Just Me offers advice to newbies to the subject of FBAR compliance and OVDP considerations. To join or not to join. That is the question. This is a must read post.
A link to his Case Study of Communication with the IRS through the entire 851 day process is here.
The purpose of this post is to address Minnows who may be new to Isaac Brock. By Minnows, I mean those of you who were not the original target of the IRS offshore account jihad that started in 2009. Those I call Whales. They were the UBS type tax evading “US persons” living in the Homeland and squirreling away their money in “offshore” secret Swiss Bank accounts specifically to hide it from the IRS. If this is not you, then you can read on. If you are a Whale, or if you have already been around the block on all these IRS VD issues and feel well-informed, you can probably skip reading this post.
If you are a Minnow visiting the Isaac Brock Society you are probably concerned about recent IRS programs and what it all means for you as an US Expat, accidental US Citizen abroad, or an immigrant to America. Some of you are now faced with a hard decision as to what your response will be. You want to know whether or not to join the most recent iteration of the Offshore Voluntary Disclosure Program (OVDP) which may be driven by fear as result of a disingenuous marketing effort created by IRS press releases and totally mischaracterized by a compliant and non skeptical US media. This is a very tough decision that many of you are struggling to make. Far be it from me to give you advice on what you should do. You will not find that answer in this post. However, I can point you in the direction that might help you with the decision that only you can make.
Since I am always reticent to provide specific advice on a blog as to what one should or should not do, I want to be sure you understand that information here does not imply that I am encouraging anyone to do anything other than self educate!
I recognize there are others who will advocate strongly for not joining, or will provide more detailed advice then I am willing to do. I would always caution new readers to be wary of specific advice provided in a causal or generalized way in any online forum. Blogs are a great source of information for continuing education, but when it comes to the OVDI issues, they don’t substitute for good legal advice based upon your very specific facts. But…., before you throw good money at a tax practitioner, you need to go down the self-education route. You need to do some drudgery!
Let’s start now. This may be in the category of conventional wisdom, but it is worth repeating.
I have to assume by now, you have read the About Isaac Brock Society, and know this is a great information sharing site with lots of knowledgeable and good bloggers, but I want to direct your attention to some of the excellent information that is also provided on another blog by a tax attorney professional named Jack Townsend. His blog is called Federal Tax Crimes.
There are many other blogs around the internet, but I am going to suggest that you just focus on these two sites right now. Links here at Isaac Brock will expand your learning universe, but at the start of an educational journey you might try maintaining a site specific core focus to begin with, and Jack’s blog might be a good beginning. Then come back here for additional learning and updates. If you start wandering all over the internet and googling everything, you are just going to get lost and confused. There are many attorneys or bloggers telling you what a great thing it is to declare your sins at the OVDI altar and “come clean.” Run away from anyone that tells you that without knowing anything about you or your specific facts.
Jack’s blog was designed for attorneys and students and not lay people. However, with the advent of the first OVDP of 2009, it has become an excellent source for learning for the rest of us non experts. Jack has indulged many lay readers with his time, answers, and advice. He has provided an excellent forum for information exchange amongst novices on specific OVDI procedures. That is why I am placing a high value on it, and why Isaac Brock lists it as an external resource at the bottom of this page.
Between Isaac Brock and Jack’s blog, you should garner enough good information to make an intelligent decision that is right for you. Once you get through all the reading that I will suggest you do, and you update yourself with the new information that is flowing into here daily, you should be well armed with the prerequisite knowledge necessary to approach an attorney for strategic advice and help, if required. That is why I am proposing that do your own due diligence drudgery first, before you run to some unknown practitioner or blog for help in deciding what to do.
Now, I know this is probably the last thing you really want to do. “Why should you have to do it?” you might say. It is absolutely ridiculous that the US government is treating you this way, and you are angry and a bit fearful. You are not alone. We have all felt that way and expressed it.
You maybe overwhelmed and beleaguered by it all. “Now, you want me to do some additional drudgery too?” you might ask. Just accept that as a fact, and do it anyway! I know, I know! Who in their right mind wants to read legalese, endless blog posts, IRS manuals (IRM) and pour over every nuance of the FAQS the IRS issues about the OVDI? None of us do, I think. But you are reading this, so you must know in your heart that you have to.
