This is my letter to the IRS explaining why my 2009 tax return is late. I felt I owed an explanation, since they sent me a little while ago a letter demanding that I file my overdue return and send a questionnaire with my return. The questionnaire did not cover the bases. So I will send the following letter with it. What I want to see is if they will honour their agreement with Jim Flaherty, not to charge late charges.
Dear IRS:
Please note that as a result of the recent crackdown on American citizens living abroad, I have been taking into advisement how best to proceed with settling with your service. As a result of extreme fear that kept me up late at night and sometimes in trembling, I have delayed filing this return.
I took some courage in FS-2011-13 December 2011 which stated (emphasis mine),
As discussed in more detail below, taxpayers who owe no U.S. tax (e.g., due to the application of the foreign earned income exclusion or foreign tax credits) will owe no failure to file or failure to pay penalties.
I have been year after year in tax compliance. I’ve never owed a thing. I still owe nothing, largely owing to business losses, and secondly, to the higher rate of taxes in Canada.
Last year, on February 28, 2011, I relinquished my United States citizenship on the day I became a Canadian citizen. I informed the United States Consulate in Toronto at the earliest opportunity that I had relinquished my United States citizenship upon becoming a Canadian.
I wish that I did not have to do this but given the stress of each year satisfying the filing requirements of both the United States and Canada, I have felt the necessity to exit the door as soon as possible. Perhaps you have seen how in the past years I have filed each year, but that I never owed anything. But it was only in 2010, before filing this 2009 return, that I learned of how the slightest omission or mistake by an innocent person living abroad could result in exorbitant fines, it was more stress than I could handle. Therefore, I decided to relinquish my US citizenship and I will perhaps never return to the United States again. Not because I owe tax, but because I fear the IRS and what could happen to me as an American living abroad.
My siblings will have to bury my father.
Sincerely, Peter W. Dunn
Great letter! Interesting to see what will happen next.
Wow Peter. You are a brave soul. Powerful letter.
@Petros, your letter deserves a wider readership – it really sums up the place many of us are at, whether we’ve taken the step finally, or are just imagining what that would be like ….
Petros: Maybe the U.S. will really start to mess around with you now? Can Uncle allow a person under duress to perform an expatriating act and obtain a CLN? You could be on the road to becoming a textbook legal case …
excellent letter.
That about sums it up. Thanks, Peter.
Petros,
You have expressed it with great eloquence.
It will be interesting to see if you receive any response, and I extend my sincere gratulations for that.
If I may ask, how did you inform the US consulate in Toronto that you had relinquished your US citizen? In person, by telephone, letter, etc.? Did the consulate confirm or acknowedge that the US recognized your relinquishment?
Great Letter Peter!! Good for you!!
Very good letter, Peter. Does kind of sum it all up, doesn’t it?
Great letter Peter, kudos to you, you have my total respect!
I think we take Peter’s letter as an example or form of inspiration, if we decide file 6 years of delinquent FABR’s and or tax returns, when writing our letters of explanation for delinquent filing. We all have a right to express our differences with our government, even if we have no representation 🙁
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*Petros, Did they actually disallow the Foreign Earned Income Exclusion on income you had earned while you were still a US citizen? This sounds like a case for Nina Olson’s Taxpayer advocate group to address. And, knowing Nina, if you have a solid case she will help. She might also highlight it in her annual report to Congress for 2012 which she will submit early in 2013.
Her email address is nina.e.olson@irs.gov
I know your are so utterly disgusted that you might just rather allow sleeping dogs to lie, and if so, that is totally understandable.
You should be able to enter the US as a Canadian citizen, using a Canadian passport, without fear of retaliation. There is no basis for disallowing a legitimate FEIE exclusion because of your having renounced your US citizrenship, of which I am aware. This really infuriates me.
*@Roger, it’s indeed these sorts of potential hassles which Petros is facing that’s scaring me off renouncing, especially whilst still within the open statute of limitations for all the still open returns which involved complex PFIC calculations (and a hefty tax bill taboot)…think I’d be wise to at least wait till those SOL’s are spent, which would be in mid 2016, as I understand things…would rather wait till any possible audit would be much more straightforward.
I believe that to renounce right now would risk me raising red flags even though I’m not a whale.
I also have a feeling that this is why many of the specialized accountants try to rely on form 1116 using foreign tax credits rather than the FEIE via form 2555. It’s hopefully just a coincidence though am cynical enough to believe that renunciants could be hassled via stealth, especially if having been brought onto some sort of black list…which I’m concerned Petros could be on.
It’s why if I do eventually decide to renounce that I would go about it very discreetly, but that’s just my way.
*monalisa Don’t be scared of renouncing. Better sooner than later.
You are a minnow. Your return will be handled by a computer. They will not audit you. Full stop. They could possibly send a bill which you could then ignore.
There isn’t a blacklist for kelp-it’s not worth their trouble.
Courage.
@ Roger Word for word, their letter said this: “Your foreign Earned Income Exclusion, Form 2555/2555-EZ was disallowed because you did not meet the Tax Home Test and either the Bona Fide residence or the Physicial Presence Test. We have changed your tax return accordingly.”
So this is the game. I am a resident of Canada since December 1994. I’ve lived at the same address here in the Toronto area, since 1998. I have spent more than two or three weeks in the United States at a time since 1986. It appears that the IRS is retaliating against me for expatriating. Not having a legal means to do it, they have decided to use the failure to cross ‘t’s or dot ‘i’s as the means to punish me.
*@Petros, That kind of retalition is illegal. If you should contact Nina, be sure and use that word. I believe that would get her attention. She is a really dedicated person who leans over backwards to ferret out illegal actions on the part of the IRS and make sure they acknowledge and correct them. She is a bulldog.
*What a bunch of power- tripping freaks. That letter was bang on! My tax preparer told me that 3 more of her clients just told her that they are renouncing their citizenship.