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! 🙂
@ij,
Thanks for your quick reply. Hope IRS will be reasonable…
I use H&R block software to do my tax return, which doesn’t include form 8891, ie. if you are not an international tax CPA/lawyer, you won’t know it. In addition, the software does not include the new required Form 8938. I even called 1-800-HRBLOCK, the customer service person confirmed that… I guess IRS expect you to hire professionals to do your tax……
@Civic
I hope you are also following Jack’s blog on Opting Out.
http://federaltaxcrimes.blogspot.co.nz/2011/12/opting-out-of-ovdi-and-ovdp-what-is.html
@Civic,
I would never hire anyone to do things as required by law. I will not hire a lawyer to go to a court. It is not required by law to hire a lawyer/CPA — I am sure Mr. Taxman has a lot money to hire anyone to do his — tax return, baby sitting, lawns, painting.. I don’t have that kind money — not even want to pay software to file a return. Being cheap/DYI is my best defense for “reasonable cause” -:)
@IJ, I resent how the US system is so complicated that it forces me to spend high fees for a specialized accountant and financial advisor, especially when I live in England.
ij,
How long have you been in the process now. Is it not getting close to a year? I thought the 2011 OVDI was supposed to streamline things.
I admire how IJ resists being ploughed not just by the IRS but also the whole financial industry. 🙂 I am optimistic that things will work out for him.
@Mona, the whole tax system was designed by those finest/best educated — and it works for them only.
@Anon123, I jumped into in late April 2011. I should have some news within a month.
@monalisa1776, Thanks.. I am now fearless — I do not have a baggage of wealth — so nothing to lose — the worst of all they can do to me is taking of 50% of my total balance.. That would not be enough money to cover the cost for a civil trial in a federal court. It would be a win game for me for whatever the outcome. I just can’t let them to rob my retirement savings without taking some blood from them.
@ij… This brings a smile to my face… “I am now fearless” You have come a long ways from those first days of comments on Jack’s blog! 🙂
@Just Me,
I am fearless because of you, and Moby — and I have also to credit to M whom I used to argue on Jack blog on “what is offshore”
My wife and three little Americans are also behind me — so they will be my cheerleaders in the court room if that happens -:)
Yes, I used to lurk on Jack’s blog and for some reason had taken note of IJ’s humble and sincere posts. I am so pleased that he has developed the courage and confidence not to roll over. 😀
3/11/2012 Update note:
I have added 5 more items to my reading list. They are denoted with the current date. Several of those items are referenced in other threads here at Isaac Brock, and have added to my drudgery list for ease of use by newbies.
@Petros
“In fact, it is the Department of Treasury who gets FBARs. So now either the IRS has to requisition the FBARs from Treasury, or Treasury has to recommend them to the IRS after reviewing them. This requires manpower, and likely many thousands of Quiets could slip through their fingers before they could assign fines to them during the six years statute of limitations. I often wonder if anyone at Treasury actually even reads these FBARs. They are full of useless information from innocent people, and they are looking for money launders, criminal tax evaders, and the like. I doubt that it is even worth their time to open up the stupid envelopes. Does Treasury have a machine that opens millions of envelopes? Are they set up to open them and review them? I wonder. This is likely why they gave the FBAR enforcement to the IRS: Treasury may not have been set up to deal with all these forms in the first place.”
You are wrong. FBARs go to the IRS’s Detroit Computing Center. There there are entered into some sort of computer which is accessible to the IRS and to the US Treasury and other US government departments as well. [ This is unlike US tax returns, which are normally kept confidential outside the IRS]. So, yes, the envelopes are opened (whether manually or not) and data entered into some computer system. Whether they will do anything with quiet disclosures is another matter (I would guess not unless large sums are involved), but your description of the process is inaccurate. And your comment that they might have to review documents by hand is inaccurate too. I assume the only things that are manually read are letters sent with the FBARs.
I w
My guess is that the IRS will instead use the new 8938 Fatca reporting form as its main bludgeon tool for non-criminal compliance.
@Mona..