The tax practitioners know that many of us are either too lazy or not so inclined to dig into these unfathomable subjects. Some of them have spent a lot of time studying the issues and laws, (or not!) and that is why they charge so much to “take care of it” for you.
Information = power = $.
However, if these experts are not up to speed on OVDI issues, and heaven knows a lot of them are not, the last thing you want to do is pay for their education!! If you are overseas it is especially hard to consult with a good knowledgeable one, but it can be done via phone conferences back to the States on Skype. Therefore, because of the communication ease these days, I would almost never rely on an attorney in your resident country (with some notable exceptions in Canada) for advice on how to navigate the OVDI Minnow processing plant!
At this stage of your education, just take a deep breath, and devote some meaningful time on your personal drudgery. Remember, you are doing this, as much as anything, so you don’t make a wrong choice in the professional practitioner market place, should you decide to go down that route.
It is a “Buyer Beware World” out there. Some attorneys are very good, and know the ins and outs of the IRS VD programs. Some are just looking for your money. There is a lot of good commentary at the Isaac Brock Society to those points, but I want to caution you again. You have to learn to identify them. Self-education is required for you do that.
As fun as attorney bashing can be, don’t discount all of them either. A good attorney who can provide you a sounding board with critical advice at key decision points is worth every penny of the price they may charge. At least that has been my experience.
Should you decide to enter the OVDI program, and again I am not suggesting that you should, there are a lot more strategies now on how to minimize the cost in dollars then there were back in 2009.
The “Opt Out” for all its faults is beginning to look like a good option for Minnows if you are already in the OVDI process. There may be strategies on joining the OVDI and immediately asking to “Opt Out”, or just doing a straight up VD, or a Quiet Disclosure (QD), or just start filing the FBARs and 1040s from now on going forward. There are other approaches too. Some are put forth here at IBS and in other blogs that say you shouldn’t join in the first place. I am not going to advocate one way or the other about that here. Each has its own set of risks and rewards depending on facts and ones need to sleep at night.
Unfortunately, what ever your decision is across the wide spectrum of choices from doing nothing to renouncing your US Citizenship, there will still be a big cost in LCUs. (Life Credit Units). It will consume a lot of your time figuring it all out. You shouldn’t have to this, and we can bemoan it all we want, but there it is. It is what it is! You are going to have to spend something, your money or your time, and it is up to you to work out what you can afford and in what portions.
At this point, I would just say, accept that fact that this drudgery for dummies is something you have to do for yourself. At first, for some of you, it will just be incomprehensible and totally illogical. Don’t get bogged down with whether or not any of this makes logical sense. My wife had a hard time dealing with that, and kept getting distracted on the logic tangent!
For a cynic like me, tax statutes by definition are often illogical, as they are written by lobbyist, passed by politicians for heaven’s sake, defined by technical IRS writers and then interpreted by tax attorneys! And then there is you at the end of the unintended consequence train wreck chain reaction to complexity . You have to deal with the impossible compliance mess that results.
Tax laws can be stupid, arbitrary and capricious, and all that complexity gets magnified every step of way until they are applied to you. We can rant endless about it, but what’s the point other than make you feel better? It doesn’t change anything. So, just get back to the recognition that you have to bear up under the burden of lots of reading and research now to work out what to do. However, if you do it slowly, but surely, the information will seep in and stick in your brain. At least that is how it works for me! You eat this elephant one bite at a time, and surprisingly, you find out that you can digest it!
It is not easy however, and not without heart burn. It took me forever to get my little brain around the legal technicalities of willful, non willful and willful blindness issues and what penalties could apply. Understanding who had the burden of proof, what were the appeal processes inside and outside the 2009 OVDP, what litigation ‘might’ happen or not, took effort and constant re-reading and repetition. These are not natural subjects for me. Then, coming to terms with an honest assessment of where I sat on that spectrum of failure and risk took time.
Trust me on this. If you do the drudgery now, and are disciplined in the incremental learning process, eventually the way forward will become clearer and appear. The right decision for you will emerge.
If you are not already in the OVDI, the “recycled” new one without deadlines for participation, means you have time for that knowledge evolution to occur. That is an advantage you have, that a lot of folks back in the days of VDPs with deadlines didn’t have. Fear, urgency and incorrect practitioner advice drove many to make mistakes in their decision-making process. You now have time to get it right! I don’t think you need to feel rushed into a decision. You also have the advantage of reading about the experience of those who have gone before you on the processing conveyor belt. There is much to be gained from their stories.
