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! 🙂
My OVDI Ordeal is over – for the most part. I recently got the last of my refund checks. I spent a grand total of 1025 days, or 2 years, 9 months and 20 days in the system. What a waste of time and money. Hopefully, the protests I made, letters I wrote and the signing of releases of my data so it can be presented to Congress will help someone else.
I also filled out a survey for the IRS. They really want the feedback. They sent me 3 letters telling me the survery was on its way and encouraging me to fill it out, which I did. In one way it was difficult as the survey only asks about your examination. I felt the examination was very professional and that my agent respected me. However, the entire OVDI program has been poorly thought out and administered and was inappropriate for minnows. So I filled out the boxes that were clearly related to my agent positively and for anything else I slammed the IRS and wrote copious comments. Will it help? Who knows? At least I tried. Oh and by the way, just to show you how little they understand about taxpayers overseas, they sent me an envelope that was postage paid only in the US. Again, if they IRS wants international taxpayers to be compliant, they should treat them like they exist and are respected. The lack of international pre-paid mailings is just another manifrestation of the lack of recognition of the IRS of the circumstances of Americans abroad.
I am still stuck in IRS limbo with respect to one thing. The IRS could not decide if one of my accounts was a trust or not. They said they will need to make a Revenue Ruling on this type of account as millions of people have this type of account. So maybe they will come back to me in several years and tell me (and the millions of other people) that we all have to fill out 3520 forms. However, my agent very graciously acknowledged that I would not be subject to fines because even the IRS did not know how to treat the account. I wonder how they will treat the multitudes of other taxpayers.
I have to go finish my tax return for this year now. After lots of simplification (closing PFICs at loss), its now down to 46 pages for the same income I declare in 3 pages in my country of residence. I have a really simple situation and I do not see how the US declaration can ever be fewer pages than this. Oh, by the way, I owe -0-.
@Not that Lisa!
My heartfelt congratulations on making it through your cleansing by fire. I hope to be there too one day, but I dread the process. 21 months in OVDI with still no word from the IRS! They are holding up our renunciation plans at this point.
Thank you on everyone’s behalf for filling out the survey. I hope you used your middle finger to type with, I hear it helps. Too bad those who’re supposed to read it are on furlough 🙁
Sorry, I’m having an OVDI induced anger moment. Again, overjoyed that it’s over for you (well, sort of over). WTF can’t they just be magnanimous and grandfather you on this ruling that they can’t get their sh*t together on, when there are much bigger fish to fry?
@Not That Lisa,
Very grateful for your sharing here, the input you are giving to the IRS via the survey, the agreement to let your example be presented to Congress, and all the useful information you graciously and altruistically posted that gave others an insight into the opt out process and how to put together and argue a reasonable cause case. It will help many.
Re; ….”The IRS could not decide if one of my accounts was a trust or not. They said they will need to make a Revenue Ruling on this type of account as millions of people have this type of account. So maybe they will come back to me in several years and tell me (and the millions of other people) that we all have to fill out 3520 forms. However, my agent very graciously acknowledged that I would not be subject to fines because even the IRS did not know how to treat the account. I wonder how they will treat the multitudes of other taxpayers. …”
And we are suppose to know if the IRS doesn’t? Alternatively, we can try to file forms even if in doubt – but how to fill out correctly if in doubt what it is? Even a tiny simple TFSA in Canada – which is a simple tax free savings account requires the complex 3520 and 3520-A – which I could not for the life of me figure out how to apply. Zero US tax was owed, but I had to get professional help. Some wanted me to sign an unlimited terms of agreement to do it. Others said they do not ever file that form and advise clients to treat it as an ordinary savings account because the IRS hasn’t ruled on it. Damned if we do, damned if we don’t – or if we make an inadvertent error – even if it would still not result in any US tax owed.
We can’t live this way. Two years on, and 5 years since our Canadian federal government invented the TFSA – and still urges ALL Canadian citizens and residents to open one – despite our Finance Minister Flaherty knowing that the Canada-US tax treaty does NOT exempt them from US taxation or reporting and confiscatory penalties. The US refuses to assist in any way – not to make the reporting simpler and more comprehensible, not to exempt the TFSA. Not to clearly rule one way or the other on TFSAs, RESPs for our childrens university tuition savings, RDSPs for our dependents with disabilities. And we lose the grant portion of the latter two – which come from our own home country taxes that we already pay into.
The US has NO respect for any of its ‘taxable persons’ abroad. And we are at the bottom of their list of concerns. That is when they recognize us at all. When IRS personnel are quoted saying that they ‘serve’ US taxpayers, it is another example where we are only ‘US taxpayers’ when they want our ‘foreign’ money, but not when they are called on to provide service. There is no reason why they couldn’t filter out those who owe zero or minimal US tax out of the OVD and process them faster and more simply. They would not treat US residents this way if they owed zero tax.
