I believe this is the worst story I have heard yet. Unbelievable. I don’t know if this person will be available for contact but I am replying with our website in case he/she would like to talk with all of us.
Courtesy of Phil Hodgen site:
http://hodgen.com/irs-chases-another-person-out-of-the-usa/
I am a foreigner that lived and worked in the US under a work permit. (Not even a green card)
I struggled the past years to make a living, because I was self-employed under an employee that had few jobs, and under the rules of a work permit, you can legally work only under your US employee, in the US.
In 2009 I learned via the Internet about the fbar requirements, and the vdpi.
My tax accountant that I contacted about this said that it would have nothing to do with me, as I am a foreigner and not an American citizen.
I learned again through another Internet article, that also America “persons” are required to voluntarily disclose. I checked the definition of an America “person” and realized, that is me.
I emailed my tax accountant again, forwarded again the article online, and he said that as long as my home money was just sitting there. That I don’t need to file myself to the programme. He was also the one that had never checked the box in my income return that I had assets in my home country. He had never asked me if I have one.
I called the IR to verify, and filed myself voluntarily, after they said I must do so, to come ‘clean”, and after they promised that a person like me would not be what they are looking for and I would be treated fairly.
Since than I went through hell. I learned that they would take 20% of the highest amount of my assets I ever had on my home countries’ bank account (which I opened when I was 20 years younger) away from me. And an additional 80 000 Dollar for the 8 years I hadn’t filed the fbar. Even so I was not aware about any of these requirements.
I was also not aware that in the vdpi it didn’t matter that I had that money on my home account before I even put a foot in this country, and that this money was mine, as I had paid all taxes due, in my country, where I had earned that money with hard work!
It also didn’t helped that I could proof that even my tax accountant had no idea about these requirements. So how should I know, not an expert in tax law?
I learned that in the vdpi each sub-account back home was defined as an account, counting again with it’s highest value.
In my case, I had over the years many sub-accounts, for better interest rates, at the same bank, upon advise from my bank to cover the bank fees (interest income tax for that filed in my home country). Those sub-accounts amounts went back, for example after 2-3 month being fixed, back into my main account Meaning, even so I had only 50 K in its entire, in some years it counted as if I had 250K, because I had “several (sub) accounts” that are considered by the IRS as individual accounts. So, in on year my assets have been as high as 250K. 20% of that I was to pay to the IRS. Even so I had only 50K in savings in reality.
I went through psychological torture and hell because of the following:
– I found nobody to advise me.
– I was poor, because I had for 2007-2009 no real income because of the economic crisis that started earlier than 2008 in my job-field, (remember it was illegal for me to work elsewhere and not under my employee that provided for my work-permit, but had no jobs to forward to me)
– The assets I once had back home on my account I had long time already wired to my US account and had lived from it, paying rent, and food and transportation.
– I spend 12 hours per day, distressed, desperate, for 2 years to search on the internet for help and information, to find CPA’s, and Tax lawyers
– I tried to find others in my situation, help groups, forums that share real information, only to learn that there wasn’t any useful, and those few with email addresses that I contacted seemed to be too scared to be “investigated or caught “ via the spying tools of the powerful US / IRS mechanisms that we all know violate privacy rights. That was the response that I got, if at all.
– I didn’t had the 20 to 30 000 retainer fees the Tax lawyers demanded to take on my case
– The lawyers that I consulted gave me information where I knew after 10 minutes that I knew more about the vdpi and penalties than they do. I had to pay them, even so I would not know where from, my last savings dwindling
– The IRS had no information, cruel and heartless I was left alone and scared
– I was offered to opt-out. I researched about that, and realized that people in similar situations like mine had been hit even harder with more penalties and costs than under the vdpi.
At the end, I realized one thing. I am poor. I can’t pay lawyers. Didn’t find lawyers anyhow. This is too big for me to handle, the costs would ruin me to a point that I would never ever in my old age recover. That I am not willing to pay for penalties so absurd, so unfair and therefore in my view really criminal.
This vdpi was a high price for me to pay, my true love for this beautiful, special land, and it’s people, remains intact, but my faith in the state is broken. I turned my back to the US.