As a good example, if you haven’t read Moby’s experience yet, this would be one that you can go to school on. (3/11/2012 Note update at end of this text)
So, if it were me, coming new to this subject, I would start reading the specific blogs which I have listed below. I would systematically work through the ones I provide in a progressive manner, starting with the oldest post first. There will be duplication of information between blog threads, but like any learning experience you need repetition for concepts to stick with you. Some of us need it more than others. And yes, again, it is a drudgery, except for a very few of you sick ones out there that love this stuff! I joke! 🙂 Who could love this? Ah yes, they have the titles like attorney and CPA attached to their names! Mate, they are not like us, but with a little effort, you can become more like them. In these matters you have to, or so it seems to me.
On Jack’s blog I would start reading in May of 2011. I don’t think you need to go back farther than that, although you certainly can using the monthly archives. The selected list below is not exhaustive, or even authoritative, but it represents progressive learning which has occurred as the OVDI was developing, and the controversies surrounding the OVDP were being discussed. I would read every comment and every additional reference provided. If Jack or someone provides a link, I would follow it to see what it says.
The special and unique thing about Jack’s blog is that sometimes he provides excellent and detailed advice around a certain set of specific facts based upon his extensive legal background and knowledge. That is very helpful. He is the professor and is qualified to do so, while I am not! I have found him to be a very valuable resource. Also, he reviews with the readers the decision tree he uses to help some of his own clients decide on their best course of action. I put great weight on what he has to say.
You will also hear many folks asking very similar questions that you may have. You will read about others sharing their experiences and giving novice responses which too can be very helpful. Of course there are plenty of opinions, as we all have one, so take that on board with a grain of salt. Since his site is moderated, if someone gets off on a wild tangent or something, it may not be put up. You don’t have to slug through a bunch of over-the-top rants although, I have had some that have been borderline! LOL
When you get done with all this reading, plus the information you are picking up here at Isaac Brock, you are now armed and ready to talk to an attorney, should you decide you want to (or not). With a strong knowledge background, you can cut to the chase, and not waste a lot of money on an attorney telling you things you already know! They then become a partner in your strategic and tactical decisions, rather than an expert dictator of what you should do!
If you are not willing to do this drudgery than be prepared to pay out BIG $. If you have more money than time, you may be tempted to do that, however you can still incur significant and unnecessary risks in spite of the money spent. By definition those reading here are probably Minnows, and likely not anxious to spend the bucks. You may be a DIY person. I was. You can go through the entire process without giving power of attorney (POA) to anyone. You can learn to trust your own council, if you do what I suggest. Just remember, if you put your OVDI life in a tax practitioner’s hands, how do you judge the quality of the advice you are given? Think about that! If you don’t have a strong knowledge foundation to measure advice against, you are setting yourself up to be fish fertilizer. So, do the drudgery now and become Fool Proof and Process Proof later!
That is the best advice I can give you for now. Hope it helps.
Happy reading!
1. Looking for Mr Fbar (added 3/11/2012)
2. Evolution of the FBAR, Where we were, where we are and why it matters, 2006 by Hale Sheppard (added 3/11/2012)
3. To OVDI or Not to OVDI – That is the Question (Of Quiet Disclosures and Doing Nothing) (5/23/11)
4. Opting Out of the IRS 2009 OVDP and 2011 OVDI (6/14/11)
5. To OVDI or not to OVDI – Part 2 (7/31/11)
6. Of Fear and Hostages: A Mid-Sight Editorial on The OVDI Program and Extortion (8/1/11)
8. Opting Out Considerations by Jeff Neiman (9/10/11)
9. Experiences Inside OVDP / OVDI (9/14/11)
10. IRS Promotes the Success of OVDI and Related Items (9/16/11)
11. Article on OVDI and Beyond – Highly Recommended (10/24/11)
12. Excellent Article on Offshore Accounts – History and Future (11/9/11)
13. IRS will Give Canadians Some Breaks!!! (12/2/11)
15. “Opting Out” of OVDI and OVDP; What is Really Happening? (12/12/11)
16. Tax Notes Discusses Dispute Between the Taxpayer Advocate and the IRS About OVDP 2011 (1/6/12)
17. IRS Re-Opens Offshore Voluntary Disclosure Program (1/9/12)
19. “Opting Out” #2 (3/2/12) (added 3/11/2012)
20. Moby “Opt Out” update (added 3/11/2012)
21. “Experiences Inside OVDP / OVDI #2 (4/4/12) (added 4/5/2012)
22. “Opting Out” #3 (4/4/12) (added 4/5/2012)
23. Open Forum Comments to Congress and IRS Regarding Tax Administration for Offshore Accounts (4/9/12)
24. IRS OVDI June 1st, 2011 Opt Out Guidelines (added 4/12/2012)
25. Article by Scott Michel, a DC attorney on foreign reporting requirements and initiatives. (added 5/8/2012)
Special note on this article, where Scott, good as he is, might have gotten something wrong. This note has been confirmed by Jack Townsend.
