Speaking out again, 30-year IRS Vet tells us that Isaac Brock was a great guy but that FATCA is not the hill that any of us wants to die on.
I wish I could address everyone individually. I am going to stick my neck out and predict that as soon as everyone in Washington “signs off” on the current draft of the FATCA WITHOLDING REGULATIONS (which is what was due on January 31,– the form 8938 regs which most of you are concerned about, were published in December) there will probably be an IRS Notice announcing the Service’s position on certain deemed compliant factual scenarios which will cover almost all the accidental American fact patterns and many of the situations described on this blog.
I am also going to stick my neck out and predict (but not necessarily advise) that anyone who chooses to engage the IRS on FATCA and either decides to start filing what is required prospectivly or blows them off until they force themselves into your lives–as long as there is no unreported income which, for whatever reason is due and owing, I do not see the IRS piling up penalties and pursuing any one if they either just start filing if there is an obligation to do so.
Remember, both our government’s have a keen interest in collecting the taxes their respective legislatures have ordered them to collect.
As for the US, the government is looking for people WHO ARE LEGALLY SUBJECT TO IT’S JURISDICTION, and to just pay up if you owe the money or forget about.
When the Bank Secrecy Act came in 1970 and they stared to enforce it 2004, and FATCA followed it in 2010, a whole new concept was introduced with regard to the way our tax was reported to the government. Since the honor system, which is still the basis of our voluntary self reporting system, didn’t seem to be working , the government was now saying, “let’s see what you’ve got and we’ll let you know if we have any questions.” What is new here is there doesn’t have to be a “taxable event” for FATCA to apply. Up until now, there had to be a sale or exchange, dividends, receipt of interest, or earnings from a job before we had to tell the government about it .The theory of FATCA is, if you are going offshore with your property, Uncle wants to see where you are going with it and what you are doing with it.
The corollary to having the inalienable right to “life, liberty, and the pursuit of PROPERTY” is, under that pursuit of wealth, comfort, and a better life for our children, there is the sense, or at least the hope that educated and enlightened citizens would voluntarily report what they earned so that the government could buy the goods and services it needs for our protection and benefit. I am not complaining here, or defending what we have now. It’s just the way it is.
The IRS is extremely limited in what it can do and as a law enforcement agency and it tries to get the most bang for its buck.
Even if there were no Voluntary Disclosure Program, the IRS just doesn’t have the people to do a whole bunch of criminal investigations. That leaves the civil fraud penalty! Probably not, because the IRS has the burden of proof in Tax Court and when I remember having to prepare fraud cases for trial as an IRS trial attorney I recall they were a real pain in the neck to prepare and twice the work of the other cases we had where someone was trying to prove to the Tax Court that they really could live on $50,000 and still afford to pay $25,000 a year to charity. When it came to bringing fraud cases to Tax Court, young IRS trial attorneys are urged to work on the ones we were pretty sure we could win. Slam dunks so to speak– cases where someone’s combination of greed and stupidity were just far enough along the continuum of behavior for the Tax Court Judge to agree with the Commissioner’s hunch that the taxpayer we were torturing for a year or two had been willfully and purposefully arranging their financial affairs in such a way that they were hiding money from their accountant and sometimes their wives, but nonetheless making sure it didn’t show up anywhere on their tax returns which they knew were false and fraudulent when they signed them.
That leaves the FATCA/FBAR penalties. Remember, they were enacted to catch real bad guys. There has to be some wrong doing. You don’t get hit with a $10,000 automatic penalty just because you were standing in the wrong place. This is still America and if the government is being stupid we get to say it. You just have to do so in the right way and it’s usually to your advantage to do it in a way that doesnt make the person working there feel like crap.
I think all the fuss over FATCA for individuals (but not for the banks) is going to result in a big stall in the pipeline until the National Office cuts the field some slack to start waiving penalties altogether. There certainly should not be any penalties if there is no unreported income. If there is unreported income then the government has the right to ask how much, is there a pattern of behavior, and for how long has it been going on. Then in practice, what the IRS chooses to go after is all a question of degree.
While I was working for the Acting Chief Counsel in Washington I had the honor of visiting your CRA headquarters in Ottawa on IRS business and had a real sense of the difference in the feel for the place as opposed to what I was used to in Washington. Pretty cool place. Calm. Quiet. I have had the good fortune and privilege to fish around Vancouver, and we always feel an affinity for Canadians, whether we meet you in your home, ours, or abroad. We see you as “laid back” like some parts of California, and Oregon, and Washington State.
I read a little about Isaac Brock and got the feeling he was probably a really good guy. He died defending his adopted country because he chose to make a stand for what he thought was right. I don’t think FATCA is really the hill anyone wants to die on. I would respectfully ask some of you to just take a step back and remenber who you are . My prediction is the government is going to do the right thing here so that Canadians can get back to what you were doing before there were FBARs and FATCA
30-Year IRS Vet