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*Just been checking whether I actually had an SSN or not (yes I do, but still in my maiden name as I never bothered to change it) and I found this in the accompanying leaflet dated 1977:
“Disclosing your social security number: Any Federal, State, or local agency that asks for your social security number must tell you whether giving it is mandatory or voluntary, under what authority the number is being requested, and what uses will be made of it.“
I’ve just done a quick check on the instructions for forms 1040 and W9 and neither of them does any of that. Is the IRS breaking the law?
Could you refuse to fill in any of their forms if they don’t provide the info?
received:
Dear Mark,
Thank you for taking the time to contact my staff regarding tax policy. I appreciate hearing suggestions for repealing the Foreign Account Tax Compliance Act (FATCA), and I’m glad that you shared your detailed outline on this topic.
The FATCA was enacted in 2010 as part of the Hiring Incentives to Restore Employment Act. Currently, the FATCA applies to taxpayers that have foreign financial assets with an aggregate value of at least $50,000.
I believe the current state of our tax code demands that Congress take action. The current code is too complex and is hurting the ability of the American economy to compete in the global economy. In the weeks and months ahead, know that I will remember your comments as the Senate debates reform of the tax code.
Once more, thank you for contacting me about your thoughts on tax policy. I value your input, and I am glad to hear that you are enjoying being a new resident in our state.
SEnator
Kudos, Mark. And, thanks again for all you’ve been doing there!
Medea Fleecestealer — old social security cards used to be stamped with “this is not an id card” . I remember great resistance to initiation of the numbers which made that happen. During the late 70’s when I began college, the SSN had grown to be used as a student id. A wave came through where that was all ordered to be stopped.
THen things went quiet for half a decade or more, but then SSN’s began to be asked for in credit applications and other stuff.
THat’s what my imperfect memory has.
*Yes, both my parents’ social security cards say they’re not for identification purposes. Mine doesn’t though and it was issued in 1977, but never used.
Just curious as to whether IRS is breaking the law by not telling you that giving them your number is mandatory, by what authority they are requesting it and what uses will be made of it. The leaflet is quite clear that they must do this.
Great site in general, and articles well written and clear. Hale Sheppard writes here as well.
http://taxblawg.net/2012/07/11/is-the-irs-going-easier-on-taxpayers-with-foreign-accounts/
“Is the IRS Going Easier on Taxpayers with Foreign Accounts”
By George W. Connelly
Noooo! But the IRS does seem to be getting more rational in a couple of respects.
On May 18, an IRS Associate Area Counsel for Philadelphia explained
that the IRS may send warning letters in lieu of asserting penalties for
failure to file a Form TD F 90-22.1, also known as an FBAR. This will
occur in situations where the IRS concludes a letter would be
“sufficient to bring the individual into compliance.” The speaker
indicated that the IRS Office of Chief Counsel reviews every proposed
FBAR penalty to ensure “that adequate facts exist to support the
proposed assessment.””………………….
From Jack Townsend
More IRS and DOJ Entreaties to Join OVDP 2012 (12/11/12)
The gravamen of the report is that Government officials are encouraging taxpayers to join OVDP 2012 because of the risk — at least for some — of worse consequences if they do not.
Summary of report is on his web site
@badger
From Eric’s
Virginia Tax Review article attacks U.S. fiscal imperialism, Bernard Schneider writes,
“In 2004, the penalties for individuals who fail to comply with the FBAR reporting requirements were dramatically increased.201 In the case of nonwillful violations, the Service may impose a maximum penalty of $10,000 per violation.202 No penalty can be imposed if (i) the violation was due to “reasonable cause” and (ii) the amount in the transaction or the balance in the account at the time of the transaction was properly reported.203 In addition to the substantial increase in penalty amounts from the prior law, introduction of a reasonable cause standard effectively shifted the burden of proof from the Service, which had to establish that a violation was willful, to the taxpayer, who must meet the reasonable cause exception.”
I hold hope that the IRS will move toward more leniency at least in spirit, if not necessarily the law.
I was born in USA to Canadian born parents. When I was still an infant, my parents separated and I moved back to Canada with my mother where I have lived ever since. I was registered with the Canadian embassy from birth, so my understanding is that I am considered a dual citizen from birth.
I just recently found out via the media issues around FATCA, that all these years I was supposed to be filing US tax returns as well as FBARs. Needless to say, this was a big shock, and I am still wrestling with what to do. I am tempted to just carry on as I have been, and not try to open up a can of worms by entering one of the amnesty programs.