I left the US, and will never go back. Now I am still in stress, because I don’t know how save I am from the claws of this country. So, my life has been partly ruined, because I lost my live in the US, many dreams, and now I am feeling as if I am still not save, even outside, and again I search for information, and it is difficult, again I seek advise in regards to what the US could now do to me, might do based on my case, and what best I should do to be protected from them.
I wonder if Mr. Mopsick has any words of comfort, or wisdom for this terrified person???
@nobledreamer,
1. This should put to rest, once and for all, the commonly held idea that if you come to the US on a work visa, even though you do not become a green-gard permanent resident, all of these US tax rules will apply to you.
2. This should be obligatory reading for any person contemplating seeking a work visa in the US. A tax trap awaits them.
I don’t think these offshore tax rules apply to non-citizens, regardless of what the IRS says.
Second, he should know to keep his mouth shut regarding offshore income and assets.
It is not just a problem with the ridiculous laws, its also the problem that some naive people follow them.
So naivete is to blame here, as in most of these minnow cases.
Anyone meeting the substantial presence test is required to file US taxes.
http://www.irs.gov/businesses/small/international/article/0,,id=96352,00.html
@M
With all due respect, the statement “I don’t think these offshore tax rules apply to non-citizens..”, is simply not accurate. Immigrants who live and work in the US are among the largest communities negatively affected by FBAR, FATCA. Simply because they have accounts in their home countries. And as Roger as pointed out, many of those coming to the US are completely unaware of the “tax trap that awaits them.”
Why do you feel “he should know to keep his mouth shut…” People are entitled to their honesty (and respected for it) and to expect a government (with the reputation of the US, as compared to say, North Korea, Russia, etc) to have reasonable laws and policies. Some parts of the world are not yet infected with the sort of cynicism that pervades many of the so-called “advanced” countries.
There is nothing criminal about being naive. In fact, the large majority of the people on this site knew nothing of these rules either. I do not have the impression that most of these people are naive and the unifying factor is sympathetic support.
Even though I am no longer a USC, I am ashamed of the way “my” government has treated this person. There is no excuse for it.
I think you mean your ex-government.
@Roger
This site largely exists due to the resistance demonstrated toward a few posters who felt a responsibility to warn those at a related forum, of the tax implications they would incur upon arrival to the US. I often wonder, what else we can do to help those who are in our shoes, but this adds a whole separate dimension.
@all, sorry for the many typos.
@noble
If you were surrounded by thieves, would you be “honest” about how much money you have?
Use some common sense please.
The fact is that the world if full of thieves and the US govt is no different. To blame the thief for stealing your money is secondary to you being ignorant that he is a thief and you being stupid for telling him you have money.
There is a proverb:
Fool me once, shame on you.
Fool me twice, shame on me.
@M
Here in Canada, we are not accustomed to thinking of the government as a thief. Maybe that’s because the Canadian government does not behave like a thief. We pay high taxes but we’re also well taken care of.
Assuming that the so called greatest nation on earth would at least be equal to Canada in terms of honesty is probably our biggest mistake.
@M
Perhaps you could offer some compassion rather than berate a person who clearly has been taken advantage of.
Yes M we offer compassion and comfort here to people who’ve been victimized by the US government. If they want to be berated there’s a million other websites they can go to.
By your standards we are all naive and deserve what we get. Your world view may protect you from the predatory US government but it also has limitations. Not being able to trust can cause you alot of problems in life and will limit your growth potential.
I do have compassion. I have been counseling these immigrants for many months now “pro bono”.
That the IRS is a thief is easy to understand. To make them act accordingly is much harder.
There are some very deep cultural barriers why they cannot follow my advice.
I think Indians see the US as a colonial overlord, which they are required to pay tribute to, regardless of whether they are thieves or not. After all the British were thieves too. To contradict it meant punishment so they avoid it.
And Chinese have a centuries old Confucian respect and obedience for authority which underlies everything they do. To not obey is to deny their identity and culture as Chinese.
Latin Americans have no problems. They already equate “La Migra” with SS Nazis. Besides, 1/2 the US was theirs to begin with. All the place names are already in Spanish.
European immigrants also have no problems. They are of the same race as the thieves.
But, like the proverb says:
When in Rome, do as the Romans.
Unless the immigrants can find a way to adapt, they will suffer and leave. Some will not be able to make it…
@M
clearly, the person who wrote this story was an immigrant.
