Greenback Expat Tax News: Short video explains how US expats can benefit from the Offshore Voluntary Disclosure Program….
— Greenback Expat Tax (@GreenbackTax) April 25, 2012
I request that you watch the video described in the above tweet from Greenback Expat Tax Services. Makes me wonder if U.S. citizens abroad have more reason to fear the “cross border professionals” than the IRS. Would be very interested in your comments.
They have posted the same video on YouTube:
If you agree with me, the next question is:
Is there anything the Isaac Brock Society can and should be doing to protect people from this kind of stuff? This video appears to suggest that jail time is likely for people who do NOT file past FBARs and and are caught by the IRS. If I am wrong, I stand corrected and apologize. It is suggested that the penalty outside of OVDI is the willfulness penalty and the jail time is a realistic possibility (for past failures to file FBARs). Furthermore, as usual they are suggesting that the only way to solve these problems is through OVDI.
If I am right in this interpretation, this is an outrage!
HOW WE GOT STARTED:
Greenback Expat Tax Services was founded by two London-based American MBAs who spent years being frustrated by how hard it was to get our US expat taxes done right. Our experience was that finding a CPA with good expat experience and good customer references was impossible. Our previous US CPA didn’t see enough expat returns to be fully up to speed with the rules as they applied to Americans living abroad. Our friends either had horror stories about expat accountants who quoted one fee upfront and then tacked on huge charges at the end of the process or avoided filing altogether because it was too complicated. And all the tax software simply didn’t have the muscle to handle even a simple expat return. So, we decided to do something about it!
We pride ourselves on having recruited the best expat accountants to our team: people who know all the ins and outs of expat rules and taxes, who are easy to work with and approachable, and who can translate the complicated tax code into something that makes sense to non-accountants. We bring that together with best-in-class systems that ensure all sensitive tax information is fully secure. Finally, we make our forms and paperwork as simple as they can be (beware: there is always some work involved!) which keeps the process as easy as possible for our customers. And we offer transparent pricing — one flat, fair fee for all federal returns, no surprises — guaranteed.
There is no mention of a connection with any lawyers.
Finally, if I am wrong in my interpretation, please explain why and this post should be removed.
Quick notice…
Have you seen this…?
HUGE Taxpayer Win: Supreme Court Tells IRS 3 Years To Audit Is PLENTY!
What does this mean for the OVDI? OPT Out assurance?
http://onforb.es/Iozpkn
John,
with IRS attach’es abroad, you can have an IRS agent knock at your door in a foreign country.
Isn’t that possible? I am not sure if they can get local police to come along with them when paying that visit.
The cheesy music playing in the background of that Greenback video should be enough to warn anybody off…
@ 30 Year IRS Vet
Researching collection abroad – check out:
“US Tax Collection in Canada”, published in “Canadian Tax Highlights” Vol. 19, Number 9, Sept 2011-10-14
Newsletter of Canadian Tax Foundation.
The authors are: Erin L. Frew and S. Natasha of Reid Thorsteinssons LLP, Vancouver (leading tax law firm)
Article documented difficulty of enforcing US tax claims in Canada. Article noted:
– Canadian courts do not enforce US tax revenue claims in Canada
– Canadian courts very unlikely to enforce FBAR penality
– Under the Canada-US tax treaty, Canada Revenue Agency cannot collect US taxes from Canadian citizens, unless the tax claim proceeded their date of citizenship.
Final paragraph:
“In summary, a Canadian citizen need have little concern about the collection of US tax, interest, and ancillary penalties. However, a US taxpayer who is a Canadian resident and not a Canadian citizen and who owes US tax, interest,and penalties may face collection thereof by the CRA pursuant to treaty article XXVI A. It is extremely unlikely that Canadian citizens or residents will have to face collection of FBAR penalties, except in the very unlikely event that those penalties may be characterized as registrable civil judgments.”
