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! 🙂
@ Just Me: I talked with my CPA yesterday re the 1040Xs he had just completed for me. He was not aware of the 8938 yet. I showed him one. A guy like that can just fill it in. I showed him the many page instructions and he said he just ignores them and starts filling out the form. If a question come up he looks for an answer. It might actually take him a short time to fill out something like this if the assumption is made that he has the information he needs at his fingertips. His eyes instantly move to tiny print like “Attachment Sequence 175” which apparently means if a client was filing out 3,589 forms that year to attach to his 1040 this one would be in the pile at position # 175. Its a government form, similar to what he’s been filing out for decades. One interesting thing he mentioned was that if someone walked in on him with a few delinquent FBARs owing and two tax returns to amend, prior to the long discussions he’s now had with me about the potential minefields, he’d amend them, fill in the FBARS, put a two line explanation on the FBAR, duh the client didn’t know, and send them in. He had no idea Treasury was roasting people. Its got to be like this all over the place. Thousands of quiet filings are coming in – Treasury has made no effort to inform CPAs.
I read the letter at your link from the American Citizens Abroad, the Association of Americans Overseas, and the Federation of American Women’s Clubs that has their critique of the new 8938 form. So I wrote them to see if they were interested that Geithner’s predecessor in 2003 backdated a report he was called on by the Patriot Act to file. I mentioned all the fishy details that came up in Geithner’s Senate confirmation hearing re various tax dodges he was into and said no one changed the Patriot Act, i.e. he is required to file some form he doesn’t know about an old Act requires him to file and he isn’t doing it. I said maybe the organizations should consider asking the Secretary to exercise his discretionary power to do something about all US persons caught up in FBAR BS who are as innocent, say, as he was when facing the Senate. I suggested they formally ask him if he has ever had a foreign financial account since 1970 and if he filed FBARs for it or them.
Reblogged this on Renounce U.S. Citizenship – Be Free.
Hi, This is really an elaborate and informative website. I have been reading this for the last 6 hours. Wish I had read as much during my college days.
Coming to the point, I am an immigrant to the US who heard about something called FBAR only last week and have been slowly discovering what a mess I am in with this FBAR. I came into US only in 2008 and have not filed any FBAR’s since then, but have been sending money to my native accounts every so few months. I realised after quite a few hours of research and sleepless nights that my biggest unreported asset aggregate during the unreported FBAR years from 2008 to 2010 was in 2010 at only ~$40k, which would bring on me a fine out abt $4.5k. I want to get into OVDI and get done with this since my net asset has increased to close ~$75k in 2011 and 2012 and if i have to do a OVDI in the later year then will have to pay a fine of 27.5% on 75k instead of 12.5% on $40k if I do now. Also with my asset raising to $75k I will be bound to report 8938 and am worried if i report 8938 and then do not get into OVDI it will be BIG red flag.
I am spoken to few CPA’s and Tax attorney’s and all are of the opinion to just to “go-forward” disclosure on the FBAR’s and comply with 8938 which I fret and is causing me sleepless nights. Also considering the enormous attorney fees and CPA fees, I am even contemplating going ahead with all the fillings by myself, as I dont want to be paying 10k attorney fees to report $4.5k of penalties. I have nothing to hide and everything is hard earned money. I am just looking to get some our really value opinions.
I filed FBARs and an 8938 myself although I ran them by a CPA afterward. I had to file some amended tax returns to account for a tiny income earned in my country of origin on the assets there. So I did the amended returns myself but I hired a CPA to do them as well to see if his work agreed with mine. He had done FBARs for people before and he said mine looked fine.
If you open a bank account in the US you don’t have to fill out forms like this, because the Treasury Department has as much access to what it wants to know about your bank account in the US or even more than it gets from you filling out the FBAR or 8938.
So in my mind anyway it just comes down to who fills out the form. If my bank is in the US the bank does it, or Treasury has access anytime to whatever info it needs. if the bank is outside the US I have to do it. Its worth learning how to fill in once because it has to be done every year and your knowledge pays off every year. Its just where is the bank, what is the account number, and how much do you have there. Its not that hard to do.
I see the OVDI as a plea bargain for criminals. I see no point in signing away my rights to enter it. They can define me as a criminal all they want, but I don’t have to agree. I came into this country in good faith determined not to break any law or regulation and it is preposterous to me they are trying to put me into a position where they are defining me as a criminal. I won’t stand for it. I can look a judge in the eye and ask him how he would like it if he was treated this way.
If you sign away your rights to enter OVDI you give the IRS the power to collect the penalty. They don’t have the power to collect until you sign away your rights. FBAR is Title 31, and because of that all they can do is threaten you. If you don’t fold, they have to take you to court where evidence means something, and the burden of proof is on them.