And, I did tell the IRS/US govt, thieves that they are, what I have via 1040’s and FBARs. To not do so would be to leave my son responsible for paying anything I could owe, after I’m gone. I believe that exhibits common sense.
This is so unbelievably outrageous that I have trouble believing it is true. Assuming that it is:
1. Some lawyer should step up and take this on pro bono case. Do we have any on this discussion board?
2. Assuming it is true, it strongly suggest that fair treatment in OVDI is impossible.
3. Even if this were not true, the fact is that most people believe it. This means that people do NOT believe they can get fair treatment from the IRS. At the end of the day (although it may be a long time), the IRS cannot function with being trusted by the professionals and the taxpayers.
4. Under its own rules the IRS can’t “double count” $50,000 into $250,000. Hence, the penalty base should only have been $50,000
5. The whole point of the 20% is to be “in lieu” of other penalties (including the FBAR penalties). So, the $80,000 in FBAR penalties should not be applicable.
6. This is 2009 OVDP so, as we know, if you didn’t get in before the magical March 1, 2011 date, “reasonable cause” would be considered only on an “opt out”. Would be interesting to know what the relevant dates were for him.
7. If this is true this would seem to establish a new low, even for the IRS).
8. Again if this is true, it will certainly discourage compliance.
This is NOT going to turn out well for the IRS and the U.S. Its citizens will want to renounce and people will no longer want to immigrate there.
Renounce and rejoice!
@ all,
Excellent discussion from different perspectives.
Brings to mind a sign in Ron Paul’s office that reads: “stop stealing, the government hates competition!”
That immigrant’s story is so sad it reminded me of overly dramatic Indian movies our father used to make us watch when we were children.
Back then Indian movies in Canada were only seen on TV at 2AM on a Saturday. Our father would wake us up to watch them so we wouldn’t lose our Indian heritage. I’d go back to bed crying because they were so sad.
@renounce
You may have a point. There are changes in the quality of the phrases-some have poor grammar and others are perfect. It never occurred to me as a possibility that it wasn’t real – I figured Phil H. would not put it up if he had reason to believe it was not true. I don’t think there is a way to check as it’s too obscure a situation for snopes, etc.
The writer said he/she had already left the US (so no need for any pro bono) and also, never really specified actual penalties but spoke of “what he/she learned” and so on (to address your comments about the validity of the amounts mentioned, etc)……by the end, it sounds like no payment was made and the writer left the country, afraid to return to the US.
The only thing I wondered about was the statement that the funds in the home country had already been moved to the US and spent since there was no employment. I assumed, not given a total time line and the grammar, that it was impossible to understand in great detail.
@Noble
Whether true or not, the fact that people are quick to believe it speaks volumes about the level of distrust that people have for the IRS and OVDI. This is a significant story in its own right.
I am not saying that it isn’t true. It’s just that it’s so fantastic, that I would not want to presume it is (but maybe that’s just wishful thinking on my part).
@all: in RE “Chased Out:” he says, “I had only 50 K in its entire, in some years it counted as if I had 250K, because I had “several (sub) accounts” that are considered by the IRS as individual accounts. So, in on year my assets have been as high as 250K. 20% of that I was to pay to the IRS. Even so I had only 50K in savings in reality.”
FAQ 37 asks:
“If a taxpayer transferred funds from one unreported foreign account to another between 2003 and 2010, will he have to pay a [x] percent offshore penalty on both accounts?”
The answer given is: “No. If the taxpayer can establish that funds were transferred from one account to another, any duplication will be removed before calculating the [x] percent penalty. However, the burden will be on the taxpayer to establish the extent of the duplication.”
Was the person able to show the duplication? Was he able to produce the bank records? If so, someone at the IRS made a real bad mistake.
I would advise him to cut and paste this whole thread and send it directly to Nina Olson’s office in Washington as ask for advice.
An outrage like this should not be allowed to stand.
@Noble
Also, even if this particular account is not true, there have been many stories of people having been taken advantage of in OVDP and OVDI. So, there are probably elements of the story that are true for sure for different people. One is the inability to get legal help without being able to front lots of money. To the extent that there is any justice here (which there isn’t), it is out of reach for those who can’t come up with lots of cash.