Let the expatriations continue – as the US confirms with every day that passes without remedy or acknowledgment or any real change in treatment – and even the IRS admits that divesting ourselves of citizenship will be our only real remedy – if we have the right circumstances to run the gauntlet of the expatriation processes unscathed
@bubblebustin – Thank you. You should not let OVDI postpone your renunciation plans. I know two people in OVDP and one renounced in June and the other in August with the approval of their lawyer who is an OVD expert and is often quoted in interviews.
@badger – I understand your frustration. I feel it. I am fighting for those south of the US border at the moment. The account that the IRS does not understand is from south of the US border and is a mandatory Social Security Account. Mexico and Chile have privatized their Social Security plans and as their Social Security plans do not look exactly like a US government Social Security plan, it does not compute for the IRS. They are lost. My position is that the account I have is a Social Security account and that I should neither have to declare it as a PFIC or a trust because it is a government Social Security account. The IRS is moving at a glacial pace even though I have been able to get lawyers and CPAs contacting them for free (unbelievable, huh?) to try to help them to understand the account. I have also been trying to make them aware of the reporting fiasco they would create if suddenly everyone with Mexican ties had to be declaring their mandatory Mexican government AFORE Social Security account as a PFIC and trust. It would be worse than what Canadians went through with Form 8891.
@Not that Lisa
Do those people you know of who renounced while in OVDP have their OVDP cases in process? The last thing I want to do is become ‘covered’ because I can’t certify 5 years of tax compliance because my OVDI box is sitting in a corner somewhere without some kind of determination having been made on our ‘compliance’.
Their cases have not been handled yet. I think you have strong arguments for showing that you have complied by submitting your returns to OVDI. Even if there are issues the IRS wants to take up in the OVDI returns and is slow about getting back to you on them, that does not change the fact that you complied and filed the returns.
@not that Lisa
I have my apprehensions. Sending tax returns in to the IRS is not the same as certifying. What if there is a dispute and we don’t agree with their assessment?
In OVDI you will opt out and then go through a normal examination process. If you don’t agree on the results of the exam, you will follow the same process as you would if you had never entered OVDI, e.g., Appeals and if that does not work, Tax Court. Going through that process. does not mean that you are not compliant. I understand your apprehensions. Perhaps for you, it is better to wait until you have certainty.
@ NotThatLisa,
re; …”You should not let OVDI postpone your renunciation plans. I know two people in OVDP and one renounced in June and the other in August with the approval of their lawyer who is an OVD expert and is often quoted in interviews. ..”
That too is very very valuable. I believe that others may feel that due to prejudices held against those who renounce or relinquish, and the deliberate IRS and Treasury mis-characterizations of all those who give up US citizenship as tax cheats and evaders with ‘hidden’ ‘foreign’ ‘offshore’ assets, as well as ALL non-filers abroad as the same, it is very very hard to believe that we will be treated fairly by those living in and employed by the US – particularly in the IRS and Treasury in the current aggressive crusade mode.
I do not trust the US, the IRS or Treasury to treat me or anyone else abroad fairly. And that is not counting what they have done to US residents who were new immigrants with pre-existing accounts and assets.
I am not alone in this.
If we could believe that the US would be reasonable, and that the process would be fair, cost-effective and timely, more would come forward and either settle things in order to exit, or join the system until such time as they decided whether to remain US citizens with all the unecessary and punitive baggage that has entailed. But, so far, it has taken so much effort and time and costs and pain, and we are still nowhere near that.
I do not believe that we will ever achieve fairness for those living outside the US. I will keep trying on behalf of those who cannot renounce or relinquish, but for myself, I cannot forget what I paid needlessly in pain, fear, lost sleep and peace of mind and body, professional fees, and the costs to my non-US family. The US has gained no US taxes, as, like so many of us, I owed none. But, what it will receive is a substantial and motivated civil opposition abroad – and, also the profound disrespect and lasting suspicion of our fellow non-US family members and fellow Canadian and other non-US citizens outside the US. The US may in the end force FATCA on the world, but what will it lose in exchange? It has confirmed the negative and anti-American beliefs that already exist.
@Not that Lisa!
Thanks so much for updating us on your final results…. It wasn’t a pleasant journey, but there are many of us that really appreciate you chronicling the story along the way. I never received a survey asking for feedback. I guess they figured with all my letters and posting they got all the feedback they wanted.. 🙂
I have updated your thread to represent what you posted above.
It is here…
PS. I hope you saved that U.S. postage paid envelope. I would frame it! 🙂
Sucessful outcome for Kingston in the Streamlined OVDI system here
http://isaacbrocksociety.ca/2011/12/14/about-the-isaac-brock-society/comment-page-5/#comment-519000
My comment on “Should You Opt Out Of IRS Offshore Amnesty?” @Forbes: http://onforb.es/1773i5I
On Robert Woods article, Should you Opt Out of the IRS Offshore Amnesty at forbes, which I linked to above, there are some excellent comments that I would recommend for reading. Specially that by Alvin S. Brown, Esq.