I didn’t know about the FBAR, and as a new immigrant I believe no court could expect me to know. The authorities did not tell me when I entered the country. The Treasury Secretary said he would educate US taxpayers about the FBAR when he addressed Congress in 2003 when they were about to drastically increase the penalty for not filling one out. He didn’t educate.
What court is going to convict someone who didn’t know about the FBAR given this? I believe there has never been a single case where an innocent was prosecuted by the DOJ on behalf of the IRS because they left assets behind in their country of origin when they entered the US to live as a permanent resident and didn’t fill out FBARs until they discovered they were in violation of a law they knew nothing about.
I totaly understand your position and am of the same opinion myself. I am just wondering if its better to pay the dues and have peace of mind then loose sleep over it every night. God knows how tough it has been these few days for me. I have been made to feel like a culprit for no fault of mine. But then the counter argument would be that we as immigrants must learn the law of the land if we want to live here. The problem arises that, once we knew we had to file the FBAR’s we should have filed the previous years FBAR’s as well. And in the OVDI FAQ they strongly detest Silent disclosure, the one you are suggesting. I know this was never intended to catch small fish like us nor do I think they will ever come after someone like me for abt $4k. But I intend to do it just for my peace of mind. I don’t want to be fretting every time I read an article about FBAR. I believe going forward especially with the intrduction of 8938, FBAR will be dropped out. If i had lesser assets to declare in 2011/2012 than in 2010, I would probably have done a silent myself. By the way does anyone here know if getting into OVDI might in anyways create problem during GC process? My GC is in progress I hope entering OVDI wont be considered as an acceptance civil/criminal offense.
Is it possible for you to share with me the CPA you used and the cost associated with it.
@ovdikills,
We can all empathize with what you describe – the urgent need for relief from the shock of it all, the sleeplessness, overwhelming stress, anxiety, and fear – and the urge to just get it over with somehow – to be able to return to some kind of bearable ‘normal’; but it is very important to consider your options very carefully – and avoid just jumping into a choice without trying to read up and be informed, and consider getting qualified advice. OVDI may or may not be the only or best choice for your specific situation – it wasn’t right for some of us. For some of us who follow and write on this and related blogs; the shock, the types of media coverage of the OVD programs, plus the pressure of looming deadlines and absence of specialized knowledge to make a truly informed decision – made for additional troubles down the road….Some may not have had the resources to pay for a consultation, some may have done that only after entering the OVDs. Not all ‘professionals’ had much experience with this situation either. And professionals differ in their roles and abilities, and in areas such as ‘attorney-client’ privilege. It is very important to understand the differences before making a choice.
There are the old sayings – “A stitch in time saves nine” and “look before you leap”: it may be that the expense of an initial consultation with a qualified tax attorney – (who is familiar with the OVD program) may save you additional grief and money in the long run, and give you a more solid idea of your real position, risks and options. You can also read the OVDI pages on the Townsend blog – in order up to the most current posts, ex. http://federaltaxcrimes.blogspot.ca/2011/07/to-ovdi-or-not-to-ovdi-part-2.html and http://hodgen.com/risk-not-enter-ovdi/ and some of the other linked resources here. That would make it easier to be prepared, and make the most of a session with an ‘expert’ if you decide to do that.
Good luck. Hang in there. I am sure that many of those reading here, and writing here understand what you are feeling, and wish you well, although we can’t say what is specifically best for you.
@ovdikills:
My $0.02, for what it’s worth:
OVDI is an amnesty program for criminal tax evaders. It says so right on the box:
“The objective remains the same as the 2009 OVDP – to bring taxpayers that have used undisclosed foreign accounts and undisclosed foreign entities to avoid or evade tax into compliance with United States tax laws.”
http://www.irs.gov/businesses/international/article/0,,id=235699,00.html
Did you use your undisclosed foreign accounts avoid or evade tax? If not, you don’t belong in an expensive, badly designed amnesty program for those who did.
This may be comforting, as far as the IRS is ever comforting (see 6):
http://www.irs.gov/newsroom/article/0,,id=250788,00.html
I’d file your FBARs with a covering letter saying you only just heard of them, and get on with your life.
@ovdikills
Well, each has to make their own decisions. I understand the need to sleep well, but you might want to consider that it may take more than just 6 hours for you to get comfortable enough with the subject, and the “OVDI or not” risks. There is a lot of material, and it can become overwhelming for sure. It takes time to develop good insights to help you sleep better at night.
Take a deep breath, relax just a bit and learn not to fret. LOL! I would have done well to have taken that advice myself back in 2009.