Scott says..
Opting out enables the IRS to conduct a full audit, and if the taxpayer can satisfy to the IRS that their conduct was not willful, lesser penalties might be imposed (for example, the non-willful FBAR penalty).
Note: It is not up to the taxpayer to satisfy the IRS, it is up to the IRS to establish willfulness. Anything the taxpayer can present in defense of non-wilfulness is useful, but ultimately, the IRS has to prove willfulness.That requires a high standard!
I think that Scott, like the IRS, slips into assuming “willfulness” if you are in the OVDI. It was what the program was designed for, willful tax evading homeland Whales. However, as we now know, given how it has been administered, and given IRS hyperbolic threats, a lot of benignly non willful minnows were in the program and should be Opting Out now rather than paying disproportional penalties.
26. IRS Warning Letters May be Sufficient for Some NonWillful Violations (5/18/12) (added 5/18/2012)
27. Burden on Government to Prove Willfulness in FBAR Matters. (Added 6/08/2012)
– Link to Jack’s discussion and comments
28. The 2012 IRS Offshore Voluntary Disclosure Initiative by Charles Rettig (Added 6/08/2012)
– Link to Jack’s discussion and comments
29. Making Voluntary Disclosures to the IRS, by Jack Townsend (Added 6/10/2012) Abstract: This paper discusses the IRS Voluntary Disclosure Practice, including tips for the practitioner. Topics include noisy disclosures and quiet disclosures as well, in some cases, just making no disclosure at all. The article places particular emphasis on the recent offshore financial account voluntary disclosure program and its alternatives.
30. National Taxpayer Advocate Report to Congress (6/27/12)
32. Tax Advocate Report Identifies IRS’ OVDP / OVDI As Problem (1/9/13) Good stats and discussion of the Opt Out process, and complexities of Offshore tax filings.
33. Report on Webinar on Opting Out and Litigating FBAR Penalties (added 1/17/13 ) This is a Must Read for those currently stuck in the OVDP and considering Opting Out.
34. Warnings on Continued Government Patience for Offshore Account Ostriches (1/31/13)
35. Report of Government Comments on FBAR Penalties at ABA Tax Section Meeting (2/1/13)
36. Article on Taxing Administration for Offshore Accounts (2/2/13)
37. IRS has New Forms for Offshore Voluntary Disclosure Letter and Attachment (3/23/13) (added 3/35/2013)
38. Hale Sheppard Article on Willful FBAR Penalty Cases (4/26/13)
39. More on the GAO Report on IRS Offshore Disclosure Initiatives (4/27/13)
41. Guest Blog: Analysis of the Data in the GAO Report (5/13/13)
42. New York State Bar Letter to Treasury to Restore OVDP Integrity by Not Ejecting Precleared Taxpayers (5/21/13)
43. IRS Modifies Policy for First-Time Penalty Relief (5/31/13)
44. Offshore Items from Report on NYU Tax Controversy Forum (6/11/’13)
45. Rubinstein on the State of Offshore Bank Account Compliance (6/12/13) (note comment by Jack where he infers that U.S. will have some type of triage that will ignore the minnows)
46. Quiet Disclosures That Don’t Stay Quiet – Civil Examinations (6/13/13)
47. An OVDI Odyssey – an Opt Out Success Story (6/16/13)
Finally: Below is the link to my personal story that is told through the letters of communication I had with the IRS through out the entire OVDP process. It starts with my letters to Commissioner Shulman, and ends with the Tax Advocacy Appeal letter that allowed me to have FAQ 35 (consider this an inside the OVDP opt out) relief. That lowered my penalty from $172K to $25k for a ‘nonwillful’ failure. Still a lot of money, and in retrospect way too much for my failure. However, the process does exhaust you, and like a plea bargain, even when you are innocent, it did allow me to put an end to a 2+year process without any willfulness charge or more lengthy appeal process or expense. Without TAS intersession, (the one bright spot in my story) I am uncertain what would have happened. Maybe I would have had even a better outcome like Moby did with his ‘Opt Out’ which came later, or maybe I would have been fish fertilizer, but will never know.