For those thinking about joining the OVDP, I would read carefully what he has to say about why you should NOT and his alternate strategy for compliance.
It is here…..
http://www.forbes.com/sites/robertwood/2013/10/04/should-you-opt-out-of-irs-offshore-amnesty/?commentId=comment_blogAndPostId/blog/comment/1057-22864-4502
In response to Roberts comment that he didn’t think the OVDP was about raising revenue, I responded like this…
Robert…
You know, at one time, I might have agreed with you when you say, “I don’t think the IRS is just trying to raise revenue”, however, the preponderance of evidence seems to indicate the contrary…
1. All Press Releases about OVDP success just wrapped tax deficiencies and penalties together in one BIG number to make a bigger impact. They have not been honest about what tax failures they are recouping in this effort. They have refused to make a distinction, and it is only via deduction from the recent GAO report that you can now see that penalties make 66% of total revenues they like to trumpet to the press.
There may not be as much re-occurring tax revenue in the future as the offshore jihad hopes to “bring into compliance”, and the OVDP appears to be a One Off Jackpot for the IRS, thus their enthusiasm and “hi fives”.
2. The lowest 10th percentile of taxpayers in the OVDP as shown in the GOA report, the penalties were 129 times that tax failure, $13,200 for tax failure of $107 over 5 years. So why, if compliance was the objective, didn’t they just issue warning letters and move on, rather than extract the disproportionate penalties? The letter would have been just as effective if revenues were NOT so important!
3. When they designed their program, they could have copied the Canadian model which states this…
http://bit.ly/WhuWuj
4. They could have designed the program to be based upon tax failure, rather than highest (FX impacted) aggregate amount. Instead they pulled the little used FBAR (designed for drug king pins and terrorist funding) off the shelf to apply in a draconian manner in these cases! If penalty collection was not the goal, why did they do this? Because there was BIG money in it.
5. In 2009, they pulled their famous FAQ 35 Bait and Switch, and if that wasn’t about revenue, I don’t know what it was.
They had apparently inadvertently built into the OVDP system some discretionary relief that would have still improved compliance, but NOT extracted as much revenue as the IRS wanted. So, as you know, they secretly removed it, and ignored Nina Olson’s TAD telling them to put it back in. So, tell me with a straight face, this was NOT about revenue.
6. Even now, in the current OVDP FAQ 52.2 (I think it is from memory) they still want a 5% penalty from the most benign of the benign, accidental Americas living abroad that DID NOT KNOW they were U.S. Citizens. If this is NOT about revenue, than what is it?
7. In the most recent GAO report, rather than focus on compliance increase via QDs as a positive, they felt it necessary to point out that the IRS was leaving penalty revenue on the table, and they should go after it with audits. The IRS immediately concurred with the suggestion. So, they have compliance but they want more revenue. That is the message they send.
So whether by active design, or by function of administration, this program has become an FBAR fund raiser, pure and simple, IMHO.
Hate to be soooo cynical, but from my perspective, that is how I see it.
Another posting about Quiet Disclosures that I would recommend folks read.
Quiet Disclosures Increasingly on IRS’s Radar Screen
Ever since the GAO report came out that the IRS was leaving money on the table by not going after the penalty opportunities being by passed by QDs and first time filings, The IRS quickly agreed. That lust for more penalty revenues gives lie to the myth that the offshore jihad was just about compliance.
If you haven’t read about the GAO report, I would start here
http://isaacbrocksociety.ca/2013/04/27/gao-report-reveals-ovd-minnows-paid-up-to-129x-more-in-penalties-than-in-tax-owed/
Thank you @Just Me.
Apparently the IRS and Treasury are still stuck on the ‘stupid’ and shortsighted setting. Particularly regarding millions of minnows and krill. That is their default. Something they have perfected. I impatiently look forward to the next report of the Taxpayer Advocate – though that will not change them.
Realistically, will they be able to penalize or pursue millions of duals and other living and paying full taxes in Canada and abroad – who just want to get finally shed of toxic US citizenship transmitted to them via parentage or accident of birthplace? Will they be able to process returns and FBARs from 6-7 million abroad if every one of those they define broadly as ‘taxable persons’ filed who they think should? I realize that to the average person – usually owing zero US tax, what really matters is if it will be a lottery process where they are punished as lone individuals if they backfile quietly or going forward, and that to there is no comfort in numbers if they are among those selected for followup or audit and the other millions are not. However the IRS – and now the GAO are continuing in the same vein as usual – employing only the stick. And the current behaviour of the IRS as regards to processing opt outs – even just in terms of time stuck in limbo, and the cost, plus the impenetrable fog of the Streamlined program means that there is no trust, there is no goodwill, there is no sure benefit to participation. Those who came forward re the OVD, who were not whales with criminal risk were punished by the length and absurd process despite owing little or no US tax.