Lucky for you, you are not under the gun on such tight schedule with this open ended OVDI, so take your time to decide. I understand that it is tax filing season now, but you can get an extension on filing this years taxes until October 15th, and you have until June 30th to file the FBARS, so use all that time for reasoned, dispassionate, non fearful assessment. It will help you sleep better.
Before you decide, I would caution you. You are saying that you think your penalty will be only $4.5K. I am assuming that means you have no joint accounts with family members back home that could get swept up into the highest aggregate penalties, nor do you have any assets like a home that might also be included. Also remember that FX exchange rates and the evaporating US dollarette’ can make what you have overseas suddenly be worth more in USD than you would think. Inside the program, the IRS wants to assess the penalty on all these things, not just your personal bank account. So want to be sure that you have fully assessed the potential that you might be underestimating your OVDI penalty.
Also, inside the program you are going to use up more than $4.5K of LCUs just doing all the work that they require of you, or you are going to pay that much to a CPA to do it for you. You might want to read through (some of) what I actually went through in the entire process. I would not wish this on you Mate, if you are just a benign Minnow immigrant. That effort will not help your sleep during the 2 years it could take to bring it to conclusion.
My Case Study…
Also, I would really encourage you to read some of the most recent comments and advice about Options that Jack Townsend has discussed on his latest blog on Opting Out. That might help you decide whether you should “Opt In” in the first place.
“Opting Out” #2 (3/2/12)
I would read the whole thing if you haven’t done so, but some of the most important comments start around March 21st.
Especially some on March 26/27th time frame.
You may not see all the comments at first, and will have to go all the way to the bottom to “load more”.. There are a lot of fearful immigrants asking questions there too.
Jack makes some very good comments about why you may NOT want to do an OVDI, depending on your facts. Most Minnows, if they got into these VD programs, would want to “Opt Out” anyway, as the penalty is really way too draconian for the so called FBAR crime. Other options are viable, and Jack has the cred (that I do not have) to give this type of advice, so I would listen and weigh it carefully…
Regarding your specific question on CPAs. I didn’t use one. I did not want to add to the expense of the process, and their hourly rates, while not as bad as a OVDI Tax Attorney, can still be significant. Frankly, you don’t need one, as the tasks at hand are really just clerical, and if you have the time and you can balance your check book, you can do what is required.
Finally, think it over VERY VERY carefully. Are you a criminal Whale, or a just a benignly negligent Minnow immigrant? These programs were designed for willful Homeland Criminal Whales and only evolved over time to deal with the reality that they were netting a lot of benign non willful Minnows. It is a crappy program, in my opinion, and it may NOT be for you. I would suggest that you may have gotten some good advice from the Tax attorney and the CPA you have already talked to.
Good luck and all the best to you in your decision making process.
@windbagblowhard
It is hard to argue with your logic as to the likelihood of prosecution for a Minnow. If you don’t join, you will be playing the Lottery audit, (just like GE does all the time with its 57,000 pages of income tax filings and deductions/credits it takes) and the odds are VERY much in your favor that they are not doing to expend “budget constrained resources” on a Minnow. The odds are millions of times better that you will win this lottery than buying a Megamillion lottery ticket!
Many seem fearful of the audit, because I think, of the OPVDI FAQ examples of maximum penalties that “could” occur. In my opinion based upon my experience, these are hyperbolic fear mongering on the IRS side to shake down the Whales. Given how an audit actually works, and the discretion and admonition that the IRM gives agents not to assign absurd penalties, you should not be frightened into joining the OVDI on the basis of these penalty fears unless your facts compel you.
This OVDI penalty program is a GREAT deal for a Criminal Whale, but for a Minnow, it is a fertilizer factory.
Unless you have have engaged in criminal behavior and really have something major to hide, an audit outside the OVDI shouldn’t worry you one whit! It is a pain in the ass to go through, for sure, but IRS agents will use discretion in applying FBAR penalties in an audit. They have an IRM that dictates their actions, rather than just applying a “one size fits all” ‘in lieu of’ penalty inside the OVDI. Inside the OVDI, they have no discretion to do otherwise. Outside the program, in a normal audit, penalties for minnows will be nowhere as severe as the OVDI penalty. Unfortunately, the way the IRS conducts itself, they will happily take from you a disproportionate penalty inside the OVDI if fear causes you to enter or keeps you there too afraid to “Opt Out’. I speak with some insight now after experienced the game.