@foxyladyhawk
While I might have a little quibble around the edges with 30 year IRS vet, I have come to respect his opinion and appreciate the effort he is putting into open discussion about Good Governance, and the FBAR and OVDI is NOT good Governance, so I focus on that message, which is a very important one for someone like him to be making…
I also saw this comment from Jack about the OVDI and why so many attorneys initially advised entering the programs in the beginning…
It is posted here…
http://federaltaxcrimes.blogspot.co.nz/2012/04/irs-ovdi-holding-irs-to-proper-payment.html
He says…
Jack TownsendApr 25, 2012 09:19 AM
Anonymous,
I think that during the early period of uncertainty, it was just to easy to advise all clients to join the program. But over time, I think most lawyers refined their views of the pros and cons of the program. At this point (and for some time), I have felt that taxpayers who would be good candidates for opting out of the program should seriously consider the QD alternative and the go-forward alternative, with perhaps the tilt being to go-forward. The analysis to get to this point is highly nuanced and requires consideration of a host of relevant facts and circumstances. But it certainly is an option based on the information now available.
I would hope that the IRS will issue some guidance on what happens in FBAR and income tax audits related to offshore accounts so that the process and considerations can be more transparent. Transparency will allay a lot of the concerns that the minnows have. I think the IRS should be concerned these concerns — rising to levels of angst, anxiety, depression, etc. Taxpayers who have committed no criminal misconduct (the vast bulk have not) should not be subjected to this level of uncertainty.
Jack Townsend
@30 Year IRS Vet – +1 on Wondering’s comment – this article dealt with the issue as it concerns Canada very thoroughly. Canadian Tax Notes also had an article more recently on the tax side of renuniciation. (I get the sense that some Canadian tax accountants have wanted to get up to speed on certain IRS-related issues.)
The only instance I have heard of CRA collection on behalf of the US was in a case called Chua that was actually thrown out by a Canadian court. We were discussing here yesterday. The issue at hand in that case was a six figure capital gains tax bill on a sale of US property.
@Calgary411
Yes, HR Block has the same page up. Don’t think they have made any changes. Along with Greenback Tax, HR Block seems to be saying that the OVDI program is the only game in town. Obviously this is wrong and very dangerous advice.
http://isaacbrocksociety.com/2012/03/12/check-out-the-following-page-on-hr-block-site-suggests-u-s-citizens-must-under-voluntary-disclosure/
In a comment to that post about HR Block, Howard noted another tax preparation firm that appears to be giving the same – you MUST enter OVDI kind of advice.
http://isaacbrocksociety.com/2012/03/12/check-out-the-following-page-on-hr-block-site-suggests-u-s-citizens-must-under-voluntary-disclosure/#comment-9431
@all
Mr. Mospick’s article about “Good Government, Bad Government” is well worth reading. I hope that it is read by the IRS. He offers a very good reason why “Good Government” implies that expats and immigrants should have different treatment. But, he also notes that this is achievable in OVDI only with an “opt out”.
https://twitter.com/#!/MopsickTaxLaw/status/195202850828197888
Of course, the question is: if one is going to “opt out” then why enter OVDI at all?
JustMe notes Jack “Townsend’s comment that QD and compliance going forward are possible options.
https://twitter.com/#!/renounceus/status/195267853174325248
Foxyladyhawk seeks clarification on what a QD (quiet disclosure is).
http://isaacbrocksociety.com/2012/04/25/video-about-ovdi-have-a-look-at-this-and-comment/#comment-15173
She notes that many minnows are simply planning to file some back tax returns and FBARs. She questions, whether this is a QD or not.
Remember the December 2011 FS for dual U.S. and dual citizens in Canada. It’s contents were confirmed as recently as April 21/12.
http://www.irs.gov/newsroom/article/0,,id=250788,00.html
The legitimacy of this avenue is validated in a comment by Michael Miller which I referred to in an earlier post.
http://renounceuscitizenship.wordpress.com/2012/03/09/u-s-tax-compliance-the-costs-of-compliance-the-costs-of-non-compliance-and-how-to-choose-a-lawyer/
For a post specifically on the December 2011 FS see:
http://renounceuscitizenship.wordpress.com/2011/12/18/update-on-the-irs-fs-for-u-s-citizens-and-dual-citizens-living-outside-the-united-states-no-additional-relief-for-canadians/
Bottom line, for U.S. and dual citizens living in Canada there are clear options beyond OVDI,compliance going forward and simply dumping returns into the system. There is no real agreement on what QD means. (My impression is that it is a way to try to slip amended returns into the system that reflect a lot of additional income.)