This would be an easier decision for me were it not for the fact that my father still lives in the USA, and will be leaving me a sizable inheritance (I estimate around 1/2 mill). My 3 daughters are also beneficiaries (I estimate around 100K each). They are not US citizens from what I understand, since they were born in Canada and did not inherit US citizenship status from me since I did not live there long enough (thank god!).
Presuming I do not take efforts to become compliant, what could be the impact when the inheritance is transferred to me? Will it immediately be withheld by the US sourced bank due to my recalcitrant status should my bank have already reported me through FATCA? If I manage to keep my US status hidden from my bank, will the money be transferred over with no problems other than the fact that my bank will report the transfer to the IRS since it will be over the 10K threshold? When the bank reports the transfer to my account, I will effectively be ‘caught’ by the IRS, but presuming I never set foot in the USA again, should I care?
One option my father and I are considering, is to change his will to leave my portion to my oldest daughter (aged 19), and have her gift the money back over to me once it is in her Canadian bank account.
Any thoughts or opinions anyone might have on this would be greatly appreciated.
WhiteKat – Your case is a poster child for the horrors faced by Accidentals. You need to find a good professional to lay out the options for your circumstances. At a minimum. The “good professional” can be just as elusive as the “good roofer,” and both are critical to well-being of home and hearth. You have taken step number one on the path of drudgery, doing what only you can do for yourself. Figuring out the parameters of your problems, figuring out who could and should be allowed to help. You need more than bloggy ideas. Home-cooked solutions risk blowing up the kitchen (keep my US status hidden from my bank, never set foot in the USA again, do a fake gift to a 19-year-old). And all is in flux. What you might be able to get away with today you might not be able to get away with tomorrow. Prime example from the post 9/11 world of insanity: not filing FBAR. The more evidence that you produce that you knew what the situation was and sought out evasive measures, the bigger your trouble could become. Not just the loss of assets, but cascading penalties.
@WhiteKat, I imagine that there are thousands of international bank transfers made from the US and reported to the IRS every day, and I really don’t know what the IRS does with all this information. However, with FATCA, one thing that foreign banks are supposed to search for is the place of birth of its customers. You might consider the streamlined compliance procedure recently announced by the IRS, and if you want to renounce US citizenship, it appears that you would qualify for an exception as a dual citizen from birth (no exit tax even if net worth is above $2 million).
Another thing, about the inheritance. If your father lives in the US, he would be subject to estate and gift taxes anyway, although it looks like his assets are below the exemption. But if you are a US citizen, and receives a gift or inheritance from a foreign person (such as if your daughter gives you the money), it is not taxed by the US but you would have to report it in form 3520 if it is above $100,000. The penalty for not reporting is 5% of the value of the gift or inheritance, per month, up to a maximum of 25% (another absurd penalty structure like the FBAR). But all of this is assuming that you would not remain invisible.
With the efforts of ACA and others including me, Congress has finally listened, and I’m hopeful that it will fix this whole thing next year.
*THRILLED to find a letter from the IRS in my mailbox this afternoon (NOT). According to the letter, The Financial Crimes Enforcement Network (FinCEN) received my FBAR for 2007 and was unable to process it because I did not submit the correct version. It looks like my tax preparer used an older version (revised in 2000) for my 2007 submission. It does look quite different from the more current ones. No space for keying in your dollar amounts, just boxes that you tick if your account balance falls within that range. Seems like a simple fix that I can do myself. My heart sinks a bit every time I open my mailbox and find a letter from these guys.
@Marie, Did they actually use the word “process”? And if the information is the same on the old form, why wouldn’t they be able to “process” it. Well, it is Form Nation. I remember making a small error on a declaration form at the Toronto Airport and to my surprise and chagrin, the US official rip it up and said, you did this wrong, start over. I wanted to rip his face off. It was a rude and extreme action to take when simply striking through the error and making a correction would have sufficed.
But processing FBARs? That makes me laugh. They don’t do a damn thing with the stupid declarations except decide if they want to fine you or otherswise charge you with a crime. That’s not called “processing”, that’s called “fishing” and that is fundamentally why the FBAR law is slap in the face to your Fourth Amendment rights.
*@Shadow Raider. Re: your comment ‘With the efforts of ACA and others including me, Congress has finally listened, and I’m hopeful that it will fix this whole thing next year’, I sure hope you are right. Thanks so much for all your efforts. Good people such as yourself give hope to so many of us.
