We received the following comment from 30 Year IRS Vet:
This web site is a wonderful opportunity for people to vent about the new IRS initiative to focus on offshore compliance. I would guess that most people fall into one of two categories: those who are “off the grid” and do not file nor do they have any intention of becoming compliant with their US federal tax obligations and those who are sincerely attempting to figure this all out and determine what to do and then make a good faith effort to comply.
For those in the second category, here is a thought from a 30 year IRS veteran attorney. The name of the game here is the abatement of civil penalties (assuming your tax problems do not arise from an illegal activity). Under widely recognized IRS procedures, civil penalties can be abated upon a showing of reasonable cause. That could mean reliance on the wrong advice of a professional, or ignorance of the law, say for someone who has lived in Canada all their lives and is an “accidental” US citizens who never had any reason to know about FBARs or FATCA.
At the present time, the IRS is under an enormous amount of pressure to “be reasonable” in its administration of these new penalties and statutes. If you happen to “get caught up in the system” and the IRS comes after you, you can be sure at some time you will get a computer generated notice with penalties stacked up automatically. If you choose to cooperate and play the game, it is usually an easy matter to get to talk to a human being and talk some sense into them and agree to pay the tax owed but get all the penalties abated.
My initial response to him was as follows:
Perhaps you misunderstand. We are not here to “vent” as if this is some kind of gab session. Neither are we here to figure out some way to reduce civil penalties as though we admit being some kind of tax cheats as the media in the United States has constantly called us. Nay, we are here to fight the IRS and to encourage the politicians in our countries to stand up for us.
Many of us aren’t even really Americans, at least not according to international law. We are of dominant Canadian or other nationality. But your portrayal of our activity here as “venting” is condescending. If you want to help us, then please help us by fighting. We are not going to back down, and we are not going to compromise with the IRS.
Now, hopefully this attorney won’t mind answering questions as Blaze has already started. There are some here who desire to comply with the United States’ illegal extra-territorial tax grab. I am not interested in compromise or compliance, beyond what is necessary to satisfy the requirements of my government, that is the government of Canada. The United States is a foreign country to me. I am no longer an American as 28 February 2011. However, anyone wishing to employ 30-yr IRS vet, I’m sure he wouldn’t mind if I told you how to get a hold of him.
UPDATE: Response from 30-yr IRS vet:
Dear Petros. Touché, and I applaud you and respect your anger. Having done federal tax for 41 years I have never seen something as controversial and volatile as this issue. I must say based on my experience in working for the IRS that the Washington never considered or could have anticipated the problems with the new rules which are specific to Canadians. We don’t want to alienate our good neighbors to the North. I can tell you that Washington is certain to consider the problems of Canadians under FATCA and I am sure they will be addressed in the regulations once they are published and the whole world has a chance to comment.
@Justme, “just following orders” in the military is not a defense at a court martial. The IRS low-level workers know what they are doing!
I imagine that the IRS holds prep-rally like meetings and awards the workers who scare the most money out of innocent people. (They simply ignore the common-sense facts that a good many of people are paying taxes where they live on this money).
If you look at the statistics, and traditional income distribution models, there’re very few whales and lots of minnows.
Of course in Canada if your a whale aka a Quebec Construction Baron you just invite your entire CRA audit team to your private box at the Bell Centre to see a Montreal Canadiens game. If your worried about difficulties in opening or closing a offshore account well you just pay a CRA auditor “on the side” to travel with you to the Bahamas to deal with any formalities at the bank.
http://www.theglobeandmail.com/news/politics/profiles-of-the-taxmen-and-businessmen/article2184044/?from=2224991
@Tim
Just wanted to say – great comment thread here:
http://mopsicktaxlaw.blogspot.com/2012/01/fatca-red-herring.html
and thanks for all your insightful comments!
@tim.. wow.. I’m pretty surprised.. Canada with corruption like that? I would expect that here, but not there….
Keeping two threads current… LOL
@Tim…
Thanks for your comments, and I understand those differences although I probably take some license in lumping them together since IRS does report to Treasury.
However, I also understand that Statutes are created with a lot of mays not shalls, and the IRS is given wide discretion in implementation and regulatory rule making. Look how unenforced FBARS were for so long, before they decided to become more harsh with the power they were given.
My point is a simple one, while Congress surely bears the blame for voting for Statutes whose contents and impacts are unknown, the IRS does not come out of this as poor non complicit victim in legislation that gets created. If Treasury and/or the IRS opposed FATCA, it would have never seen the light of day.
