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! 🙂
@innocente…
Have you noticed that the strongest anti-FATCA advocacy has a female face on IBS?
Some good comments by someone called “Seat” start here and provide solid advice about doing your own diligence and being wary of attorneys ‘billing’ motives that drive their advice.
Recommend you read what all he has to say. Again, one would be foolish to make a decision based solely upon advice taken from a blog, but there is knowledge to be gained as you arrive at your personal decision.
Bubblebustin says
February 16, 2014 at 1:03 pm
@Just Me
Some of those 2009 OVDP participants have had their penalties refunded to them:
http://m.economictimes.com/irs-to-refund-certain-2009-ovdp-penalties/PDAET/articleshow/13410410.cms
@ USCitizenAbroad …
2. Don’t use U.S. based lawyers. They seem to use OVDP as the default solution…….
In theory you are absolutely correct but unless you live in London (or even Canada now) you have very little choice – it was even worst in 2010 and 2011.
The quality and experience of counsel for this particular topic was and even still today is very limited.
Many european based tax lawyers still use Caplin & Drysdale (no endorsement) as their main source for cooperation. Taking both sources into account will cost you > $700/h as well.
@ JustMe ….
Yes CCW is my motto as well these days – and paying forward is the least we as “survivors” can do.
With regards to Jack Townsend and his blog.
I agree that his blog is a great source of information and updates and that in 2010 and 2011 he provided a lot of FOC online advice but I am not a fan of his OVD style and practice.
I know that you did spend 2 hours with him for an “expert opinion” and outlook of your case and I am sure for you at the time the money was well spend.
But for me he has demonstrated unfortunately too many times how tilted his OVDI/P approach was and still is today.(has still 0 experience with SFCP) .
Like the rest of the US he remains in a state of willful stubborn ignorance. He has become a “swiss bank basher” beyond reason – He has still not understood what souvereignty of a nation means and that Swiss law trumps US law in CH even if you disagree with it.
God knows I’m no intellectual giant. But the response to Jack Townsend information and his opinion he provides on his blog that conflicts with his model of the world that says “I’m right, you’re wrong and I don’t want to discuss it any more” is really productive when the person is in a position of power. And he clearly is by advising mainly USPs ….
I did recommend in 2012 to a friend of mine to seek his counsel because he had similar facts and circumstances to me – oh boy I wish I would have never done that and kept my mouth shut. Jack made clear from the beginning that he was not interested in a inconvenient, dissenting opinion… the slave dare not speak back to the master.
Jack Townsend is smug and hubristic in his mission, as he thinks he has “RIGHT” on his side and “Financial Transparency and Compliance” as his goal.
@Seat, All, I would had one more thing about Jack and other lawyers that seem knowledgeable in the area of OVD: a couple of them made clear that it was not financially worth for ‘minnows’ to hire them.
Their crazy high cost, minimum number of hours and retainer would outweigh whatever tax owed and most of the case penalties for simple cases that don’t involve higher $ accounts and that they were mainly interested in those higher $ amount, more ‘gray’ cases.
Basically, it is very difficult for small people to get valuable advice at a reasonable cost. The entry level price for talking to Jack is 2 hours at $700/hour. In a lot of minnow cases, a 1/2 hour conversation is enough to understand the facts and recommend a course of action. @Seat, this relates to your post about the morality of attorney billing.
@Just Me, I don’t know how long you talked to Jack, and the kind of advice you got from him, but realistically, how long did it take to present your case to him, when you were informed and had all the data in hand? I can’t imagine this would really require a lot of the lawyer’s time and research, when people are really just asking for the best course of action given their facts. At some point, it boils down to a gut feel from the lawyer. They must have some sort of account thresholds and typical questions they ask to make a decision, whether they think the IRS is going to go after a specific person and for how much – i.e. are trust involved, are there obvious signs of fraud, approximate amount of taxes owed etc, or was it a typical case or I didn’t know I had to do that.
Basically, what most people are paying for is advice that they should get directly from the IRS. Their no de minimis amount for OVDI is just BS. That’s why people feel like they have to consult an attorney, because of all the hyperbole and fear mongering.
@noone …
….Basically, what most people are paying for is advice that they should get directly from the IRS…..
Yes , this is so true and this is why I said before that it is a win-win situation for both – the IRS and tax attorneys…. they know that they need each other to prosper !
I’ve always been an advocate of keeping the money I spend on US tax filing and reporting in the Canadian economy – even if I couldn’t keep a big portion of my retirement savings here.
@noone…
Regarding my conversations with Jack….
Understand that was relevatively early in the process and trying to figure a way off the processing belt.