Hindsight is 20/20, as they way, but knowing what I know now, I would not have difficulty sleeping if I didn’t join the OVDI given my facts. I don’t really know yours or ovdikills, but if as represented I would think long and hard before I entered that OVDI processing factory. For me, had I remained outside, and just did a QD or became compliance going forward, I really don’t think my wallet would have been so lightened by a pick pocket called the IRS. With everyday that passes the statute of limitations would have run out, and an audit would not have been as bad as what they tried to assess me inside the program. Unfortunately sometimes, “doing the right thing” which I believed I should do in the 2009 OVDP, turns out to be exactly the wrong thing to do. Ponder it carefully.
“So want to be sure that you have fully assessed the potential that you might be underestimating your OVDI penalty.”
This is a good point. I was considering OVDI at one point last August before I’d done a lot of research. It turned out that the highest value in accounts I had signature authority on during an eight-year period included the point where we’d bought a house, and the penalty would be assessed on that amount – 5%, which seemed crappy but manageable, would have come to a C$22,000 fine. At that point I stopped taking the exercise seriously.
@A broken man on a Halifax pier
@badger
Good comments. Thanx
Thanks guys for all the reply. I know very well what you guys are trying to tell me. This program was never designed for the minnows. But for me its really troubling, its like a saw hanging over my head until i get out of it. I have been doing lots of reading and also started calculating my penalties more closely. The OVDI penalties is coming to around $7k now before the taxes dew. I do not have any property back home yet. I am a young guy 28years old trying to make a career. I dont have much yet. I have come to US with much hopes and have been doing pretty good since then, my Green Card is also in progress and I want these issues to cause problem later in life. Every time i read this or Jacks blog it makes sense not to join the program, but when I go and try to sleep I just cant sleep until promise myself I will join the program. I think even $10k though hard earned and big amount for me is something I will have to pay to sleep. Its like a sleep tax for me. One thing that i might think of doing is the opt out. At least then they cant do a criminal case on me. At least they cant win since I would have declared everything. My main worry is my assets has gone beyond 75K in 2011. So If i dont do it now and have to do it later I will have to pay up at 27.5% instead of 12.5%. The worst part is, with the VISA issues becoming so strict I do not even know if I would get a VISA to come back when I am going back home this year to get married.
Assuming i do join the OVDI i have a few questions for you guys if you are kind enough to answer
1. I came to US only on July 30th 2008, which does not make me a resident under the substantial residency test. Do I need to amend my tax for 2008. Yes i had filled my taxes for US earning.
2. IF i do have to file amendment for 2008, should I have to declare the income earned in my native country from Jan 2008 to July 2008 and pay taxes on it? If so can anyone throw more insight on this
3. My company transferred me to my native in Feb 2009 to May 2009 during which time i worked there and had an Income there. Again this income was fully taxed in my native. Should I be declaring this in my 2009 amendment.
Thanks for the links. I have gone through each of them already. And will dig into the ones you suggested even more. I am sure I have more knowledge on this process now thanks to this and jacks blog than some of the attorneys/CPA’s i am talking to. And then the IRS tells us its our mistake to not know to file FBAR.
I am really sorry to trouble you guys with my questions. But any help is greatly appreciated. Look forward to hearing from you guys.
re (2): Google “Foreign Earned Income Exclusion”
@ovdikills
I am not a CPA or a tax expert, so am a bit reluctant to offer specific advice…
I think that at the point you became Tax resident in the US, and such a “US person”, then yes, any income you earned overseas either “passive interest”, or “earned income/salary” would have to be declared on your tax returns. Also, with a combination of the “Foreign Earned Income Exclusion” and “Foreign Tax credits” you might not have much or any liability depending on your gross earnings in the US, and the rates at which you paid taxes overseas.
For those answers you would either need to have an international CPA do some trial 1040xs for you, or do like I do… just work it out in Turbo Tax.
I hope the price you are willing to pay for your “Sleep Tax” isn’t going to become too steep. But understand, it may not give you the rest you think it will. If you do enter, you are really going to want to strongly consider “opting out” at the first opportunity. If you haven’t read Moby’s tail here, be sure you do…
http://isaacbrocksociety.com/2012/03/10/moby-opt-out-update/.
@ovdi
There have not been any cases of immigrants charged for $75k in assets, so you don’t have anything to worry about that.
Second, how likely is the IRS to find it? If it is in India, just transfer the money to a relative’s name, and save the trouble and expense of filing anything.
The OVD you are reading is a scam by the IRS to prey on scared and innocent immigrants like you. Don’t voluntarily pay any fines. Fight for keeping your money.
The other alternatives like filing forward are a way to keep all of your money.
@M & @JustMe….. thank you very much for your responses. From researching a bit on “Foreign Earned Income Exclusion’, i think I will not be required to show income up to July2008, using the 330 days which can be used from any time during the year to any time during the year. So Considering from July 2007 to July2008 I was not in US for more than 330days, i do not have to pay tax on that. But i will have to pay tax on the March-April 2009 salary.