The December FS is a clear option. Just be intelligent about how you use it.
@30 Year IRS Vet – thanks for your response. One other thing, I read recently the most the IRS can attach on a Social Security payment on back taxes is 15% under current law. Do you know if that’s true or not? Many thanks.
@Foxyladyhawk
Re QD…..In the simplest of terms….
QD is just quietly filing an amended return to report previously unreported income for a year(s) and paying the tax rather than walking into the Criminal Investigation division and noisily saying, “oh by the way, I didn’t pay my tax on this past years income” The later is a noisy disclosure, as in the case of an OVDI.
Hope that helps.
@Foxyladyhawk
@JustMe
Interesting discussion of QD vs. compliance going forward by Jack Townsend:
https://twitter.com/#!/renounceus/status/195277271777546240
@JustMe, I’ve often heard of the perils of making a quiet disclosure: “For example, in FAQ 15 of the Offshore Voluntary Disclosure Initiative (OVDI) [2] the IRS stated:
Those taxpayers making “quiet” disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.”
http://www.moodystax.com/blog/33-us-taxation-services/167-official-irs-guidance-for-taxpayers-who-have-not-filed-.html
@bobblebustin…
I think you have to take that FAQ with a grain of salt, and look at it as a bit hyperbolic. Also, after 3 years of this jihad, you have to put it into some context now based upon how things have evolved.
It is the left over FAQ from the heady days of the UBS prosecution when the IRS rolled out the OVDP. They were all focused on getting those Whales to come along side the Whaling vessel without them having to use their harpoons which might miss, and they had a limited supply of harpooners (prosecutors).
They wanted to make it easy for themselves to get these guys on board, and get their oil extracted, without having to look through every amended return to find them. So, they issued the FAQ warning! In that context, I kind of understand now what they were doing.
However, as time has moved own, they realized they are getting a lot more minnows they never considered. They have made all the technical adjustments in penalties, 12.5%, 5% etc and created an OPT OUT as their relief mechanism. However, they were a bit trapped with their past FAQs. They realized they couldn’t or wouldn’t go back and remove that language, as this is still a program to get Whales. They only slightly modified for minnows without acknowledgement that they existed, so it has just stayed there as boiler plate language as they rolled these programs forward.
When you think about it, logically QD is exactly what they should want millions of immigrants and Expats to do… (I know… Logic has nothing to do with IRS programs..) They can’t process them all in the OVDI, and they certainly can not prosecute them all even if they could find them, so having the QD warning FAQ remain as it is is counter productive to their goal which should be more compliance and collecting past due taxes.
Anyway, at this stage of the game, a person has to decide if that FAQ language a real threat. Does it represent real risk to you, or is it just huffing and puffing on the IRS part? Are they just the boy crying “wolf”?
Yes, you “might” be examined, but my response is “So what?” If you are NOT criminal, and if you have nothing else to hide, then an examination will be no worse than an Opt Out examination which you probably should do if you are minnow now caught inside the program. IRM discretion will be applied, and your penalties will be way less than the OVDI, “one size fits all.” That is what the anecdotal evidence so far indicates. AND… if you just do a QD or file going forward, you won’t have to spend all those LCUs and practitioner fees.
Now, all of that pre-assumes you have not engaged in criminal evasion activity, and are not now continuing to evade although you have knowledge. You have just been benignly non compliant, and for whatever reason you want to be compliant now.
Anyway that is how I see it, and this should not be construed to be advice on what to do, as I really do not have the qualifications to give it. It is just my opinion on how I see things working now, and upon some similar readings from attorney’s advice and opinion I respect, like Jack Townsend, who I quote from above:
@JustMe, my sincere thanks for taking the time to give me your thoughts based on your experience and knowledge on this subject.
