today I found some other interesting comments /stories which are below. I conclude with something I posted at the WSJ.
IRS Offshore Programs Produce $4.4 Billion To Date for Nation’s Taxpayers; Offshore Voluntary Disclosure Program Reopens
133 stories most characterized as amnesty for dodgers and tax cheats..
”The IRS recognizes that its success in offshore enforcement and in disclosure programs has raised awareness related to tax filing obligations. This includes awareness by dual citizens and others who may be delinquent in filing, but owe no US tax. The IRS is currently developing procedures by which these taxpayers may come into compliance with US tax law.”
There is already a process in place, it just isn’t very pleasant and does contain some risk.
While Canadian politicians and the US Ambassador have made similar promises, this is the first time the IRS has made such an announcement. It remains to be seen what these procedures will entail and whether they will be different than the IRS announced in FS 2011-13 issued on December 7, 2011. It is, however, a very promising development.
Story of FBAR and FATCA in the Swedish press.
Lisa said… January 9, 2012 12:19 PM (Townsend’s blog)
The international press is reporting on FATCA and FBAR consequences, even in foreign languages. A full page spread on FATCA and FBAR appeared on Monday, January 9, 2012 in Sweden’s Dagens Industri print edition which, is the Swedish equivalent of the FT in the UK and the WSJ in the US.
Before listing the points made in the bylines, Lisa would like to thank Just Me and Canadians. Their torrent of activity inspired her to speak with the press in her country. While it is just a drop in the bucket from that part of the world, the ocean is made of up of a lot of drops …
This article is interesting because it reports how one American abroad in a non tax haven is getting beat up from both FATCA and FBAR. High penalties, high bank fees and account denials. There is also a sidebar that points out, based on interviews by the author, that most banks and financial advisers in Sweden have no idea what FATCA is. When they find out things could get worse for Americans. Many of the smaller financial institutions have already closed out American customers while the bigger ones do not yet know what they will do. They are considering charging Americans higher fees.
The reporter is Martin Rex (email@example.com). Last May he wrote an article in the Swedish press called “American Taxhunt can cost Swedish Banks their Shirts”. It just goes to show that other countries have given FATCA a lot more thought than its US authors have.
The article is not in the online version of the newspaper. If you want a copy for your compendium of FATCA and FBAR articles so you can run it through Google Translate yourself, try writing the author.
The main article has the title “Pressure on Customers” with the byline “The USA’s intensified hunt for tax cheats has hit American citizens in Sweden hard. In addition to receiving high fines, those who make a mistake in the labyrinth of difficult forms also risk being banned from Swedish banks.” The bylines in the main article state: “Americans blacklisted”. “Insecurity in the (banking) branch” “Heavy fines”.
The case of Lisa, a Swedish-American resident in Sweden is described. She was initially denied an bank account because she was American, but eventually got an account because she did not live in the States. The author states that she was also subject to FBAR fines for not sending in the FBAR form on time. He says that Lisa is not alone and it could happen to any American anywhere in the world regardless of whether they are a citizen or have a Green Card. He says that Americans can lose their life savings by being ignorant of these filing requirements.
He ends with a quote from Lisa. “I am in shock. How can it be possible to owe money to the IRS for the rest of your life for not filling in a form?”
Pretty good analysis!
Posted by renounceuscitizenship — JANUARY 9, 2012
You do the Math
This from a group that supports FATCA and lobbying in DC in favor of it, as I understand it.
New Post Alert
by Robert W. Wood
Image via traveller.easyjet.com About 30,000 taxpayers came forward over the last 2 years to disclose Swiss and other accounts. See What’s Next for Offshore Accounts? The IRS knows there’s a much larger number who haven’t. And the IRS is doing something about it. There was one amnesty program in 2009 and another [...]
Topics: Entrepreneurs, International, Investing, Options, Personal Finance, Taxes, Taxes and Law
Finally, on the WSJs story on the newst IRS VDP, I finally posted something tonight in the comments section that I will try to put in comments on as many stories around the web as time and my other projects will allow.
