On January 25th, I posted a story of the “Opt Out” success of a Minnow with the alias of Moby.
It was under the title of An OVDP Minnow “Opt Out” Success by Moby
If you are not familiar with his story, I would suggest that you read that post first to bring you up to date with his story.
Moby, now complete in his dealings with the IRS and no longer residing in America, has generously made his “Opt Out” correspondence public for all OVDI participants to see and learn from. What follows is his message for all of us.
Hi All,
Here are copies of my correspondence with the IRS during the opt-out process. It starts with them sending a 906 (which I did not sign) and ends with the acceptance letter for my opt-out recommendations and the assessment of only the accuracy related penalty (which I did pay). I believe the whole episode is now concluded for me.
I’ve published these letters with a view to providing more visibility on the mechanics/details of the opt-out process, and to hopefully inspire some creative arguments to use during the process. I hope this of use to people out there who are still knee deep in this stuff.
NOTE: The only communication not in the letters was a phone call that took place between letters 02 and 03 where the agent explained the opt-out process over the phone.
Link to the 5 letters is here: http://bit.ly/wdrEky
–Moby
This will also be posted at Jack Townsend’s blog, Federal Tax Crimes at the thread Opting Out” #2 (3/2/12)
If you are not following Jacks blog, I would encourage you to do so, especially those who are in the OVDI, and now considering whether or not they should Opt Out. There has been some new Opt Out stories and messages of reduced penalties reported that should give you hope that the worse case scenarios that the IRS shows in its OVDI FAQs may not be applied to Minnows. This is all anecdotal of course, but it does give some hope that application of reason is starting to set some free of this OVDI morass, and all may not be as dire as it seems. Time will tell as my cynicism remains finely tuned, but there are hopeful signs of a positive trend coming from the trickle of new reports.
A personal note to Moby. I just want to say publicly how much I have appreciated what you have done with your open communication at Jack Townsend’s blog. You and Sally were Opt Out trend setters that have benefited a large community of Minnows, many unseen or not heard from, but still gaining from your knowledge and the sharing of your experiences. A sincere thank you for helping us all in such an unselfish manner. Your departure from America’s shores is our collective loss, and I wished Commissioner Shulman would man up and issue an apology for your treatment. Or, as an alternative, how about just an formal acknowledgement of Nina Olson’s TAD? Sadly, tonight, Commissioner Shulman is snug in his bed in DC apparently unconcerned about the continuing damage that is being done to the IRS reputation, and America’s image with expats and immigrants around the world from his misguided offshore VD processes. Sigh…..So it goes.
PS… I just issued two more warnings tonight to Australians I met at a dinner party not to ever consider immigrating to the US. It is not the welcoming country it once was. Steer clear! They were absolutely flabbergasted at the story I told them of how the US taxes and treats its “US persons”, and I tried real hard not to be hyperbolic or over the top. I told them just the facts, …really!
‘she has consistently argued for 8th Amendment protection in cases like ours where there was obviously no willful intent’
I think she’s confused. The Eight Amendment (if applicable) would hold for everyone, even for the most willful evader.
Reblogged this on Renounce U.S. Citizenship – Be Free.
I wanted to add something here, that I read over at Jack’s blog regarding Opting Out.
It is located here...
Since it is hard on his blog to direct you to a specific comment, I am going to reproduce here. He was answering a question from a Minnow . The question was…
Does going for OVDI make sense knowing that I will be opting out during the process? (I have spoken to a couple of attorneys on this and they suggested opt out). I am a Minnow, was unaware that we are taxed globally
Here is what he said…
Jack TownsendMar 26, 2012 09:24 AM
I think you are asking the right questions. Let’s see if I can approach it a different way.
I start with the assumption that you have a case where there is no material risk of criminal prosecution. Only if that were true would it make sense to opt out (because the factors giving material risk of criminal prosecution would also give material risk of a civil fraud penalty and willful FBAR penalty).
The IRS says that, if you opt out of OVDI, you get a regular audit in which you would get the results you would get in a regular audit. If you do a quiet disclosure and get audited, you will get the results you would get in a regular audit. If you go forward and, through the bad luck of the audit lottery, are audited, you get the results of a regular audit.
So, the worst thing that can happen under any scenario is the result of a regular audit. Then, if you go into the OVDI you will get a regular audit and those results. If you do a quiet disclosure, you may get a regular audit and the same results, and the chances of an audit are significant albeit not certain (I doubt that all quiet disclosures will be audited). If you do a go forward and if you get audited (probably a low percentage of that population), then you will get the result of a regular audit.