Whether it is via Treasury attorneys or by IRS attorneys,or a combination of the two (likely) the IRS/Treasury leadership had a role in the bills creation. To now claim difficulty in understanding Congressional intent just doesn’t wash with me. Just ask Shulman or Geithner what they intended. That is about as deep as they need dig. I am sure no one (or few) but Carl Levin in Congress knows what was intended. JTC is a fair point for you to make. (They would be the few).
Maybe I am wrong, and too cynical, but I have seen how the sausage is created. I had my little part in creating some of it. The IRS can also lobby Congress to undo what they have done, and create amendments to strike a different balance, if they wanted. They could have stopped it in the first place.
It should not have to wait for letters to Senators/Congressman from a far flung Expat Diaspora to raise a stink and awarness. ACA has been working the issue hard, but there are few other Expat groups so organized that can lobby or fight this. I am looking for evidence that the IRS really wants changes in FATCA or will do anything different without pressure just because it is the right thing to do. So far I see the opposite, but will amend my views given the evidence to the contrary. I guess we wait the next FATCA regulatory guidelines.
However, as you know, they (the IRS) have gone a step farther than FATCA, and have attempted by regulatory power to create DATCA, or the domestic version of FATCA to impose on all US banks the requirements to disclose the amount of interest paid to nonresident aliens, under the ‘what is good for the goose is good for the gander’ theory.
http://www.accountingtoday.com/news/Congressman-Tells-IRS-Back-off-Bank-Disclosures-60322-1.html
So, what do you make of that? Are they just trying to intone Congressional Intent, or do they have a larger mission here? So far, it seems they have been deaf on Congressional intent here, but there has been no further reporting that I have seen so not sure.
Fair questions, I think, but you can correct if I am wrong. I am very open to contrary opinion or thought. I would like to be less cynical of our poor IRS officials. There is only one official, I am not cynical about, and that is Nina Olson. So far IRS leadership are ignoring her. I am watching for their response to her TAD and report to Congress to figure out IRS intent, as that intent has more relevance to us right now.
BTW, I am pretty sure that ACA has been lobbying the JCT, as I think you are right, that is the place to look now. Maybe in the current offshore hunt, they can call off the dogs.
Isn´t true that FABArs are a requirement for all Americans regardless of where they live, even the ones living in the USA?
@markpinetree
Yes, Homelanders or Expats have to file FBARs if they have an offshore account(s) or across border accounts like Canada or Mexico with aggregate amounts (all accounts) exceeding $10K. That also includes US persons residing in the US like Green Card holders.
@Mark, Yes, “mainlander” Americans who may have money abroad are expected to file the same paperwork.
Mark, if you **LIVE** in Brazil, my recommendatiion is that you contact the nearest deputado (congressman) near you. I have an idea of what they won’t be able to *believe* what you are saying because the US has gone completely crazy with this FACTA and FBAR..
You are Brazilain and protected under the Brazilian constitution. I have a long list of things where the Brazilian Government gave the US the middle finger in regards to Brazilian citizens. Be glad you have Brazilian citizenshp!! Brazil will protect you.
But to be safe, IF the US wants peiople to give up US citzenship, since “it is so valuable in their eyes”, give up US citizenship if you don’t need it anymore. I wouldn’t pay R$ 10 ($6) for US citizenship after having living abroad for 10 years.
And I already know your next question – but it was ruled unconstitutional by the congress in America.
Você só tem que avisar todo o mundo!! Fale para os seus filhos, todo o mundo!! Que os EUA está fazendo é um absurdo!
@Mark, I have 1 document remaining to enter with my petition for Brazilian citizenship. For this, I have to travel to Belo Horiizonte. When I come back, I plan on telling the Policia Federal that I’m applying for Brazilian ciizenship and renouncing US citizenship [soon thereafter], to protect my Brazilian wife and Brazilian son.
Why should Brazilians like my wife and son be subject to US laws?? My calculations show that people in Brazil pay arouund 80% of their income in taxes because IPI, ICMS, and whole lot of other taxes that exist in Brazil, and NOT in the USA.
@geeez
Wishing you a speedy process towards getting Brazilian citizenship!