I am also wondering if they will have to acknowledge that for those born dual abroad, without a US birthplace, and who have not been registered by US parents, and who do not have a US SSN or passport, there are more options.
The renunciations and relinquishments will continue – as will those staying off the radar.
I am scared, terrified. On the positive side, in 6 months or so, I will be compliant for 3 years.
Where is Nina Olson?? Why do they listen to the GAO and continue to ignore her ??
@Chris…
I hate to say it, but don’t overlook the role of sexism in government. It is because she is a women pointing out the friggin’ obvious to a bunch of arrogant men in the IRS who don’t want to hear it.
Just like the SOBs in power at the time, drunk on their own importance and certainty ignored Brooklsey Born of the CFTC. And we all paid the price.
http://www.pbs.org/wgbh/pages/frontline/warning/
Will they still continue to audit quiet disclosure in 8 or 9 months, when they’ll start receiving the first batch of FATCA data from the countries that already signed? At some point, they’ll have to prioritize.
It would be interested to hear the length of their list and the percentage of non compliant people.
I am sure they’ll trumpet it. Stay tuned.
Hat tip to Badger…
Letter to #IRS About Tax & Financial Account Reporting by Long Term Non-Resident Dual Citizens @YourVoiceAtIRS http://bit.ly/1a30l8H #FBAR
This link and resulting tweet was taken from Badgers comment here…
http://isaacbrocksociety.ca/expat_tax/comment-page-43/#comment-594896
Interesting discussions about OVDI and opt outs:
http://www.bna.com/opt-irs-offshore-n17179879879/
http://federaltaxcrimes.blogspot.com/2013/11/should-you-opt-out-of-ovdip-11513.html
Thanks Chris…
Have been traveling, so behind in my reading…
Will check it out.
I am a little disappointed in Robert Wood’s article, where he seems to discourage opt outs.
It’s hard to write a one page op ed on the complexity of that subject, but still, he could have used a little more nuance, and actually write down the same conclusion that Michael Miller states in his comment on Jack Townsend blog:
If the first analysis is that a client might opt out, then maybe he shouldn’t advise OVDI in the first place.
I guess a lawyer can’t really advise that in a public document – but it’s OK on a blog.
You rock, Michael, for not being afraid of saying the right things !!!!!!!!!!!!
I am still baffled at the fact they continue to disregard Nina Olson’s advice on common sense changes to this program.
@Chris…
We make a mistake of thinking of “They” as being of one mind that responds to logic from someone inside their own bureaucracy. It is such a convoluted management structure, no one is authoritatively charge of the process. No one person has their hand on the OVDI wheel. What is more amazing to me, is why someone like Nina would stay in the position while constantly being ignored. Time to move on, as no one listens.
@Chris,
thanks for that update from the Townsend site,
I noted this exchange;
http://federaltaxcrimes.blogspot.ca/2013/11/should-you-opt-out-of-ovdip-11513.html#comment-1111738619
“…………However, the procedure has now changed. Now, all opt-outs are sent to an IRS office in Milwaukee, which has been designated as the opt-out processing location. The civil Revenue Agent who had been handling the OVDI/P file will not be the agent handling the opt-out, and will no longer make recommendations to an opt-out committee. The agents in Milwaukee will take the file anew. Civil agents are also now reluctant to give the taxpayer (or his/her representative) the agent’s assessment as to facts and penalties on an opt-out. Which makes the opt-out process, as Jack put it, fraught with more uncertainty.”
and, see http://federaltaxcrimes.blogspot.ca/2013/11/should-you-opt-out-of-ovdip-11513.html#comment-1113039511
What are the odds that files will be lost between Milwaukee and Washington or Texas or where-ever all those files have been sent crisscrossing the US for the last 2-3 years or more?
What are the odds that this will result in longer processing, and add to the general confusion?
Will this mean that the opt outs will go to agents who have NO opt out, or OVD or Streamlined experience?
How does this help those in the OVD programs opting out, or opted out by the IRS into the Streamlined process – particularly the minnows and krill in the OVDs inappropriately – via bad advice from the IRS that ONLY a ‘noisy’ OVD filing was acceptable, or via one of those ‘professionals’ who urged them into OVDI, worried about their own a — and Circular 230 perhaps more than their client’s best interests where there was no US tax owing, and no ‘material bad facts’ (instead of filing compliant going forward).
How many times will the IRS consolidate, distribute, redistribute, consolidate, and scatter these files across the US?
Is there even a rational plan?