@M, yes the “sleep tax” I am going to pay is approximating $10000, thts pretty high for a starting minnow like me. I have done pretty much all the calculation myself already and have usually over estimated to get a kind of idea. And I am sure there is no other surprises left for me since that is all I have got. I do not even have any join accounts. I also read that whatever calculation I do the IRS will have its own calculation and we have to comply and since my case is not very complicated (nothing hidden) I feel i wont get hughe differences.
Also yes I am thinking of opting out of OVDI, but atleast they cant win a criminal case against me then. I did read Moby’s case really wont wish that on even my worst enemy. Just assuming I wont have any such surprises since I dont have any other assets than all the accounts I am going to show which are combination of CD, savings account, PFIC and stocks. Only PFIC calculation has been a bit challenging but I was able to work it out using the MTM method. I got the statement for the PFIC from 2008 to 2011. Used this method
(NAV reported for DEC * total Units in hand in DEV) – ((NAV reported for JAN * total units in hand in JAN)+(premium payed for entire year))
Also just to make sure, if I get into 2012 OVDI, i have to show only from 2008 to 2010 (came in to US only in 2008) and not 2011, correct? As I can file 2011 normally within Jun 30th 2012?
@ovdikills
From what you have told me, there is NO WAY that the IRS is going to waste one $ of a prosecutors time on you, even if they discovered you by doing a full blown audit.
They have recently lost 30% of their staff for going after the Whales, for god’s sake. So you really think they will spend any resources on you? They are stupid in how they create these rigid programs, but they are not that stupid when it comes to prosecutions.
Read this…
http://www.mainjustice.com/2012/03/27/tax-division-farms-out-lawyers-to-u-s-attorney-offices-raising-questions-about-focus/
There is NEVER going to be a criminal case against you, in my opinion. As long as you don’t willfully engage in discover-able tax evasion. There is no criminal case for non willful failures to file a FBAR. End of story. If an examiner brought your case to a DOJ attorney, he would laugh them out of the office.
So, if you do a QD, for years 2009, and 2010, and they decide to audit you, so what? You have nothing else to hide. At that point the Examiner is going to use full discretion in assessing whether or not a FBAR penalty is appropriate. If you have already filed the past FBARS for 2009 and 2010, with a “reasonable cause” letter that you didn’t know it was required for many of the same reasons that John Doe and Moby have made, I doubt you will have any problems. The audit is going to find nothing, because you amended your returns and paid your taxes, and the FBAR penalty isn’t going to be much, as your failure was non willful with reasonable cause. You would probably only get a “go and sin no more” letter, if that.
I really don’t quite understand why you are so eager to enter the OVDI. I am going farther than I usually do in giving advice, but I can see NO compelling reason for you to enter. I think you will find, inside the OVDI, you are going to have more sleepless nights and less reassurance than you think, to say nothing of the extra money and LCUs you are going to spend. Are you ready for a 2 year process?
If it were me, and if the facts are as you represent them, then I would probably just amend 2009 and 2010 taxes. File 2011 correctly after you apply for an extension. Send your 2009 and 2010 FBARs in with a reasonable cause letter, and then forget about it.
You will eventually get a letter from the IRS wanting additional interest payments on under reported income for 2009 and 2010. They may or may not add an accuracy penalty, but I would be willing to wager, that is all you will ever hear. It should not keep you up at nights, because you already know that should they decide to audit you, you have already amended everything and filed everything and there is nothing else to discover. There is going to be no police knocking on your door because you filed late FBARS.
Rest easy Mate, I think you are unduly concerned. 3 years from now, with the statute of limitations past, you are going to wonder what were you all worried about. 🙂
@JustMe, thanks for your advice. You have really made me think about this all over again now. I have a question though, if they do audit me, they can then levy me with an FBAR penalty of at least 25% correct or is it 50% of my assets? I know chances are very less, but my luck has always been worse than shit.
Also thanks to “A broken man on a Halifax pier” for many replies.
Yes I am just a small fish in this big system trying to live as correct life as possible especially in a foreign country which has treated me well except for this draconian FBAR. All the Attorneys/CPA I talk to mention if I amend my taxes and also submit prior FBAR its a BIG red flag for audit. Some of the CPA’s have no idea what OVDI is and still want to take my case. Its so frustrating. I have given my piece of mind to a few who did not even have the knowledge I have on OVDI but still wanted to take my case at unbelievable rates.