Here is what I said…You have heard it all before…
Just Me wrote :
Oh my… Where to start? The story of the past 3 years of IRS voluntary disclosure programs (VDP) are so poorly reported in the press, that I can understand why few understand what really is going on.
First of all.. What is an amnesty? It is better described by how a civilized country, Canada, does a VDP. Here is their description.
“The VDP allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information they have not reported during previous dealings with the CRA, 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 for those amounts accepted as a valid disclosure.”
Now compare that with what the IRS does, “27.5% penalty on 8 year highest aggregate of all accounts and all assets, plus interest, plus a 20% accuracy penalty for tax underpayment!” No agent discretion allowed.
You will see why there is little enthusiasm in the Expat or new immigrant community for what the MSM mischaracterized as an amnesty. Compared to jail, I suppose it is a great deal for the real Whale Homeland tax evader, but a lousy one for the Minnow Expats or new immigrants who fully didn’t understand the most complicated tax system in the world.
Don’t be fooled by those lesser percentages for technical thresholds which can still be significant for the middle class of modest means, who upon learning of their benign failures, just want to become compliant without financially ruining their lives. It also has taken up to 26 months for some to go through the VDP process, and that cost in Life Credit Units (LCUs) never gets accounted for on a reconciliation balance sheet. It is a real cost too!!! Ask anyone who has been through it.
Secondly: In the January 3rd WSJ opinion piece by William McGrun called “Washington’s Assault on American Expats”, you can read quite vividly some of the impacts of the US misguided taxation policies on 6.3 million US expats (and even more “US Persons”) who have come afoul of the citizenship taxation model. Did you know that, America is the only OECD country that taxes its citizens who reside abroad? Read the 150 comments posted there, and you will get an eye opening education.
Third… What to you really know about the 2009 VDP? What was the profile of those that came forward who the media likes to call “Cheats and Dodgers”? The MSM never asked a question, and the IRS never released any stats other than totals, so how would you know? Was it effective in increasing compliance? What are the % of those filing FBARS before and after the effort? And why don’t you know? That would be a key indication of success, wouldn’t you think?
I don’t know either, as the IRS won’t tell us. Would require a FOIA. In the meantime I would encourage you to read this excellent analysis by Scott Michel and Mark Matthews about the “sea change” that is happening under Commission Shulman.
Be prepared for some unexpected observations like…
“…..private practitioners encountered a broad range of culpability. There were a few of the stereotypical offshore tax cheats — native-born U.S. citizens who, on their own accord, decided to evade taxes and developed plans to use offshore entities and accounts to shield from taxation funds earned in the United States. That is the media image of offshore tax evaders and an image promoted by IRS public statements. ……. It may surprise most observers, but we saw few cases like that. It is anyone’s guess why. It may be that this aggressive and risk-prone group was prepared to let it ride. Or perhaps there simply are not as many of them as anticipated.”
Additionally, you might turn to the Tax Advocacy Service (TAS) within the IRS for some good insight. They have issued only 6th Tax Advocacy Directive (TAD) against the IRS in their history. It is related to the unfairness of the VDP. You would think that a MSM reporter who really wanted to understand what was happening might write something about this, wouldn’t you?
No, not yet, so here is a link to the Tax Notes story about the dispute between the TAS and the IRS.
And here is another analysis that was done by some Canadians who are much more familiar with these issues than most Americans.
Finally, watch for a January 26th Shulman announcement, if the MSM reports it. See if he does the right thing and upholds the TAD that Nina Olson has issued. Then you will know whether increasing compliance is really the objective of these efforts, or is it something else. Is it really just about collecting tax revenues and penalties no matter the cost to the unintended victims of this overzealous and misdirected program?
Do the right thing Commission Shulman. Do as the TAS has directed your VDP department!