I think you are right. I just posted this article from Accounting Today on another thread , but will also put it here too. It deals with the conundrum of the FBAR and form 8938.
http://www.accountingtoday.com/ato_issues/26_3/FBAR-FATCA-put-pracs-on-alert-61871-1.html?pg=1
Yes, the 8938 has a higher filing threshold so will relieve most expat minnows by default. This means the IRS can concentrate on those with at least $200,000 in foreign (non-US) assets so they’re not wasting their time on people with only ten or fifteen thousand dollars, for instance.
The 8938 also blatently asks the filer
about special reporting forms such as the 8621 or 3520/3520a trust forms, thus making it far easier for the IRS to fine people for not including the required obscure forms such as needed if you own shares in a foregn mutual fund.
It also makes it easier for the IRS to extend its statute of limitations to six years (from the normal three) if ANYTHING is missing on the 8938. Also makes it easier for IRS to determine if an audit is worth their bother.
When I filed my delinquent fbars, I had to file a short version in which I only listed the number of accounts which was over forty. I’m sure this will have raised a few eyebrows but at least when they see every account on the 8938 listed in detail, they’ll probably still consider me a small fry because many of these accounts held less than $50 in them but had to be declared as they were technically financial accounts. In
The 8938 is under title 26 statutes so can be enforced directly by the IRS whereas. Fbar fines have to be pursued through the courts by the doj, as they are title 31. They are so draconian that it would be easy to argue the 8th Amendment as protection against cruel punishment and excessive fines. The 8938’s standard penalty of 10,000 bucks is still very harsh but not so draconian and could be much more efficiently enforced as a revenue generator for a desperately indebted government.
It’s also directly tied in with fatca and will have a 40% accuracy penalty taboot. It will also by default catch out quiet disclosures…I thus think that last year (for 2010 and earlier) would have been the final year that one could realistically make quiet disclosures without undue risk.
I was reading a comment by Mr Townsend on his blog which suggested that the government might not need to pursue FBAR penalties in courts, but could collect them the way standard (non tax) fines are collected by the government. He has also commented on the Eight Amendment issues at various times and has been much more circumspect — although as a criminal tax lawyer, he presumably deals with more complex cases
Info reported on FBARs can be shared widely compared to what’s on a tax return. Title 26 has strict requirements that don’t allow the IRS to share what it finds out on tax returns with very many outsiders. Its part of the price the IRS pays for its special powers
to seize the assetsget taxpayers to voluntarily pay the taxes governments can’t live without. Title 31 info, like FBARs can be revealed to just about anyone.I’m curious about the 8938. I haven’t figured out where it fits in. I’ve got one on my desk I am trying to fill out. There’s 9 pages of instructions and one index page. It was written by a comedian:
“The time needed to complete and file the form will vary depending on individual circumstances. The estimated average time is: 1 hour and 5 minutes”
Here’s a paragraph from page 2 of the instructions:
“Asset with no positive value. If the maximum value of a specified foreign financial asset is less than zero, use a value of zero for the asset.”
From the law requiring the 8938 “(d) Penalty for failure to disclose (2) If any failure [ to report ] continues for more than 90 days after the day on which the Secretary mails notice of such failure to the individual, such individual shall pay… $10,000″
The Secretary is presumed to know what you haven’t told him. When he gets tired of you not telling him, because he knows that you need to tell him something he mails you a notice. If you fail to respond to that notice for 90 days its a $10,000 fine. Man, this Secretary has a lot to do.
Kiro: I read that comment on Jack’s blog as well. I followed up on it but I don’t have the legal experience to understand how it would be possible for a loophole to be found now that would get the IRS out of its bind on title 31 after all these decades. One topic was the IRS could seize any refunds it owed you for the next “x” years as opposed to trying to get a court to enforce on their word some $xx,xxxx penalty because you are a willful FuBAR criminal who hid your life savings from them to avoid $23 in tax, only it was said people could counter by filing paperwork that ended up reducing the size of their refund by not allowing the IRS to withhold so much.
John Doe… Welcome to Isaac Brock. Thanks for commenting over here.