48. My Story: Letters to Shulman, or a Case Study of OVDP communication attempts with the IRS. An insider’s view of the process. (added 3/11/2012)
One final comment, which I would be remiss not to mention. Phil Hodgen’s has up until recently maintained a fine blog on OVDP and OVDI issues. I used it extensively during by own personal drudgery. I checked it daily. You will notice that Isaac Brock has it listed in the resources, and Petros comment in the thread about Phil is right on point. I like Phil’s style of writing, his cynical wit, and his advocacy on behalf of Minnows. I did do some posting there, but since the majority of my experience sharing was on Jack Townsend’s blog, I decided to keep your focus there in your discovery process.
If you read all the threads and comments that I suggest, you will note that there are often links back to Phil, and you should definitely read what he has to say. There are other blogs by attorneys that I could mention also. I have found many to be reputable and very helpful in understanding the history of how this FBAR mess all came to be. Not wanting to clutter a long post any further, I left them out. Again, if you just methodically work through the Townsend threads I have highlighted you will discover them too. It all depends on your personal tolerance level for drudgery. Not many find this discovery process an exhilarating one! 🙂
An unprecedented leak of documents is revealing the closely guarded investment information of more than 100,000 people around the world, including hundreds of Canadians.
In what is believed to be one of the largest ever leaks of financial data, the Washington, D.C.-based International Consortium of Investigative Journalists has received nearly 30 years of data entries, emails and other confidential details from 10 offshore havens around the world.
CBC News has partnered with the ICIJ over the last seven months to gain exclusive Canadian access to the information. Thirty-seven media outlets in 35 other countries are also involved.
http://www.cbc.ca/news/world/story/2013/04/03/offshore-data-leak.html
@Mike Tarrantes
Wait until FATCA puts U.S. Persons data into 3rd party hands, and all security is GONE!
@just me ….. lol … I am one step ahead : I have closed all of my accounts worlwide already and have only cash in my safe . Who needs all of this paperwork . I have over 30 thick folders with bank statements from the last 10 years … been there,done that and good-bye. Keep it simple is the new mantra !
update on Proving Wilfullness in Civil FBAR Cases by Steven Toscher and Lacey Strachan
April 2013
http://www.taxlitigator.com/main/index.php?option=com_content&task=view&id=12&Itemid=26
and this…
Lies, Dams Lies and Statistics – DOJ’s Tax Promo Stats
“The press release is timed to coincide with the tax filing season. Nothing surprising there.”
This audio CD-ROM program provide updates on the “opt-out” process and pending FBAR penalty cases. In addition, the program examines the procedural and substantive issues relating to the collection and litigation of the assessed FBAR penalties, including taxpayer-initiated litigation.
$ 150 price tag seems to be worth it… see also Parts I and II
http://apps.americanbar.org/abastore/index.cfm?pid=CETX0413T1CDR§ion=main&fm=Product.AddToCart
I also often wonder if former U.S. citizens such as myself could continue to face security risks from third party information sharing from FATCA. The U.K. will be sending information to the IRS via its IGA; I’d imagine that even after closing and reopening accounts that H.M.R.C. or even my financial institutions might accident send off my information because I would still have U.S. indica with my birthplace, etc. This is where form WH-8BEN will come in handy.
Especially because my biggest fear is that U.S. sourced assets or income could, in spite of my expatriation, continue to accidentally face the 30% withholding if being transfered to a non-FATCA compliant institution; but, again, this is where my having submitted form WH-8BEN vs W9 should prevent this issue.
Might actually be more of a problem for those in countries without an IGA.
@monalisa 1776………because my biggest fear is…… take a deep breath and take it easy … you worry too much 🙂 …… stay the course.