My husband and I are poster children citing reasonable cause, if ignorance of the law constitutes reasonable cause in helping to eliminating the 5% FBAR penalties. Our TAS agent said that negotiations have been taking place within OVDI and told us that a “First Time Penalty Abatement” under the IRM may be available to us in eliminating the penalty associated with the capital gain tax. Why would we then consider opting out? This is all hypothetical of course and subject to change depending on the response to our submission (gulp). I agree that there may be some acknowledgement that the one size fits all isn’t working, and thus the IRS is working within OVDI to process submissions. Would it not be be more expedient to deal with the minnows within the program than to necessitate the extra step of an opt out in resolving cases that clearly involve minnows?
@ Just Me
That was a brilliant analysis and mini-minnow me even understood it because of the perfect whale analogy. Thank you! I think they should give you back all of your penalty money but then I’m just a lowly “US person” minnow (in their eyes only) who swam into a “Resident Alien” trap 30 years ago so what do I know? Amazing how when I had practically nothing I was an “alien” but now that I have a bit more I have been elevated to “person” for purposes of penalty extraction.
@Em..
Thanks. I don’t know about brilliant, it is just how I see it now in hindsight.
@bubblebustin.
Of course it would be better just to allow agent discretion within the OVDI rather than having an “Opt Out” at the back end. It would be even better if they had a front end “Opt Out” or filtering process for the minnow to begin with.
However, the IRS has a lot invested publicly in its stand of “NO Discretion”, take it or leave it “one size fits all” approach to the “in lieu of penalty”. In the 2009 FAQ35, they had a safe harbor that allowed for just what you describe, but they with drew it! That got them the TAS TAD which they ignored, except to finally publish the letter that withdrew the relief.
I hope they do give you some discretion inside the OVDI, but if they don’t, and I would be surprised if they do, (pleasantly so), you may still have to Opt OUT for reason to prevail! Stupid process, but it is what it is.
Back to that cheesy piano music – will that still be playing in the background when the IRS notice for $150,000 dollars in OVDI penalties arrives in my mailbox, or while the cops are handcuffing me and hauling me off to debtor’s prison, or maybe even when the world ends for good later this year? Will Greenback still be there to help me?
@dest
IRS agents are attached to the local US consulate. They’re really not going to come around knocking on your door; that would be likely to violate the Vienna Convention on Consular Relations and would give you very strong grounds to make a complaint to the host government and get the guy expelled. Besides, they’re just private citizens in your host country and have no power to compel you to do anything. The only people who can compel you to do anything are the police or courts of your own country.
Roger Conklin has mentioned a few times that the IRS used to conduct audits abroad by telling the taxpayer to come to the US embassy building (which is formally US soil), but they stopped doing even this, and now taxpayers abroad are only subject to correspondence audits.
It’s essential to choose your tax preparer wisely. Firms like Greenback or Taxes for Expats are probably primarily designed for expats with very low assets and incomes such as students.
It’s easy to have a potentially complex situation such as from having non-US mutual funds or a personal pension; until last year, I’d assumed my circumstances were straightforward.
Though it’s ludicrous, I’ve concluded that a decent accountant doesn’t come cheap. I wouldn’t think $1000-1500 even after being fully consolidated will be unreasonable because working our form 1116 will continue to be a nightmare, plus I’d want to know they’d feel confident enough to help represent me in case of an audit.
@Foxyladyhawk et. al. re: QD options –
It seems to me that there is a very important distinction bewteen (1) truly “quiet” disclosure (filing back or amended returns as the case may be, & FBARs, with no letter of explanation or reasonable cause, and just hoping they don’t attract attention); and (2) a louder (but non-OVDI) disclosure (filing everything with a reasonable cause letter). The latter option is what the Dec. Fact Sheet says to do, and it specifies 6 years.
As for going-forward, I know Jack Townsend leans toward this option, and it may indeed be a less immediately risky path…. but it also seems like it could cause problems if you’re unlucky in the long run. For example, if your go-forward return does attract attention (say with a sudden FBAR showing foreign accounts of $200k when previously you reported nothing), and you get audited, how is the IRS going to like the fact that you obviously now know the rules and did nothing to correct the past? This might be seen as ‘wilful’, or at least not very cooperative, and might suggest you have something to hide. If I were an IRS agent (God forbid!), I would be more suspicious of someone who did that than if they followed all the guidelines. Also, with 6 years at once, they can see the big picture of your innocence: no sudden massive payments from out of nowhere, a gradual increase in balances etc.
Note that Jack wrote on his blog:
“I will say that some taxpayers want to do a quiet because they want to get partially right with Government without the hit of the “in lieu of” or FBAR penalties.”
To me this is an argument against going forward, as well as against OVDI (if I’m understanding him correctly).
If nothing else, following the Dec. fact sheet would probably offer more peace of mind because you are trying to get “wholly right”, not just partially, as well as desmonstrate good faith if worse comes to worst.
I just realized I’m unlcear about something as I was writing the above:
On the FBAR you need to report the highest balance for each account per year. What if you open new accounts and transfer money? For example: you have $100k in a savings account, then open a new savings account which has better interest. You have to transfer the $100k to your checking account in order to then transfer it to the new savings account. On the FBAR form this will look like you have $300k instead of $100k, because it will have been in each account at some point. This could easily make a minnow look like a whale….
I’m thinking of mentioning this in my reasonable cause letter, and summarizing the origins and movement of my money. Any thoughts?
Also, the accountant I finally hired said to keep the reasonable cause letter short and sweet – along the lines of “I relied of bad advice from a professional” – though I seem to remember that not working for someone on this blog…. How much detail should one give in their explanation? And how much groveling/promises not to do it again etc.? Any thoughts? Maybe Mr. Mospick or someone else with experience has some advice on this?
@Howard, please make sure you read this post: http://isaacbrocksociety.com/2011/12/19/the-term-aggregate-in-irs-speak-is-a-fraud-perpetuated-on-us-persons/ I keep refering to it because is is important that people realize that most of what the IRS is doing is just simply fraudulent. Here is the mathematical proof of what I am saying.
@Howard
The issue of the amount in the account is clearly relevant in the context of OVDI or if the IRS tries to argue willfulness.
Not sure why it would matter in the case of simply filing an FBAR. – but would be interesting to hear from Mr. Mopsick on that point.
Check out this thread on Jack Townsend’s blog.
http://federaltaxcrimes.blogspot.ca/2011/12/irs-guidance-on-us-persons-with-foreign.html
He makes a comment about reasonable cause letters – something about not getting too “exuberant”.
@Bubblebustin
@Just Me
Just Me – great analysis of:
“FAQ 15 of the Offshore Voluntary Disclosure Initiative (OVDI) [2] the IRS stated:
Those taxpayers making “quiet” disclosures should be aware of the risk of being examined and potentially criminally prosecuted for all applicable years.”
I would like to add to why I think your practical analysis is probably right. Here goes:
In interpreting FAQ 15, one must remember that it appears in the context of all the FAQs for the OVDI program. Remember that the purpose of the OVDI program is to go after criminals. Therefore, I suggest that FAQ 15 should be interpreted in that context. In other words, the IRS is not going to give criminals a better deal, if they do a QD instead of entering OVDI. If you are not a criminal, then …
Obviously not every can enter OVDI (wouldn’t even have the legal fees to do so) and as Just Me points out, the IRS can’t process everybody in OVDI (just based on the numbers). So, the IRS has no interest in everybody entering OVDI. But, the IRS does have an interest in people being tax compliant. So, if you are a minnow, just get compliant.
You might find this blog post from Phil Hodgen to be of interest:
http://hodgen.com/the-official-irs-position-on-quiet-disclosures/
It is interesting to note that, according to the Hodgen blog, even some people who entered OVDP were hit with criminal charges. Unbelievably counterproductive.
http://hodgen.com/open-letter-to-irs-commissioner-about-voluntary-disclosure-program/
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