Check this link “http://www.greenbacktaxservices.com/blog/expat-taxes-explained-offshore-voluntary-disclosure-initiative/” , scroll to the bottom in the comments section, these guys claim experts in Foreign tax and openly declare the people on H1 Visa have no obligation to declare FBAR’s how wrong. its a shame a real shame that IRS expects people like me to know what these big guys dont.
@ovd
There is is truth in that recent immigrants are under fewer obligations. 100% of the IRS targets are US citizens who are actively hiding income and assets, not immigrants, and especially not recent immigrants or immigrants who are not permanent residents.
Please do not allow the IRS writings to scare you into OVD. You must fight that fear.
There is no such thing a “sleep tax”. It is your own imagination.
The OVD program was made for multimillionaire Americans who are hiding millions in Switzerland, not for minnows. It does not work on the wealthy Americans because they are not afraid. It only works on the minnows because they are afraid.
@ovdikills
Re: “they can then levy me with an FBAR penalty of at least 25% correct or is it 50% of my assets? I know chances are very less, but my luck has always been worse than shit.”
Well mate, your luck is about to change… 🙂
The penalties that you are all hung up about are penalties for “willful” tax evaders who knowingly decided to hide money in secret accounts and then deliberately did not file an FBAR even though they knew they had the obligation under current law.
Is that you?
If not, then FBAR penalties can be much much less, and even nothing. If you have read the IRS’s own manual, the IRM, as much as I have, that would be plainly obvious to you…
Maybe you should do some more drudgery and read the IRM for yourself….
http://www.irs.gov/irm/part4/irm_04-026-016.html#d0e529
Here are numbers 4, 5 and 6…
4. Penalties should be asserted only to promote compliance with the FBAR reporting and recordkeeping requirements. In exercising their discretion, examiners should consider whether the issuance of a warning letter and the securing of delinquent FBARs, rather than the assertion of a penalty, will achieve the desired result of improving compliance in the future.
5. FBAR civil penalties have varying upper limits, but no floor. The examiner has discretion in determining the amount of the penalty, if any. Examiner discretion is necessary because the total amount of penalties that can be applied under the statute can greatly exceed an amount that would be appropriate in view of the violation.
6. Examiners are expected to exercise discretion, taking into account the facts and circumstances of each case, in determining whether penalties should be asserted and the total amount of penalties to be asserted. Because FBAR penalties do not have a set amount, IRS has developed penalty mitigation guidelines to assist examiners in the exercise of their discretion in applying these penalties. The mitigation guidelines are only intended as an aid for the examiner in determining an appropriate penalty amount. The examiner must still consider whether a warning letter or a penalty amount that is less than what would be called for under the mitigation guidelines would be more appropriate given the facts and circumstances of a particular case. For example, if an individual failed to report the existence of five small foreign accounts with a combined balance of $20,000 for all five accounts but the income from each account was properly reported and the taxpayer made no effort to conceal the existence of the account, it may be more appropriate to issue a warning letter rather than assert penalties under the mitigation guidelines.
So that should give you some more comfort that you are not going to be hammered like you think they might. As the 30 year IRS Vet, Steven Mopsick has said somewhere here, (and I couldn’t quickly find the link, so I will paraphrase), “the IRM practically screams at the Examiner not to to assess a harsh penalty.”
So relax a bit. You have to bring FEAR under control, and it takes a long time to get familiar enough with this subject and have a strong enough knowledge base of what worse case “could” happen versus what is “likely” to happen. You are right, there are a lot of practitioners out there giving bad advice, probably don’t know as much as you do now, and want to charge a lot of money for it. Buyer beware!
The thing you have to remember about the Statutes that created the stupid FBAR requirements and penalties, they are written in the language of “May’s” not “Shalls”, and wide discretion is given to an examiner in an audit. That same examiner has NO DISCRETION in the OVDI. Let me put it this way….which would you rather deal with, an examiner who has discretion in an audit, or a black and white, no exception examiner in the OVDI?
Regarding your attorney and CPA warning you about the audit “Reg Flags”: This is just another Fear tactic. So what if it is a “red flag”? What do you have to worry about? I mean, really truely, what do you care? An audit is less stressful and takes less time (LCUs) than the OVDI. Yours was a normal non-willful foot fault of a new immigrant who didn’t figure out all the requirements of the most complex tax and reporting system in the world!!! You are a very sympathetic tax payer now complying as soon as you found out. An audit, if it ever happened, would be a piece of cake compared to the OVDI process. You will have already disclosed everything by filing your amended returns and sending in your FBARS late with a “Reasonable Cause” Letter. You really have nothing more to worry about this “Red Flag” boggeyman.