Too true,@Mike, Lol.: D
Tax Notes Today has an article summarizing the webinar regarding FBAR penalties and willfulness I was speaking about above > Few Have Been Disqualified From OVDP After Being Previously Cleared, Officials say……
Cases like Williams and McBride will no doubt fuel the government to be more aggressive in selection of the cases that it proceeds with on a willful penalty. Considering a recent court decision on the standard of willfulness, Caroline D. Ciraolo of Rosenberg Martin Greenberg LLP deemed United States v. McBride, No. 2:09-cv-00378 (D. Utah 2012) , “a tough case.” She said the decision seems to suggest that once the government has proved that an individual has signed the return, it has proven willfulness. The court makes that leap by noting that if an individual signed the return, the individual read the return and had knowledge of its contents and must have known about the report of foreign bank and financial accounts, she said. Ciraolo said that willfulness is then asserted because the taxpayer did not indicate an interest in a foreign account on Schedule B and prepare a foreign bank account report.
Ciraolo called that “a scary argument” but said she would not tell clients that they will be hit with a willfulness penalty if they sign a return. “I think it was a case of bad facts making bad law,” she said, adding that the IRS is generally reasonable and is still likely to consider all the facts and circumstances of every case……. yeah right 🙂
McDougal said that he does not read McBride as providing strong support for a per se willfulness penalty. In that case, he said, the judge gave importance to the type of transaction the individual entered into, concluding that it was so inherently risky that the taxpayer was on notice that he would need to read the return carefully. The IRS is training agents not to assert willfulness penalties based on failure to check the box on Schedule B, McDougal said. Instead, they should make a unique evaluation of the taxpayer, considering factors like the individual’s level of training and the nature of the activity, he said. McDougal said that agents will consider all the facts and circumstances, but the IRS may try to make the case for willful blindness if the transaction is “the kind that you should be nervous about.”
My take is still that checking the box no and not including the offshore account income is not per se proof of willfulness.
For those who are foreign residents and in OVDI, a major breakthrough in communication with the IRS has just occurred. The IRS is now allowing its examiners assigned to OVDI cases to send emails to the taxpayer whose case they are handling as long as there is no financial or confidential information in the email. Questions of a general nature can be responded to.
While many outside of OVDI will not want to give their email addresses to the IRS, for those of us who have already exposed ourselves to the IRS as we are in OVDI, this is a cost and time saving development. I just had my first email exchange with my examiner this week.
Last year I wrote Nina Olson complaining that because I am resident abroad, the inability to send an email to someone in the IRS was making it more expensive for me and dragging out the time my OVDI case was in the system. I told her I could not understand why her case advocates are allowed to send email and agents in the regular IRS cannot send email. Nina wrote back and acknowledged that she was speaking with the IRS about this so I bet her tireless advocacy had something to do with this.
Oh, I should add that while we can finally exchange emails, my examiner is still not allowed to make phone calls abroad.
Good for you, for passing that on to Nina Olson, Not that Lisa! I’m sure the combination of that and maybe a few others making the same plus Nina Olson’s communication about this subject. You and others will now have a record of your email communications on your case. Good work!
@Not that Lisa…
GREAT advocacy and persistence on your part. The IRS ban on email was just ridiculous, and even with the TAS, we exchanged tax information in my appeal, so what is the big worry. At least this is a start for those so unfortunate as to be caught up on this. Now, where is the official communication from management to examiners that they can proceed, as I am sure some Examiners will still insist on letters… It would be good to have that link reference if it is to be found anywhere! 🙂
a comment from LeVine on Linkedin : What is even worse is that IRS statistics released to the Taxpayer Advocate show that the 250 people who opted out of the 2009 program paid an average penalty of $15,737. While that is probably a fair and reasonable result under a supposed amnesty program designed to motivate people to come into compliance, it means that the IRS essentially extorted higher penalties from the 10,750 people who stayed in the program. This is not the way a government should treat its citizens. IRS pronouncements lead participants to believe that penalties in an opt out audit would likely be higher than if the taxpayer stayed in the program. But in reality, opting out was the ticket to lower penalties. The government should not be misleading taxpayers.
Just to let you know I am in the final stretch now. My case was taken through the OVDI Opt Out Committee quickly after much protest on my part about being put to the back of the Streamlined Program queue after 2.5 years of waiting. I referred to how OVDI participants are facing Refund Statute of Limitations issues. Hopefully, this will set a precedent for other OVDI opt outs into the Streamlined Program.