Initial phone conversation was about 1.5 hours. He than followed up late the same day with a detailed written script for me to use in conversation with my examiner. That led to a lot of back and forth emails. I sent him a modified script for his review and comment. We were trying to figure out how best to counter the $172K that examiner was demanding, and trying to see if there was any negotiation room.
He ended up billing me for 3 hours, I think it was, and then provided a very substantial “courtesy discount”. I am sure, especially in the back and forth on email, he spent more time on it than that. I think it was fair, and it did help me with arguments, which as you may know, went no where with the Examiner.
Ultimately it did help me with the TAS arguments and gave me a broader understanding of the insides of the process, so it had value for me. Never did he try to get me to hand him the case or ask for a retainer. This was just fee for limited service.
Also, I just posted final note to @Libertad on the Ask your FATC question, which I will reference here…
@seat…
Just catching up late this evening. Thanks for your comments and your observations on Jack. I have not experienced what you mention, and have not been reading there much lately, but have noted his views on the Swiss situation and FATCA. In that, I have disagreed, and tweaked him occasionally with my comments. I almost think he is in league with the “Tax Justice” crowd when it comes to transparency, but I guess that shouldn’t surprise me. The hubristic attitude probably comes from too many years inside the belly of the beast. It does that to you. A bit like Mopsick maybe.
BTW, what is SFCP? My mind is drawing a blank. San Francisco Crap Practice?
@ Just Me…
San Francisco Crap Practice…… that is a good one !
no, SFCP stands for Streamlined Filing Compliance Procedure
btw. there are some good comments …………
http://hodgen.com/real-questions-about-expatriation-for-our-workshop/
Thank you @Seat, @NotthatLisa, @JustMe, and others for the discussion about your experiences with trying to obtain legal and tax help in dealing with the IRS on the issues of compliance, filing and reporting from abroad. Very grateful. Very valuable to all of us. In some cases, the legal and accounting professionals can turn out to be more of an immediate threat than the IRS. As more and more stories surface, we will see what has actually been taking place. Credit goes to you, and to IBS for informing people so that they can better protect themselves – against the odds. Costs and fees will mount even higher given that the market is taking full advantage of the desperation and fear and demand that FATCA is fuelling.
Even being as informed as possible – we may be no match for some of the lawyers and accounting professionals. How can we be? They have information and experience that we need, and behind the scenes access to the IRS and their colleagues, and we do not. Some have personal and professional ethics, and many it appears do not: it is particularly nauseating when some use their public persona by appearing to be friendly and solicitous, dangling small seemingly useful tidbits that make them appear to be allies or advocates, and are not upfront that what they are doing is actively trolling for clients. It is a significant problem when even asking questions of them to find out whether they are knowledgeable and trustworthy costs so much that we cannot afford the test. And in my experience, they might project a helpful, sympathetic and solicitous facade – up to the point at which you’ve signed the agreement and they’re in possession of the retainer. Suddenly, after that, they may not reply to your emails, and you’re left to deal with juniors who are not competent or familiar with your file.
Some of them justify their fees and sell their services by touting their behind the scenes access to IRS counsel and to information and discussions that we don’t and can’t have as laypersons. If the IRS wasn’t committed to operating in deliberate obscurity – and fostering fear and an atmosphere of looming threat – even for the cases of the smallest amoebas, then it wouldn’t be guilty of complicity in exposing the ordinary person to such significant harm.
As we know from the Taxpayer Advocate reports, the ordinary taxpayer is lucky if they can even get through on the phone to speak with someone at the IRS, or to get their correspondence answered.
That has been my direct experience with dealing with the IRS – using the contact information listed on their correspondence – they cannot explain their own notices, and trying to get telephone assistance can take hours. They vow to call back with an explanation of billings that even they cannot justify, and they never do call back. They vow to respond to phone calls, correspondence and faxes, and they never do (with the singular and notable exception of the consistently reliable Taxpayer Advocate staff) .The fact that we’ve noted their name and agent number doesn’t seem to be sufficient impetus for IRS employees (other than the TAS) to do what they’ve promised. Even without a compliance problem, interactions with them are unsatisfactory, and frustrating. All overwhelmingly compelling reasons to cut all ties with the US even apart from the massive jeopardy of trying to become compliant – there is the problem of trying to maintain compliance – an arduous and increasingly impossible task.
In continuing to operate cloaked in mystery, obfuscation, deliberate lack of clarity, random computer generated notices and incompetent or overburdened staff, the IRS is actively assisting in creating and fostering significant additional harm to those whose cases are benign or de minimis, and who come forward to try and become compliant – and stay compliant. That harm is such that despite owing zero or minimal US tax, individuals abroad are paying significant portions of their legal local post-tax savings to the compliance industry, and spending outsized amounts of time and attention to satisfying a government of a greedy and arrogant country who provides them with zero benefit, zero services, yet asserts the right to their assets and earnings from afar – for life and beyond.