Frankly I would be more worried about what might happen and how frustrating the OVDI process will be for you, and that 2 years from now, you may still be fighting your way through it trying to Opt Out for a lessor penalty. The Opt Out would just be that “Red Flag” regular audit without all the front end OVDI crap and frustration to suffer through.
M is right. You must fight that fear factor. I appreciate that you have been reading and trying to understand the program, and you want to do the right thing, but you haven’t examined your options enough if you think the OVDI is a “sleep tax” which will some how put your restive mind at peace.
Do a little more drudgery and you will come to the right answer for you.
@ALL
I’ve got a quick question about “non-willfull” and “willfull” FABR penalties. Does the IRS have to take you to court for just “willfull” penalties or do they have to take you to court for “non-willfull” penalties too?
thanks in advance 🙂
The word “Minnow” shows up alot around here and it keeps reminding me of this:
@JustMe, great piece of information. Thanks for that. I read in another blog that people who are doing this “noisy declaration” of FBAR which you are suggesting are getting a reply from the authorities to join the OVDI program. Have you guys heard anything about it? Also though painful, which do you think is better, 1. OVDI and opt out or 2. Noisy Declaration with amended taxes ? Also none my accounts back home have a US address assigned to it. They are all local accounts. But problem is i have lots of small accounts with max in each account not crossing $15k at any time. But i get screwed when aggregating them.
@UncleTell…
All FBAR penalties, “willful” or “non-willful” are civil penalties under title 31, and only collectible if the IRS/DOJ gets a judgement against you. I understand they have 2 years from the time they assess the penalty to take it to a federal court to get that judgement. In the meantime you keep the money.
From a practical matter, I have never heard of the IRS taking anyone to court for a “non-willful” penalty, and the “willful” penalties we hear about are often collected in the context of Tax evasion court case, or at least that is how I read all the examples I have seen. Even in those cases it is only one FBAR penalty is usually assessed.
It is really hard to imagine that an Examiner would send over a “non-willful” to the DOJ for court action. The IRS and the Taxpayer would probably have come to a negotiated agreement long before it got that far, and from a practical matter, I don’t think the IRS wants that kind of case in court in the first place. The cost of collection would be way more than the non-willful penalty, unless they tried to assess multiple account non-willful penalties, and I don’t think any lawyer wants to be arguing that one. Multiple penalties get into the absurd area that the IRM warns about.
@ovdikills
First of all, Definitions: I think you are getting confused. When you say “noisy declaration”, that is what the OVDI is. Quiet Disclosure (QD) is just filing amended returns.
I don’t know what other blog you are talking about, but as a bit of advice, and to keep yourself from getting confused, I would just stick to this blog, and Jack Townsend’s blog for information.
Jack, from a technical/advice stand point is the best there is. He has done a great service with pro bono advice for minnows that he provides with careful qualifications. He has really tried to help minnows see that their fears are unfounded, and while you have to wade through a lot of comments to pull out the gems, I recommend you pay attention to what he says. He is the expert, and I am just the novice who suffered the hammer, so have an ax to grind. My advice is suspect, but his is based upon years of DOJ practice. It is much more dispassionate and less hyperbolic.
I know the IRS discourages QDs. They make you feel like you have to do a noisy disclosure and enter OVDI. That is plainly WRONG! From a practical matter when it comes to compliance and bringing more people into the fold, so to speak, QDs are exactly what the IRS should want, if only they had a brain. They are acting like the scarecrow in the Wizard of Oz.. If only they could sing a reasonable tune, it would be tolerable…
http://youtu.be/nauLgZISozs
In their warnings about QDs, they are just engaging again in some fear mongering which is directed at the Homeland Evading Whales to get them to come in the VD front door, so the IRS can be sure to assess the big penalties that they can later trumpet in the Media as big revenue collection successes.
They are also removing the threat of criminal prosecution in the OVDI. That is a GREAT deal if you are a Whale, and have bad facts and were engaged in egregious willful activity. Then you probably do not want to do a QD unless you are a Big risk taker. However, understand by nature, most Whales are risk takers.
From a practical matter, the IRS doesn’t have the resources or even the Examiner expertise to audit all QDs, so they are just trying to scare the Whales, and by default a few Minnows like you. It is what they do. They call it their educational outreach. Scare the s#$% out of them, and take their money “voluntarily” without having to search them out in audit and find out there is nothing else to take.
Our so called “Voluntary” income tax program, as complicated and unfair as it has become, only works if they instill fear in the taxpayer that you will likely get caught and prosecuted. They are trying to make you think a QD is some admission of guilt or some wrongful act. It isn’t. People amend returns all the time when they figure out they forgot something, or made a mistake and want to correct it. This fear mongering is very effective on Minnows, especially of the immigrant variety, but sophisticated tax payers have long ago learned to engage in “selective listening” when the IRS cries “wolf” with its warnings of dire penalties should you be caught because we flagged your QD.