The Refund Statute of Limitations is important. If you have overpaid tax payments to the IRS, the money will not be refunded to you after two years unless you specifically request it be refunded before two years from the date of payment.
My agent has informed me that I have been approved for opt out, but into which program remains unclear. This is bizarre and I am waiting to see what comes next.
I have no idea if I have been accepted into the Streamlined Program or not. The one thing that has been made clear to me is that the $1500 threshold is no longer valid for acceptance into the Streamlined Program. There is no range. This is a good thing. All OVDI participants should note this.
A pertinent question is if OVDI opt outs can be eligible for the Streamlined Program since they may have had to file amended returns for compliant years that are in OVDI., e.g., 2010. Also, do only open unfiled years count for entry into the Streamlined Program? The policy in the IRS Is absolutely unclear. So there is no clear answer for me (or my agent) as to which program I have opted out into.
The good is that I am out of OVDI and my agent expects to settle matters soon.
@Not that Lisa…
This is good news. You are trail blazing here for others, (small consolation for a long journey and a BIG expense in LCUs and USD. I think you are right about the $1,500 threshold being mushy. They should change that in their regulations to reflect the reality, but then they don’t want to encourage people to enter it, I think, by leaving it in place just to scare more folks into the OVDP or into continued non compliance.
The best I can say, sorry. My thoughts are with you. Thank God it comes to a head. Incredible ability that you have to rise above it.
@Not That Lisa!,
Thanks for sharing with us where you’re at along your path of horror. My best wishes for an end to it all.
@Not That Lisa, you are incredibly generous to share information and thus help others here to shine light on what is going on.
Your efforts and contact with the TAS will have helped countless nameless others. Thank you.
I hope that the IRS gauntlet comes to an end for you soon, and with the best result possible given all you’ve suffered to date.
So many people and families caught up in this one way or the other. So much needless suffering and expense. So unjust and unethical. And for what?
And as for the changes to the Streamlined Program, are they just winging this as they go along? I really wonder whether some of the IRS agents themselves have started to question the validity and sense of their jobs as they start to see more and more ‘benign actors’ and minnows, and very few whales, and as the submissions are sent to one IRS location, consolidated and then dispersed, and the months and years pass. Do they even know where the submissions are? I suspect that much paperwork has disappeared into the maw and will not be found again.
Good news from Mike
http://isaacbrocksociety.ca/2013/04/25/bloombergnews-writes-about-americansabroad-paying-up-wherever-they-reside/comment-page-2/#comment-303499
Also there are comments in that thread about the IRS moving OVDIs into the streamline program. Not sure of the veracity of the claim, but it might be something to try and verify, as much as one can with the opaque IRS processes.
I.m.o this is potentially very good news for a lot of minnows :
the U.S. government, which indisputably has the burden of demonstrating that the amount of the FBAR penalties is proper
When does an FBAR violation occur—June 30 (i.e., the deadline for filing the FBAR)? December 31 (i.e., the last day of the calendar year)? Neither the law nor the regulations specifically address this issue, but other IRS documents reveal the government’s position. For example, an infamous IRS internal legal memorandum ILM 200603026) states the following:
“The decision to base the FBAR penalty on the highest balance in an account during the year was a policy decision made during the development of the FBAR mitigation guidelines. Section 5321(a)(5), however, limits the amount of the penalty to [a articular amount] or the balance in the account at the time of the violation which, for failure to report accounts, is June 30 of the succeeding year.” (Emphasis added.)
This conclusion is also confirmed in the IRM, which states the following about when an FBAR violation occurs: “The date of a filing violation is June 30th of the year following the calendar year for which the accounts are being reported. This date is the last possible day for filing the FBAR so that the close of the day with no FBAR represents the first time that a violation has occurred. The amount [balance] in the account at the close of June 30th is the amount to use in calculating the filing violation.”
GAO Report…
IRS Has Collected Billions of Dollars, but May be Missing Continued Evasion
What GAO Found
As of December 2012, the Internal Revenue Service’s (IRS) four offshore programs have resulted in more than 39,000 disclosures by taxpayers and over $5.5 billion in revenues. The offshore programs attract taxpayers by offering a reduced risk of criminal prosecution and lower penalties than if the unreported income was discovered by one of IRS’s other enforcement programs.