What is the advantage to joining OVDI with the expectation that the OVDI penalties are too high and you will opt out? Why would one be better off than quiet disclosure or go forward only?
It is perhaps not quite that easy because detailed knowledge of all of the facts and circumstances will help for a better decision, but those are the questions to ask and I think you do ask them.
Thanks,
I have a follow up question for the lawyers who read this blog and are willing to answer:
Whether we choose OVDP and opt out, or do a quiet disclosure to address the past (amend tax returns and file FBARs, do we face the risk of being prosecuted for perjury if our original 1040 did not disclose the foreign account and the new one does.
Thanks.
Sorry for posting this in this thread, I still haven’t resorted to creating a WordPress account…
Just ran into this article. It looks like some 2009 OVDP participants can get a partial refund of their penalty.
How nice it is from the IRS…
http://timesofindia.indiatimes.com/nri/other-news/IRS-to-refund-certain-2009-OVDP-penalties/articleshow/13410879.cms
@ Christophe
Just Me needs to see that. Please make sure he does. I actually think he should get a full refund but this may just help a bit (forget what % he ended up paying). No, not just a full refund, they should also have to pay him for all the LCUs he gave up by spending gazillions of hours trying to comply.
Christophre…
I have been traveling and not keeping up with posts or comments, but I did see this one.
I am doing some fact checking on this to see if it is true, or if there is anything new here, as this could be an old policy just now being reported in the Times of India,,,,,
I would only comment this…
It appears that they are retroactively applying the lower penalties that evolved over time as they figured out they were capturing too many minnows. They are now letting the lesser penalties from 2011 now apply to those poor souls they hammered early in the 2009 program. I guess that is some measure of mercy or not….
I am still stunned by Condition 2, where the IRS still wants 5% from the most innocent of innocent, those who are not living in American and didn’t even know they were American Citizens! I guess, not knowing anything about your accidental American status and living overseas still isn’t sufficient for the IRS who is determined to extract some measure of minnow oil out of you anyway!!! Real mercy would be an apology for even thinking that this person should pay any penalty at all. How sick is this?
Condition 2: Taxpayers who are foreign residents and who were unaware they were US citizens
@Em
Thanks for the thought, but I would not qualify for this penalty abatement. It is very very narrowly constructed to apply to a sliver of those they plundered.
@ Just Me
Ah nuts! Well you still deserve a medal for the patience to put up with that plundering system. Safe journey.
@Just Me, so sorry to hear you cannot benefit from this.
@Christophe…
After a little more research, I see that there might have been an update to the FAQs to represent this refund provision talked about at the Times of India.
They are just repeating what is in the OVDI FAQ 52, which states…
and there is the same comment on the FAQ53 regarding the 12.5% penalty.
It appears that those FAQs 52 and 53 were updated 6/2/11, but not sure that is when those provisions were added, as the update notes don’t indicate what the update was. When I actually look at the page where these FAQs are recorded it says…
So not sure when these provisions came to be.
Also checking the IRS news site, there is no mention of any penalty relief for 2009 OVDP participants, so I guess the IRS is putting no effort in news releases in this regard. Again, makes you wonder about how hard they really want to make this right, eh?
However, on a positive note, the IRS is cutting back on office space to save taxpayers money, so maybe Examiners will be sharing desks now and consolidating work spaces to handle those unadvertised 2009 OVDP refunds.
Jack Townsend has a new post that should interest some here… I put up a comment still in moderation.
ABA Tax Section Webcast on Opting Out and FBAR Litigation
The ABA Tax Section is sponsoring a CLE Teleconference and Live Audio Webcast titled: Through the Looking Glass (Parts I and II): Opting Out of the OVDI Penalty Structure and Litigating FBAR Penalties, on January 16, 2013 1-3pm.. The weib site for the presentation, with a link for signing up, is here. The participants are major players in the OVDI brouhaha, so I look forward to learning from them.
Description
This panel will discuss matters relating to opting out of the IRS Offshore Voluntary Disclosure Initiative, including “opt-out” mechanics and procedures, and issues relating to examination, negotiation and settlement expectations arising in various “opt-out” scenarios. The panel will also emphasize procedural and substantive issues that are emerging in FBAR assessments and litigation.