You have had very well researched and excellent comments on Jack’s Blog. Thanks much for your contribution.
For readers here, who would want want to follow some of what you have said, especially for immigrants looking for “reasonable cause” Opt Out arguments, I would reference them to your comments at Jack’s second thread on “Opting Out”
“Opting Out” #2 (3/2/12)
I think you first comments started on Mar 11, 2012 04:32 PM. I would recommend to all, that they read everything you have written from that point forward.
cheers
Just Me: thank you.
The lawmakers who created the law that requires taxpayers to send an 8938 to the Secretary connected the start of the meter for the big penalty on it to 90 days after the day the Secretary mails the taxpayer a notice he needs to file. So the Secretary doesn’t need the data. He’s already got that before he asks for it.
The information on an 8938 is almost identical to what’s on an FBAR, but the FBAR is data in a better form. He can distribute and trade FBAR data for data from other jurisdictions, whereas the 8938 has restrictions.
The threat of a large helping of more reliably collect-able 8938 penalties piled on top of only potentially colossal FBAR penalties may sound to Geithner like its the way to blast into tax havens, but there is the question of all this collateral damage.
Why the failure to educate?. They’ve talked equal status on the educational side for a decade and done nothing. They could have made America look less brutal. They look stupid.
What’s wrong with new legal weapons capable of accurately hitting what they’re aimed at? Why does this new one look like more of the same? Can it be that Switzerland is too tough for the IRS? Do they actually want the life savings and homes of innocent US citizens and newly arrived immigrants in North America?
So glad to find someone else harping on the implications of Form 8938. There will be many middling fish that are much closer to a minnow than a whale. For now true minnows will dart through the 8938 net. Others will not – especially older persons who have a pension base that pops them over the $200K limit. Oopsie!
Notice that 8938 must be backfiled for 2010 as well as 2011. (1) In a few months, all those US residents of Canada who are not Canadian citizens can take no comfort in that universal protection from FBAR penalty enforcement, because extended reporting (now pensions as well) will suddenly become a direct IRS enforcement issue. (2) That FATCA speck on the horizon will vanish for anyone who is buried in the looming shadow of spring 2011 need to comply with 8938.
More news that no one is happy to hear.
John Doe…
Welcome to America. You are asking the imponderables! Why do bureaucrats do anything? They do it, because someone, namely Senator Carl Levin, gave them the power to do it. His name was on the FATCA Amendment that created this damn form, but in actuality, it was probably a group of IRS attorneys working with his staff came up with the stupid thing…
It is just a penalty vehicle, and nothing more. Welcome to the Penalty division of Form Nation!
In this penalty trap, and the information is only of value if they can, during an audit, show you didn’t reveal everything correctly. Otherwise, it has absolutely no value.
They make up this nonsense just because they can. They asked for comments on the draft form, but I can guarantee you that they really don’t want them and pay no attention. ACA did a good comment write up, and I haven’t looked at the final 8938, but I can almost bet that they ignored the suggestions
It was here..
http://www.aca.ch/joomla/images/pdfs/8938comm.pdf
Someday I would like to meet this little “Form Creator” who ever he/she is that comes up with these mind numbing forms and the instruction booklets that accompany them. Maybe it is a whole committee that have endless meetings and conference calls with active debates over the 3rd sentence on page 4 of instructions on “how can we make this less clear for the reader? Need to get that estimated time to complete up over 1hr and 30 minutes.” That will teach those offshore rich b#%$s! What a friggin’ miserable life they must have. Sitting in some featureless windowless cubicle in some Big Box Bureaucrat paper mill in DC, cranking these things out all day long. What poor little pitiful lives they must lead. I think they must have a sadistic streak in them.
@Just Me
“……It is just a penalty vehicle, and nothing more. Welcome to the Penalty division of Form Nation!”
Maybe for now, but this information is priceless if and when the US institutes a wealth tax! 🙁
@Just ME
“…..What poor little pitiful lives they must lead. I think they must have a sadistic streak in them.”
A masocistic one to I might add! 😉