For the 2009 Offshore Voluntary Disclosure Program (OVDP), nearly all program participants received the standard offshore penalty–20 percent of the highest aggregate value of the accounts–meaning the account value was greater than $75,000 and taxpayers used the accounts (e.g., made deposits or withdrawals) during the period under review. The median account balance of the more than 10,000 cases closed so far from the 2009 OVDP was $570,000.
Participant cases with offshore penalties greater than $1 million represented about 6 percent of all 2009 OVDP cases, but accounted for almost half of all offshore penalties. Taxpayers from these cases disclosed a variety of reasons for having offshore accounts, and more than half of them had accounts at Swiss bank UBS.
Using 2009 OVDP data, IRS identified bank names and account locations that helped it pursue additional noncompliance. Based on a review of cases, GAO found examples of immigrants who stated in their 2009 OVDP applications that they were unaware of their offshore reporting requirements. IRS officials from the Offshore Compliance Initiative office said they have not targeted outreach efforts to new immigrants.
Using information from the 2009 OVDP, such as the characteristics of taxpayers who were not aware of their reporting requirements, to increase education and outreach to those populations could promote voluntary compliance.
IRS has detected some taxpayers with previously undisclosed offshore accounts attempting to circumvent paying the taxes, interest, and penalties that would otherwise be owed, but based on GAO reviews of IRS data, IRS may be missing attempts by other taxpayers attempting to do so.
GAO analyzed amended returns filed for tax year 2003 through tax year 2008, matched them to other information available to IRS about taxpayers’ possible offshore activities, and found many more potential quiet disclosures than IRS detected.
Moreover, IRS has not researched whether sharp increases in taxpayers reporting offshore accounts for the first time is due to efforts to circumvent monies owed, thereby missing opportunities to help ensure compliance. From tax year 2007 through tax year 2010, IRS estimates that the number of taxpayers reporting foreign accounts nearly doubled to 516,000. Taxpayer attempts to circumvent taxes, interest, and penalties by not participating in an offshore program, but instead simply amending past returns or reporting on current returns previously unreported offshore accounts, result in lost revenues and undermine the programs’ effectiveness.
Why GAO Did This Study
Tax evasion by individuals with unreported offshore financial accounts was estimated by one IRS commissioner to be several tens of billions of dollars, but no precise figure exists. IRS has operated four offshore programs since 2003 that offered incentives for taxpayers to disclose their offshore accounts and pay delinquent taxes, interest, and penalties.
GAO was asked to review IRS’s second offshore program, the 2009 OVDP. This report
(1) describes the nature of the noncompliance of 2009 OVDP participants,
(2) determines the extent IRS used the 2009 OVDP to prevent noncompliance, and
(3) assesses IRS’s efforts to detect taxpayers trying to circumvent taxes, interests, and penalties that would otherwise be owed.
To address these objectives, GAO analyzed tax return data for all 2009 OVDP participants and exam files for a random sample of cases with penalties over $1 million; interviewed IRS Offshore officials; and developed and implemented a methodology to detect taxpayers circumventing monies owed.
What GAO Recommends
Among other things, GAO recommends that IRS
(1) use offshore data to identify and educate taxpayers who might not be aware of their reporting requirements; (2) explore options for employing a methodology to more effectively detect and pursue quiet disclosures and implement the best option; and
(3) analyze first-time offshore account reporting trends to identify possible attempts to circumvent monies owed and take action to help ensure compliance. IRS agreed with all of GAO’s recommendations.
For more information, contact James R. White, (202) 512-9110 or whitej@gao.gov.
Jack Townsend comments
Crack down on QDs and bog up their voluntary compliance programs more?
@Mike Tarrantes
I think the quote you are referring to comes from a LONG read by Hale Sheppard. He is the FBAR scholar, as @USCitizen says. It was blogged about by JAT
yes I know but it should be filed under this post as reference for others
@Just Me. So they are going to scrutinize even more QDs and Go Forward.
IMHO, this report from GAO will increase the number of minnows who will just do nothing – not even go forward. People will close their accounts and just give the money to family instead of risking being discovered, given the possible fines. I don’t understand why they don’t see why their policies go against compliance and that this will just not bring more money in. When faced with such penalties, people won’t just trust them given the horror stories that have now surfaced with OVDI.
They basically say that there is now even more risk of doing QDs or GF. They stick to their story of OVDI being the only way to fix the issue, instead of implementing Nina Olson’s recommendations. Go figure…