Here are the Faxes of Reps. in the Caucus Americans Abroad:
Americans Abroad Caucus (2007)
Carolyn Maloney, Chair D NY Fax: (202) 225-4709
Michael Capuano, D-MA Fax: (202) 225-9322
Andre Carson, D-IN Fax (202) 225-5633
Donna Christensen, D-VI Fax (202) 225-5517
Jim Clyburn, D-SC Fax (202) 225-2313
Steve Cohen ED-TN Fax (202) 225-5663
Michael Conaway R-TX Fax (202) 225-1783
Gerald Connolly D-VA Fax (202) 225-3071
Susan Davis D-CA Fax (202) 225-2040
Charles Gonzalez D-TX Fax (202) 225-3236
Key Granger R-TX Fax (202) 225-5683
Alcee Hastings D-FL Fax (202) 225-1313
Michael Honda D-CA Fax (202) 225-2699
Rush Holt D-NJ Fax (202) 225-6025
James McGovern D-MA Fax (202) 225-6101
Jim Moran D-VA Fax (202) 225-0017
Gregory Meeks D-NY Fax (202) 225-4169
Donald Payne D-NJ Fax (202) 225-4160
Gregorio Sablan I-MP Fax (202) 226-4249
Loretta Sanchez D-CA Fax (202) 225-2965
Janice Schakowsky D-IL Fax (202) 225-2111
Chris Van Hollen D-MD Fax (202) 225-0375
Henry Waxman D-CA Fax (202) 225-3976
Joe Wilson R-SC Fax (202) 225-2456
Frank Wolf R-VA Fax (202) 225-0437
Pingback: What facts will NOT support reasonable cause arguments for FBAR? | The Isaac Brock Society
I’m worried that catching minnows instead of whales is a feature and not just a bug in these laws. Politicians in the U.S. use the wrong words on purpose.
Time after time they pass laws that are everywhere publicized as being one thing when they are actually designed from the start to do just the opposite. No Child Left Behind, for instance, was promoted as a way to improve public schools when, in fact, it was designed to wreck them so that it would be easier to persuade the public to privatize them later.
The current U.S. leadership expects the world to pay the gambling debts of it’s banksters. They’ve already saddled citizens in-country with that burden. I’m not surprised to learn that they are also looking for victims beyond their borders. As people on this thread have been describing the way their finances and peace-of-mind have been wrecked by these policies, to my ear still trapped in-country, it sounds like all of you are just describing what it feels like to be American these days.
Well said, “someofparts” and welcome to Isaac Brock.
Reblogged this on Renounce U.S. Citizenship – Be Free and commented:
This is an important post on the issue of “abatement of penalties” and “reasonable cause”. As always, pay attention to the comments!
http://isaacbrocksociety.com/2012/02/01/comment-from-a-30-year-tax-lawyer/
Pingback: Renounce U.S. Citizenship – Be Free
@ petros (February 1, 2012 at 8:58 pm) wrote: “I became a Canadian on February 28, 2011, and I don’t need the United States approval to have expatriated, as it is a fundamental right. No government which is just and free ever stands in the way of the fundamental rights of individuals. To do so is tyrannical.”
I am coming around to that same attitude. I am a Canadian and I refuse to let any bully bureaucracy in the USA tell me that I am a “US person” — for tax purposes, for FBAR penalty purposes or for any other purposes. I made a mistake by not knowing I was supposed to return my old green card and fill out a form but I will not be punished with perpetual US personhood. I am thinking I will probably murder that card rather than return it … but first I will render it on an open flame and waterboard it.
@Em You should consider writing your story for our section “participants stories” (Actually, there has been a new story added there for a while–any takers?). If you have told extensive bits of your story in comments, then it would be just of matter of gathering them together and editing. Then send it to me.
@ Petros
I have considered doing that but I don’t want to get involved with a wordpress account. (I know it’s probably easy to do but I am overwhelmed right now with other stuff). If I posted it here would you be able to just add it to the “participants stories” for me? I have “my story” ready to go (altered a bit for clarity since my original panicky posting). I don’t mind being the test case for kryptonite card madness. Discovering I-407 had me discombobulated for awhile but my derring-do is slowly returning.
What’s up colleagues, good post and pleasant arguments commented at this place, I am genuinely enjoying by these.
@chicago tax attorney
Welcome to Isaac Brock Society. We would love to hear what you might have to say about the present situation regarding the IRS’ long reach.
@chicago tax attorney
Let me extend my welcome too. Glad you are enjoying the arguments. We try hard to keep it civil while allowing active debate. Hyperbole is a little harder to constrain! 🙂 Gosh am I guilty at times! There is a good debate going on about QDs as related to the offshore IRS jihad at this thread. You might find something interesting there too.