And the idea of Harper and Flaherty – as ‘our’ Canadian government – traitorously agreeing to in any way assist in turning that questing and unmitigated Hydra-headed threat in the direction of the million or more individuals and families in Canada affected by this makes me sick.
@Badger,
Maybe ‘our’ government wants us put all our money into those registered accounts it has managed to carve out as unreportable, as a submissive way of sticking it to the IRS, as apparently ‘our’ government does not have the balls to do this itself.
Maybe, WhiteKat. But then again, maybe they want us to keep buying those profitable to the bank investment products (you remember who our government works for don’t you?) and the US agree to it because for them it’s future tax revenue for when we’re eventually turned over to the IRS.
Those investments are the proverbial double edged sword for US persons in Canada.
Very recent article re Appeals procedures re FBAR penalties, and the FBAR now known as the FINCEN Form 114 (and 114a). Also has discussion of willful vs. non-willful, etc.
http://taxlitigator.com/wp-content/uploads/2014/02/Revised_IRS_Appeals.pdf.
‘Revised IRS Appeals Procedures re: FBAR Penalties’
By Charles P. Rettig
pg 23-27 December 2013–January 2014
JOURNAL OF TAX PRACTICE & PROCEDURE
@Badger..
Very good commentary. Thanks for the link to Charles Article. I have not read that one, so will when I get the time…
@Seat…. SFCP but of course. It was late, and my mind was blank!
@WhiteKat and @bubblebustin, I think that Flaherty and Harper had only the intention of masking their failure to get our own Canadian registered savings recognized as US tax exempt. The fact that Canadian banks and the CRA don’t HAVE to report them doesn’t mean that they will face any penalty if they do. And as those registered accts are dissolved, then they go into the other accts which will be reported – since FATCA’s intent is to gather all transactions on subject accts – including transfers, deposits and withdrawals.
Flaherty and Harper have deliberately obscured that our registered accts are still under the same threat by the IRS and Treasury, as ‘taxable foreign trusts’, with burdensome filing requirements and draconian penalties. They still count for FBARs too.
Maybe Harper and Flaherty have convinced themselves that that makes them not as complicit, but it won’t fool anyone who actually knows what the US is demanding.
How exactly can Flaherty and Harper explain away their failure to get any of this addressed in the US Canada tax treaty during the years he’s been the Finance Minister, before and after the advent of FATCA? And now they sign up to FATCA which they say ‘builds’ on ‘existing’ agreements?
So they built the FATCA IGA on top of their glaring failures to protect us from existing US double extraterritorial taxation.
Harper and Flaherty acted willfully and with full knowledge of the consequences.
I’m frankly tired of wasting my breath on these ‘leaders’ on both sides of the border. They obviously know how devastating this is to their own citizens and are choosing to ignore it with every American who renounces US citizenship and every Canadian who cannot adequately prepare for old age. I’m going to now concentrate my efforts on warning and educating people, where I might at least get some appreciation for my efforts.
My letter to my government will state only this:
I am glad my mother did not live long enough to regret bringing her American born children to live in her native country, Canada, and to learn that doing so would put us in more danger than had she not – thanks to the Canadian government’s unwillingness to protect its citizens within its own borders.
@noone: “I am very surprised that the banks would have the right to transfer the data in the case of dual families if the USP has been removed. This is totally not right. Isn’t there any protection for Swiss people in Switzerland?”
The banks here view duals with US citizenship as USCs, period. The fact that they have Swiss citizenship is irrelevant. Only if the USP were removed from the account period to 2008 (or possibly August 2008) would the account not be reported. Few families with duals would have had the foresight to do that in 2007.
The Swiss government views duals with Swiss citizenship as Swiss only; the dual’s second citizenship has been generally irrelevant.
I am not aware of duals filing lawsuits against the banks.
On another topic, I wonder when we will hear of the first extortion case where a blackmailer threatens to out a USC who is not easily identifiable (e.g., born outside of US to a USC parent). There are likely tens of thousands of difficult-to-identify USCs around the world. A potentially lucrative business opportunity for the ‘Ndrangheta or some other crime group.
@Innocente, too true!! Brave New World.
@Anon0Percent posted this, but it disappeared!
Buyers be aware !
As it has been written here many times before how important – if necessary – it is to pick the right tax lawyer…..
let me share the following :
A practitioner from Atlanta ,Georgia who is well known and probably thinks very highly of himself and is offshore compliance expertise had nothing better to do than to shove a university student (dual) into OVDP.