As far as what you should do, I would just read my advice over again. I have provided you as much as I feel I am qualified to say. I don’t think you want to do the “noisy disclosure” which you are confusing it with a Quiet disclosures (QD). IE, I don’t think the OVDI is for you. You have had both a CPA and a Tax Attorney tell you that. Like I have said, I would pay attention. That is as plain as I can say it.
Now, if that is not sufficient, or if you think your Tax Attorney or CPA was not qualified to give you the correct advice, I would find another OVDI Tax attorney for you to run your facts by. Pay the fee for an hour or so of their time. That might help remove your fears. There are several that I would recommend, and some of them have posted here. Jack Townsend is expensive, but might be worth a phone consultation. Phil Hodgen is another. Also Steven Mopsick posts here is a 3rd you could consider. Also, Jack maintains a list of attorneys that he thinks are well qualified to advise on these matters. There might be one in your area that you could talk to.
http://federaltaxcrimes.blogspot.co.nz/p/ovdi-attorneys.html
Just remember, if you insist that you want to enter the OVDI, then you do NOT need to pay high priced attorneys or the CPAs the big fees to do it. This is definitely something that can be handled as a DIY project. I would not be afraid to go it alone. In fact, I think the Minnow is better placed to do so. If you show up with an expensive POA, (power of attorney) then the IRS examiner naturally thinks you must have something to hide that you need the high priced representation.
Force them to deal with you as a minnow, as you are more sympathetic that way. Frankly, again, if your facts are what you represent them to be, the Examiner will probably encourage you to consider the Opt Out, which could be the regular audit that is the “Red Flag” boogeyman I have previously mentioned. It should be no big deal for you!
@ovdikills It is a very bad idea to enter the OVDI because you will no longer have any of your constitutional rights in the program. I suggest that you read all the posts on your rights on the right hand column of this blog, under the rubric: OUR RESOURCES. Especially read the last post on the Eighth Amendment, which shows that the IRS stands in dread of assessing the huge fines that the FBAR law allows. So they are using the scary penalties only as a club to scare people into OVDI.
If you want peace of mind, then I would suggest that you expatriate definitively from the United States. I have peace of mind because the Canadian government says it won’t collect taxes from me because I am a Canadian citizen; it will not collect any FBARs from any one either. As long as you are living in the United States, you are subject to the jurisdiction of the United States. So peace of mind is essentially impossible. So choose the least of all evils, and in my view that would be either (1) No FBAR on 4th and 5th Amendment grounds–but the risk is that the US will find out somehow about your foreign accounts (through FATCA perhaps); or (2) Go forward compliance. Given your risk tolerance, I would suggest that (2) is probably your best choice (but I am no lawyer). QD–quiet disclosure of six year’s worth of FBARs, with a letter of explanation to the treasury department, is still a much better choice than OVDI. Remember too, that ignorance of the FBAR law is a very good excuse for non-compliance:
@Just Me and @Petros, thanks for your replies. JustMe thanks for clarification on the definitions. @Petros I have 3 default FBAR’s 2008/09/10. I am seriously considering the QD now though cant decide yet. I am going to ask for extension on my 2011 taxes and take some time and decide. As i go through the calculations I might learn of even more cases here and on Jacks blog. But I have to tell you Just Me, you have been like god send for me. I am much more calm over the last two days since I started corresponding with you. I am sure all the help you are doing will be rewarded to you in some way or form.
I am sure to bug you guys further if I have any more doubts. I am in the process of getting all my bank statements now. Do you guys know if i go in for OVDI do I need to submit all the bank statements along with the package. One of the CPA suggested me if assets <$500K I dont have to. Nothing to hide but some are difficult to get so thinking of over approximating for taxes. Also if we do have to provide the statements, do the agents keep questioning you on each and every transaction say for about $2000-$3000 checks coming in and going out? Its impossible for me to justify these transactions. My parents would have debited and or credit money as required, there are many though about 4-5 transactions in $2000-$3000 range in the 2008-2010 range.
If i go through OVDI and then do an opt out, will I know the fines before hand or will that only be calculated after opt out. Also I was reading in Jacks blog that the fines they are calculating on opt out is only per year around $500 is that correct? I hope they dont take it per account per year as i have tooooo many small accounts. My taxes for all three years are coming to approx $2000. I am pretty much there on 2009 and 2010. 2008 need some more calculation. Can you guys suggest any good CPA whom I can hire and decent rates with knowledge of foreign taxes and PFIC?