@Noble
For those who don’t know who Phil Hodgen is he is a “friend” of the site and the former head of the Tax section of the California State Bar Association. I suppose anyone can be “taken” having said that I don’t think Phil Hodgen would rank high on that list.
@renounce,
I guess I didn’t think twice about posting it because everything you have mentioned is exactly what I believe about the IRS since I came to know about all of this last fall.
One of the reasons I renounced is the expense involved in filing – with the very real possibility of making a (costly) mistake. I also cannot afford xborder accountants or lawyers. I thought my returns were so simple that it wouldn’t be necessary. Lo and behold I realize the day before it is due, Form 3520a ($10k penalty if not done on time etc ad nauseum). I had to spend an entire day trying to figure it out, all due to TFSA being a “trust.” All the old fear and anxiety about fines etc came up again. It just isn’t worth it and since I am now used to not being upset about it, I really resent even one second feeling like that.
So good to know that only a few forms remain and I will, as you often say, “be free!” (renounce part already done 😉 )
@Noble
@Tim
I second what Tim says about Phil Hodgen. He is a friend of this site and has been of enormous help to those dealing with “compliance questions”. He is clearly a “class act” and I, along with others, hold him in the highest regard,
There are some 30,000 minnows in OVD programs. I’ve read many of their stories on Jack Townsend’s blog, and they sound similar to his. The IRS can make up any rules they want, all in their favor, and they usually do.
Some points:
1) The OVD program is voluntary extortion. You can always so no to their proposed “fines”. You can always leave the program, ie “opt-out”. The problem is that you’ve given them 8 years of bank records, which they are not going to give back to you, so they can always come after you for something.
2) And people who are meek enough to voluntarily pay fines to authorities, are not suddenly going to turn courageous and say no, to the same authority they’ve submitted to a short while ago. It is not psychologically consistent.
As I said previously here….and I feel compelled, now reading this, to repeat it…
http://isaacbrocksociety.com/2012/03/25/video-robert-wood-speaks-with-scott-drake-on-loss-of-u-s-citizenship/
The Immigrant side of this problem and the harm that is being done them really bothers me almost more than what happened to me. Maybe it is because I have an Australian wife who has a greencard, and understood why the US system of taxation was so incomprehensible to her when I tried to explain what I had discovered back in 2009.
I think of immigrants arriving in this country with fresh hope for the American Dream and having no idea of the tax complexity and problems awaiting them. There is no one explaining to them of the foreign reporting requirements for family trusts and joint accounts they have left back in their home countries. They have never been provided even the most basic advice about FBARS, foreign income reporting rules and now the IRS via the OVDI is quite happily taking significant portions of life savings from them, without regard to its failure to provide even the most rudimentary educational outreach. John Doe has done an excellent job pointing this out in very complete detail in this blog thread…
http://federaltaxcrimes.blogspot.co.nz/2012/03/opting-out-2-3212.html
Over the past year, I have heard their agony and pain of discovery many times at Jack’s blog, and while we as Expats, have ACA which tries the best they can to represent our interests with direct lobbying efforts with Congressman, I have often wondered who speaks for them? The answer, no one!
The Expat story has had some limited journalist attention, but there has been nothing in the press about the immigrants problems. Theirs is the bigger untold and unheard story, I would bet.
Now, you will see ij, Anon123, Moby and John Doe occasionally show up here, and one or two others to comment once in an while. But they are on the fringes mostly, and there are probably many others lurking, reading, trying to gather information on what to do, but too bashful or afraid to comment.
They have been caught out by this IRS offshore trap, and are fearful of the financial pain that awaits them with no easy way to become compliant. I wished there was someway to better help them, but sadly, some have even lost even more of their savings by taking bad advice from practitioners whose charges to “help them” become compliant has doubled the cost as they struggle to understand and come current with the tax complexity requirements. I often wonder how many skilled immigrants are voting silently with their feet and walking down jetways and heading home as the IRS jihad continues unabated. They don’t have to renounce, and it is much easier for them return home without all the complications that Robert Wood talks about for US Citizens.
Knowing what you and I know now, would you ever recommend to anyone to get a Greencard now, or become a US citizen? I certainly would not, unless you are truly a refugee with nothing left in your homeland, and no desire to ever reside overseas again.
https://twitter.com/#!/FBAR_Compliant/status/184081492752875522