I say ‘shove’ because I know all the “minnow” facts and circumstances – unfortunately a bit too late to help significantly. Nevertheless this arrogant $%§” from Atlanta had no scruples to take $400 for an initial consultation without mentioning SFCP,QD or the traditional VD than $500 for the pre-clearance letter , $2,500 for the OVDP questionaire and about $3000 for research,file development and e-mailing twice the kid. The student did spent so far > $6K , some of it he had to borrow, and has not even reached the level of submission package with RC letter etc…..
The practitioner gave the scared student initially an estimate of approx. $10-11K from start to finish (without opt-out) and pressured him by saying that he was so busy with other offshore cases that he is doing him a basically a favor.
This is sickening !
@ Just Me … yes thank you for finding my previous post again.
I would like to offer the following great link for “Minnows” finding a good legal summary of RC arguments and how to avoid or seek abatement of federal civil tax penalties.
REDUCING THE PAIN
IRS penalty mitigation
Practice and Procedure………………………… MAY 2013
http://www.paleyrothman.com/wp-content/uploads/2013/05/Reducing-the-Pain_-IRS-Penalty-Mitigation-Practice-and-Procedure-MD-Bar-Journal-Article-2013-2-2.pdf
Further I would like to make a suggestion with regards to the topic of tax lawyers.
Imo. it would be very productive to have somewhere on the side a tab with a summary of useful tips,hints and experiences or warnings how to deal with practitioners or what to expect when you hire one. Unless you follow the comment section closely here at IBS I am afraid many Minnows are missing these great stories or advice given from “SEAT” recently.
@anon0percent,
Re: “a summary of useful tips,hints and experiences or warnings how to deal with practitioners or what to expect when you hire one.”
If you, or anyone, would like to make a list of links to useful comments on this, I could create a permanent page for this under “List to Links by Subject” in the sidebar.
I would like to share something I just saw on Linkedin which is so ridiculous and pathetic you could not make this up ……… @JustMe … is this worth a comment ?
http://www.linkedin.com/groups/Delinquent-FBAR-3694878.S.5845731789921865731?view=&srchtype=discussedNews&gid=3694878&item=5845731789921865731&type=member&trk=eml-anet_dig-b_pd-ttl-cn&fromEmail=&ut=39xbuXNBS1um81
Jeffrey Verdon , a lawyer asks the following question :
“Has anyone had an experience with filing relief from the failure to timely file the FBAR for reasonable cause, such as the client’s CPA failed to do so? If so, has the results been favorable?”
He gives further details upon being asked :
“No taxes due. The CPA failed to file the FBAR last year and we have been hired to clean it up. All income was reported, just not the reports. Thank you for your insightful comments .”
I think so far we here at IBS are just amazed about the lack of knowledge of Jeffrey Verdon since all the necessary facts anybody can find now on the WWW with regards to such a simple case.
Now Richard L. ….Counsel at Withers Bergman LLP enters the discussion again and really gets going with “great professional advice”…………NOT !
“We have done hundreds of voluntary disclosure cases since 2009. We have done many noisy voluntaries. We have done FAQ 17 returns. We have done opt outs from noisy voluntries. Happy to schedule a call to discuss our experience on a no-names basis to preserve privilege (which may require co-counsel agreement with regard to your client to preserve confidence flowing in the opposite direction). Also happy to discuss whether to file FBAR electronically and how to preserve reasonable cause argument in 750 characters, or risk paying the $500 fee to file on paper while providing a more extensive reasonable cause argument. Given the IRS drive to nail taxpayers with foreign accounts (and the Congressional report on failure to pursue Credit Suisse accounts certainly did nothing to reduce the ardor of the hunt), you must treat very carefully here. Very substantial (some would say punitive) penalties for tripping up. ”
Let me repeat :
Co-counsel agreement….. preserve privilege…..extensive RC argument……noisy voluntaries……tripping up…………….
FEAR,FEAR,FEAR…………. and wasted practitioner fees over such a simple case, actually the word case is not appropriate here….. a small compliance error with regards to an information form.
I really would like to know what the “client” will have to pay in the end after the practitioners are done with him or her .
http://mopsicktaxlaw.blogspot.ca/2014/03/opt-out-of-offshore-voluntary.html
Monday, March 10, 2014
‘Opt Out of Offshore Voluntary Disclosure Program? We Need To See the National Office Appeals Coordinated Issues Paper Now!’
“An emerging issue for practitioners engaged in the offshore voluntary disclosure arena is collecting intel on what exactly the field offices are being told by the National Office about how to resolve opt out cases……”
@badger…
I saw he had posted that on Linkedin, but I have not gotten around to reading it yet…