*WhiteKat -The OVDI programs are a trap to be avoided They were never intended for innocent duals. The streamlined programme is a possibility if you are ‘low risk’ and owe no money. Problem is they determine who is ‘low risk’
your bank has no business asking your place of birth. As far as they are concerned, you are Canadian.
When your father passes on, his estate pays estate taxes regardless of who or where the heirs are. Under US law it is the estate rather than the heirs that pays the tax. Currently the taxes only apply for an estate greater than $5MM. This number could change when Obama and Boehner reach an agreement. The best guess is that it will remain at 5MM. Certainly 1MM will be exempt.
There is no reason for the US bank to withhold anything. The estate will have been settled. There is no reason to believe that you will have been ‘caught’ There are hundreds of millions of reports over the 10k threshold Who knows where they go. I imagine a computer looks for patterns.
One thing for your father and you to consider is gifting. He can give 15K per year to anyone anywhere with no reporting required. He can give this to as many people as he likes.
Professional advice is advised. However Caveat Emptor. Some advisors are more interested in helping themselves and they owe their primary allegiance to the IRS.
*Petros, it says “process”, they are unable to process by form. I’m pretty sure it’s because the older forms don’t let you key in the exact dollar amount, that is the only difference between the two versions. The letter goes on to say that forms are updated every three years and that the most current version must be used. I’m instructed to re-submit within 10 business days or face fines and penalties.
Be very wary of these types of Practitioner advice… I just tweeted this.
An Interview with Jon McBride & the Hidden Facts behind his #FBAR Judgment!
http://bit.ly/U1bktP Be careful Joining OVDI is NOT a no brainer
@ Duke of Devon, Thank you for your common sense advice. I agree that possibly even the ‘Stream-lined’ procedure is a trap to be avoided. On the other hand, I have a tendency to over-think things and imagine worse-case scenarios. This whole mess, is a nightmare for someone who by nature is already a ‘glass-half empty, dot your i’s and cross your t’s’ kind of person’.
@usxcanada, Yes, I definitely feel like ‘a poster child for the horrors faced by Accidentals’. I also get your point about being careful not to set myself up with possible evidence that I knew what the situation was. I am still waiting to wake up from this really weird bad dream, tell my family about it, and then have us all laugh at the absurdity.
@Marie, please note that there is no “process” to what they do. Fishing is a random activity and hit or miss. The first reason is that they cannot process many of the forms because the person declares that they have 25 or more bank accounts. Which means that they have no account information from that person. FBAR is a joke, making the United States the laughing stock of bureaucratic nations. This bureaucracy that has one purpose: to terrify law abiding citizens into revealing information privileged by the Fourth Amendment. The United States government has become what the authors of the Bill of Rights most feared: an invasive, high taxing authority with arbitrary and capricious powers to destroy the lives of citizens. I refuse to condone what the United States has become.
@Marie, more practically… by “process” here the IRS just means they can’t transcribe (OCR, or manually type) your old-style form into their computers’ new-style databases. Send them the same stuff on new-style forms like they’ve asked for and dollars to doughnuts you’ll never hear from them about this again.
Jack Townsend has a new post that should interest some here… I put up a comment still in moderation.
ABA Tax Section Webcast on Opting Out and FBAR Litigation
The ABA Tax Section is sponsoring a CLE Teleconference and Live Audio Webcast titled: Through the Looking Glass (Parts I and II): Opting Out of the OVDI Penalty Structure and Litigating FBAR Penalties, on January 16, 2013 1-3pm.. The weib site for the presentation, with a link for signing up, is here. The participants are major players in the OVDI brouhaha, so I look forward to learning from them.
Description
This panel will discuss matters relating to opting out of the IRS Offshore Voluntary Disclosure Initiative, including “opt-out” mechanics and procedures, and issues relating to examination, negotiation and settlement expectations arising in various “opt-out” scenarios. The panel will also emphasize procedural and substantive issues that are emerging in FBAR assessments and litigation.
I just read an article (NY Times blog) which states that if the AMT issue isn’t settled before year end tax returns for 2012 will not be able to be filed on time next year. Just wondering how this should be handled by those who need to file form 8854 on time?!?
This is the article in the NY Times blog I was referring to.
*@Not amused, I thought that everyone living abroad (including renunciants filing 8854) could file for an extension up to October 15 or even Dec 15 in some cases.
Phil Hodgen says: