IRS Commissioner Douglas Shulman, on Thursday (April 5), in a question and answer session at the National Press Club in Washington, indicated he would step down when his term expires in November. As we have all heard before, he repeates the numbers of how many have come forward (33,000) and how much they have collected ($4.4 billion). Yawn, yawn. And particularly offensive is the following:
We view offshore tax evasion as an issue of fundamental fairness. Wealthy people who unlawfully hide their money offshore aren’t paying the taxes they owe, while schoolteachers, firefighters and other ordinary citizens who play by the rules are forced to pick up the slack.
His entire speech is at the IRS newsroom.
One of the first sites I visit everyday is Jack Townsend’s Federal Tax Crimes Blog. And not surprisingly, he has written about Mr. Shulman. (emphases mine):
I wonder if the Commissioner really understands how misfocused the program really is. Does he really understand the difference between whales and minnows, both of which he sweeps into the same net? Punishment should not be the same for both. Yet, the IRS offers a program of one size fits all, where the penalties for the whales (most of whom are really bad guys in terms of tax noncompliance) and the minnows (most of who are not). I am sure that the Commissioner and the IRS see the opt out as the safety valve as the way to deal with minnows and nuance, so that the inside penalties really apply to only on the bad guys. But the opt out because of all its uncertainties and interminable delays poorly serve a community of taxpayers who should receive at worst a light tap on the wrist and who are willing to be compliant into the future now that they are fully educated about the expectations of the IRS.
I strongly urge the IRS to move swiftly to publish guidance for how taxpayers will be treated on the opt out audit. That guidance should not cover the whales — who are the ones likely to deserve the onerous penalties and should stay within the program penalty structure without opting out. The guidance should make the punishment fit the conduct — I don’t say crime because in these cases there is no crime. That would mean in many, perhaps most, cases a future compliance (some call it a warning) letter or a relatively light slap on the wrist and at least an implicit welcome into the community of taxpayers with full knowledge of what is expected in this area. This would help alleviate a lot of the angst that these good people have about entering the program and getting right with the IRS. That way, these taxpayers can feel more comfortably about opting out in the first place and, because they will know something about the administration of the opt out audit, will not feel that for long periods they have the Sword of Damocles hanging over them.
One of the commenters to this post relays yet another horror story about what he/she is experiencing in OVDI.
Anon5% Apr 6, 2012 12:16 PM
The IRS OVD programs, for those of us in the know, appear to be the equivalent of letting the Keystone Cops loose in the Treasury Department.
What irks my ire most about Commissioner Shulman’s remarks is that the hallmark of a true leader is seriously missing. It would not take much to acknowledge the missteps with respect to minnows in the OVD programs by implementing a clear policy for rectifying the situation. Nothing needs to be said. The policy would speak for itself. This kind of action is seriously lacking. An action of this sort would allow the Commissioner to save face as well as help many victims of the poor policy planning. Let me illustrate by example.
As a minnow, I have recently had to abandon my legal counsel because I wish to opt out and I can no longer afford them. They have told me their costs will be greater than my penalty. In our last conversation, my former lawyer told me that people like me, minnows, were suffering greatly since a “one size fits all” policy was implemented. He told me that when FAQ 35 discretion had been allowed, he had a client who had USD 300 million in assets overseas and who, in OVDP, faced a fine of USD 60 million. The client spent over USD 100,000 on legal fees and my former lawyers were able to obtain discretion from an IRS agent so that the client paid a penalty of USD 50,000.
If I am not mistaken, Just Me paid a penalty of $25k. This is so unfair it makes my blood boil. I kind of doubt our dear friend has assets of $300 million. Yet the wealthy man paid only double . How on earth could anyone think this is justifiable, reasonable or FAIR?
Another commenter, who I believe is a lawyer offered this:
How about getting an electronic petition going, one of those thingys that you can add your name, address, email, etc, to and edit a standard letter and it gets sent to Commr. Shulman outlining the reasons why this OVD program is silly, unfair and actually serves to undermine tax compliance by highlighting who gets prosecuted and who does not? Occasionally, I sign up for letters to my Senators and Congressmen and I always get a thank you back so I know they got the letter. I will sign it for sure as will many lawyers, accountants and people who are affected by it. I would not have known much about this program were it not for this blog, but now I know and it infuriates me. This is just a bad idea on many levels. I cant imagine how infuriated those involved in must feel.
Anon’s comments about being a leader point out all that is not noble about people in positions of power in the US government. (I almost said “our”). A real leader would at least defend himself against the “allegations” made by Ms. Olson in the TAD. He escapes by claiming he is only required to respond to the annual report to Congress. Rather cowardly, don’t you think?
November is 7 months away. Though I doubt Mr. Shulman will get off his horse about his accomplishments regarding offshore tax evasion, it would be interesting to see if we could find a way to insist on a breakdown of who those 33,000 were, as well as try to force some kind of response at least to the FAQ 35 issue. I would expect, if the American people read about the wealthy man with $300 million paying $50,000 compared to Just Me paying $25k, maybe a few would come around. Somebody should make the Congress and Shulman exposed for what they done.
I wonder if it would be worth trying to set up another petition. The FATCA petition moves slowly and I don’t know if there would be a way to get people interested in another one.
Ideas?
http://federaltaxcrimes.blogspot.ca/2012/04/shulman-recounts-his-tenure-and.html
Sorry if this is a repost.
‘The news that Steven Miller, deputy commissioner for services and enforcement at the Internal Revenue Service, will become acting IRS commissioner next month is likely to be a welcome development for tax whistleblowers.’
http://www.forbes.com/sites/erikakelton/2012/10/11/irs-whistleblowers-should-see-new-tone-at-the-top/
@bubblebustin I read the comments for the article. Most claim a lot of interference from upper-level management. And that they have heard nothing further after the 90 day announcement. Disturbing was a list from one commenter asking where was guidance on several issues including:
“No awards based on Title 31 FBAR’s”
People are whistle-blowing about FUBARs?
@nobledreamer
Are there some Brockers familiar with the name Linda Williams, this comment’s author? Is she not that lawyer/professor with a blog, or am I confusing the name?
*As to the question of whether Steven Miller would stick around after a new Commissioner is selected my hunch is no. Essentially to stay around would to be demoted back to some other job in the IRS. Most people in these types of acting positions tend to leave afterwards. In some ways it is a bit of retirement present to be acting head of an agency for a few months. However, you never know. I suspect he will be politely offered some type of position by the next permanent commissioner and he will politely decline. That is the way it usually works.
@Bubblebustin, I think the lawyer/professor you’re referring to is Linda Beale (the one who wrote some pretty negative stuff about the situation on her blog last spring).
@Pacifica777
Right you are! Thanks.
@bubblebustin and Pacifica777
and wasn’t it fun to talk with her? NOT!
@nobledreamer
and wouldn’t pursuing rewards for turning in FBAR violators sound like something she’d find worthwhile?
@bubblebustin
Absolutely! LOL
Last night Fox News Business had an article claiming rumors on Wall St were circulating about Geithner moving over to CITI after he steps down. Apparently he was offered a position there before but did not take it. He doesn’t have any previous in the private sector and some see it as a way to reward for the bailout.
http://www.foxbusiness.com/business-leaders/2012/10/22/could-geithner-land-at-citigroup-after-treasury-stint/
Re Geithner link above;
“Geithner, who is as politically-connected as it gets, would instantly
add credibility and his deep international and regulatory experience to
Citi’s front office, which has a history of luring big-name individuals
from the public sector.
It would also be a way for Geithner, who has no private-sector
experience, to score a big payday after years as a public servant at the
New York Federal Reserve and more recently at the Treasury Department.”……….
….”Citi has had success recruiting former government officials to its
C-Suite in the past. Last year, Peter Orszag, the former director of the
Office of Management and Budget, joined the New York bank as a vice
chairman.
And who could forget Robert Rubin, who made a fortune by joining Citi
in 1999 just months after stepping down as Treasury secretary in the
Clinton White House“….
Apparently, it is no impediment to being a banker, the fact that you’ve been responsible for regulating them – and then can go on to make it big assisting the banks to work around regulations, and use your government connections to make things more favourable to their interests.
But, if you’re just an ordinary person living an ordinary life; paying taxes and banking where you live and might have been born – outside the US, you’re a traitorous would-be criminal, with few advocates. Banks have lobbyists, lawyers and accountants – all working to help them make money – and influence government in their favour. Remember ‘too big to fail’? Remember bailouts? Even when they’re committing crimes, they prosper. Who is actually the source of the storied US ‘tax gap’? US politicians, and Geithner will help the banks, but ordinary US citizens living ‘abroad’ are out of luck – cause they don’t have any connections to work.
This is such an ironic speech by Douglas Shulman, that I encourage you to read the excerpts all the way through:
“Prepared Remarks of IRS Commissioner Douglas H. Shulman before Harvard Kennedy School, Cambridge, Massachusetts” Nov. 14, 2011
Some very deeply ironic highlights if read by those of us living and paying taxes and reporting to one government already, outside the US, who Shulman and the IRS don’t feel the need to extend any consideration or justice to at all:
……”My senior team and I spend a large portion of our time thinking about
serving taxpayers better. And taxpayer service is on par with
enforcement when it comes to fulfilling our mission. My philosophy is that everybody at the IRS should try to walk in the
taxpayers’ shoes and understand their service needs. Indeed, taxpayers’
views about the competency of their government are often shaped by their
interactions with us, such as when they call us to discuss whether they
are eligible for a tax credit or call to try to resolve an outstanding
tax liability. That’s why we hold ourselves to high standards of
efficiency and fairness…
…”As IRS Commissioner, I’m also at the intersection of where public
policy meets reality, or implementation. From this vantage point, I have
observations that I hope are useful about where tax policy creates
challenges – both for the IRS and for taxpayers.
And I believe that the lessons we learn about tax policy confronting
reality have implications in other areas that affect us both in America
and across the globe….”
…”Most taxpayers want simplicity. They want to pay what they owe…
understand what tax benefits they are entitled to… and not get tripped
up by the system. However, today’s tax code is anything but simple.”…
…..”Then start to layer on other complexities, including standard vs.
itemized deductions, medical expenses, education expenses, charitable
expenses, local taxes, and for many taxpayers, the Alternative Minimum
Tax …the list goes on and on. And it gets even more complex if one of
the spouses has some self-employment income and files a Schedule C. You
get the point.
My central message this evening is this: Making the tax code less
complex is the single most important thing that could be done to improve
taxpayer service and boost compliance.
Complexity can lead people to not take advantage of tax benefits,
largely credits and deductions, that Congress intended them to have,
either because they don’t understand them or are afraid they may be
ineligible.”…
…”But, I don’t believe in less complexity only to demystify the tax code
and improve tax administration. I also see one of my jobs as
Commissioner as being an advocate for the nation’s taxpayers…providing
better service and making their lives easier and less burdensome.“…
…”However, tax code complexity means that the average person is not
well informed about the tax system. This is a big deal because for many
people paying taxes is their only direct interaction with the federal
government on an annual basis. They don’t understand one of the biggest
bills that they pay every year… their tax bill. And they don’t
understand the benefits they can or do receive through the tax code. If
you want people to feel engaged with the democratic process, one could
argue that they should understand their annual transaction with their
federal government.
Perhaps the most telling indicator of taxpayer confusion over the
code’s complexity is that today, 90 percent of individual taxpayers pay
for professional tax preparation or tax software to prepare their tax
returns.
Indeed, the valuable services and efficiencies provided by the tax
preparation industry have in some ways masked the increase in taxpayer
burden which can be attributed to this complexity. IRS research
estimates that over the past 10 years burden for the typical taxpayer
has grown. It increased by about 20 percent and would likely be even
more if they had to prepare returns themselves without any aids or
tools, such as professional return preparers and software. Moreover, we
estimate that in the U.S., individual taxpayers and businesses spend
more than seven billion hours each year complying with filing
requirements.
I approach tax code complexity from the point of view of making
policy work on the ground: meaning that we can actually administer it
and individuals can cope with the complexity.…”
…”Over time, Congress has exercised its perfectly legitimate right to
create incentives in the tax code to either encourage or discourage
particular behaviors. A whole set of important laws and societal judgments have been written into the tax code.“…
…”And what is the result of all these conflicting definitions and
requirements that are difficult to analyze? Regrettably, eligible
taxpayers may not claim the credit and others may erroneously or
illegally claim it. It’s also harder for the IRS to administer and
causes a number of audits we would not have to perform if the tax code
was not so complex.
I think this is a cautionary tale for those listening tonight that
has implications outside of the tax realm and whose lessons can be
applied broadly. Keep your definitions and requirements simple, in ways
that can be understood by your target audience.”….
…”This causes instability and uncertainty among taxpayers who cannot plan
and create a budget as they may be hit with an enormous tax bill the
following year.”…
…”In spite of all the bad mouthing it takes, the tax code contains a lot
of sound policy that has benefited and continues to benefit millions of
our fellow Americans and our nation as a whole. Certainly, while many
taxpayers miss the opportunity to claim a deduction or credit because of
complexity, many others are very pleased to have more money in their
pockets because of them.”….
“…making the tax code less complex is the single most important thing
that could be done to improve taxpayer service and boost compliance….”
…”Changes to the tax code, even for the goal everyone agrees on –
simplicity – are hard because inevitably it means more money for some
and less for others.”…..
…”So while I tell you that the single most important thing we could do to
improve taxpayer service and compliance is to reduce complexity in the
tax code, at the IRS we are not waiting for that to happen to improve
our running of the tax system. We are innovating around multiple
customer service channels, including the web, phones, correspondence and
face-to-face. And we are innovating in our enforcement programs,
through new treatments for taxpayers, better data analytics, and
extensive use of pilots to test new approaches. I believe that we have
an obligation to always be looking for ways to improve the services we
provide to taxpayers.”…………
Excepting in every single instance if you have the bad karma to be born and deemed a US ‘taxpayer’ living outside the US – already reporting and paying taxes assessed in the country where you live, may have been born, and hold citizenship. If you live outside the US, you can expect only persecution, no service, only enforcement. No simplicity, only more complexity than that foisted on US residents. You can expect for the US to continue to threaten and persecute you through draconian penalties levied on your legal post-tax bank accounts and assets, earned and held entirely outside the US – penalties levied despite owing NO US TAX, because you can’t even vote in 28 or more states, and no-one – including Congress gives a rat’s behind what the IRS does to you.