Cross posted from RenounceUScitizenship

It’s no secret that U.S. Green Card holders and immigrants have been among the biggest victims of OVDP and OVDI. For countless immigrants, the “American Dream” has turned into the “American Nightmare”. Imagine coming to a country – let’s call it “Form Nation”. Imagine not being told about the tax and reporting laws of  “Form Nation”. Imagine  not knowing about Mr. FBAR and then being told that you were a criminal and that the only way out was to pay up. Imagine, being told that you were a criminal according to the laws of a country AND LIVING IN THAT COUNTRY. Imagine trying to seek help from the “cross border professionals” who told you that you must go into OVDI (and pay them lots of money for the privilege).  U.S. tax compliance is very expensive. Understanding FBAR penalties is import in making the OVDI decision. As bad as the situation has been for U.S. citizens living abroad, I suspect that the situation is far worse for the immigrants. What are they do do? For the most part they want to be in the United States (although after hearing their story, I suspect fewer and fewer people will want to immigrate to the U.S.). Like U.S. citizens living abroad, the lives of Green Card holders are also being destroyed.

I thought the following part of a thread should be made into a separate post. It illustrates the nightmare facing Green Card Holders. But, it also demonstrates how the Isaac Brock Society has become a real help to people in distress. What follows is certainly “Chicken Soup for the Immigrant Soul”, but it also delivered as a very nice “Good Night” story, helping this person get the good night’s sleep that he or she so craves. This thread is proof that a “good night’s sleep” can be had without spending $10,000.

What follows shows that  the “Isaac Brock Society is coming of age!”

The thread starts here:

http://isaacbrocksociety.com/2012/01/28/the-ovdi-drudgery-for-minnows/#comment-11581

1. ovdikills
   April 1, 2012 at 1:56 am

   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.
2. windbagblowhard
   April 1, 2012 at 1:26 pm

   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.
3. ovdikills
   April 1, 2012 at 3:26 pm

   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.
4. badger
   April 1, 2012 at 7:35 pm

   @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.
5. A broken man on a Halifax pier
   April 1, 2012 at 8:37 pm

   @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.
6. Just Me
   April 1, 2012 at 8:39 pm

   @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.
7. A broken man on a Halifax pier
   April 1, 2012 at 8:53 pm

   “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.
8. Just Me
   April 1, 2012 at 8:58 pm

   @A broken man on a Halifax pier
   @badger

   Good comments. Thanx
9. ovdikills
   April 1, 2012 at 9:08 pm

   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.
10. A broken man on a Halifax pier
    April 1, 2012 at 9:14 pm

    re (2): Google “Foreign Earned Income Exclusion”
11. Just Me
    April 1, 2012 at 9:48 pm

    @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/.
12. M
    April 1, 2012 at 10:35 pm

    @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.
13. ovdikills
    April 1, 2012 at 11:21 pm

    @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?
14. Just Me
    April 2, 2012 at 12:01 am

    @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.
15. ovdikills
    April 2, 2012 at 12:34 am

    @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.
16. M
    April 2, 2012 at 12:59 am

    @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.
17. Just Me
    April 2, 2012 at 4:01 am

    @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.
18. UncleTell
    April 2, 2012 at 7:07 am

    @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:
19. ovdikills
    April 2, 2012 at 8:56 am

    @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.
20. Just Me
    April 2, 2012 at 2:13 pm

    @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.
21. Just Me
    April 2, 2012 at 3:10 pm

    @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…

    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 scar 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 has 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 attorney 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 i 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!