I am making what you could call a “noisy” non-disclosure. I have stated that I do not plan to file FBAR. I am no criminal, but because I’ve not done FBARs in the past, and I plan never to file one, actually filing an FBAR creates a substantial hazard because of its criminal penalties. This is the fatal flaw in the FBAR requirement. If there were only draconian civil penalties, no one could invoke the Fifth Amendment in refusing to file it.
But the problem for someone who has relinquished US citizenship like me is that the Form 8854 reveals too much damning and detailed information about assets, giving the IRS the ability to deduce that the person has financial accounts and how much must be contained within them. I have learned that while the Fifth Amendment will not allow a person to make no tax filings at all (remember Al Capone went to jail for that), one may withhold information on a tax form, if that information could lead to a violation of person’s Fifth Amendment privilege. Therefore, here is Part V of my 8854 (I’ve blackened the actual declared numbers, which is actually the necessary numbers in order to make it possible for the IRS to determine that I am not “covered”):
So the IRS will be able to see that my assets fall below the $2 million threshold and they can see that I have owed zero taxes for the last five years. I am not a covered expatriate.
But they have no right, under the Fourth Amendment, to an inventory of my assets, and therefore, I will not provide sufficient information to them so that they can charge me with criminal FBAR. The Fifth Amendment is invoked for the value of all my Canadian assets. For all they know, my house is worth the full amount of the declaration. As for the categories with zero, it will hopefully show to the IRS that all my assets are already “offshore” and therefore safely out of the reach of their grubby hands. In any case, all I have in this life has been earned in Canada, and not subject to the jurisdiction of the IRS.
I invite comments.
@monalisa1776
I do appreciate your patriotism for your birth country but I hope you can also appreciate that Canada is my country of birth and if it came down to it, even in my dotage, I would take up arms (or assist Canada in any way possible) against the USA if it were to attack my country as it has attacked so many other sovereign nations. (My ancestors were United Empire Loyalists.) I owe no allegiance to America as you do and I have to draw a line somewhere. My bank accounts are not fair game to the USA (every penny in there gained in Canada). I don’t believe Peter’s so-called defiance will in any way affect the outcome from your comply and complain decision or anyone else’s decision and neither should mine. If we Minnows are so insignificant that we could not stop the IRS from setting up its Whale net which snared us too then we should be insignificant enough for the IRS to “pay us no never mind” (if you understand that phrase) when it comes to how or if we file a particular form which tries to extract information which is none of its business. This is not about hatred of the USA, it is about having rights as citizens of our own, non-USA, countries and trying to find as non-confrontational a manner as possible to exert those rights. You can pray for reform but the USA seldom if ever backs down and I don’t see it happening.
@Petros
The reason I suggested going to the CRA is they have the ability to submit the form 8854 filing requirement to binding arbitration with the US.(I believe no one has actually approached the CRA over expatriation). No other country other than Canada can submit tax treaty issues with the US to binding arbitration so by going to CRA you would possibly have to possbility to make “tax history” in a fairly inexpensive way. Read my new post.
@ Tim Good idea. But we should find a covered expatriate who would do this. Since I am not covered, at least if they accept my Form 8854, I would not at all be the best person to challenge the exit tax.
“Justice cannot be for one side alone, but must be for both.” Eleanor Roosevelt
http://www.gwu.edu/~erpapers/abouteleanor/er-quotes/
http://www.peterwall.net/2009/05/02/law-vs-justice/
………….
“it has been argued, by Lon Fuller in a famous debate with H.L.A. Hart (Harvard Law Review, 1958), that a jurisprudence which generates outcomes offensive to justice doesn’t deserve the name of law. It may come fully equipped with procedures, tests, distinctions and all the other marks of law, but it isn’t law because, at its heart, it isn’t good. The question Fuller and Hart debated is whether Nazi law was law. The positivist Hart said that law and morality are two distinct registers and that a system of law could be procedurally legitimate and at the same time rest on an immoral foundation. Fuller replied by distinguishing between “mere order” and “good order,” and declared that a legal system “which clothes itself with a tinsel of legal form can so far depart from . . . the inner morality of law itself that it ceases to be a legal system.”………….
@em- U.S. citizens increasingly have few rights vis-a-vis their government. Expats have even less rights than resident citizens.
The U.S. looks upon citizenship more like a license that a person has to operate his/her franchise under the franchisor’s name.
Like in any franchise arrangement the U.S. government as franchisor, retains all of the rights, property, in the title and therefore can dictate the rules under which you operate. You, the citizen, have no rights to define the content of ctizenship.
Typical franchise rules dictate hours of operation, means of advertisement etc. The pertinent franchise rules under these circumstances are those which relate to the sourcing of inputs or in our situation financial asset purchases and the associated licensing fees or taxes.
As most of us already know, all franchise operations are authoritarian in nature and have steep penalites for violatations of the franchise areement. Although it is clearly evident in contract law that the franchise arrangement is a “property” arrangement and that the relationship of the U.S. citizen to his/her government is a similar the U.S. is not willing to acknowledge this truth.
@Petros
I believe there is a case alone based on the simple filing requirement imposed on renounced citizens. The real screwup Congress made was in your case imposing the filing requirement as of April 2011 after you were no longer under the law a US citizen instead of Febuary 2011. Thus after Febuary 2011 you are no longer a US Citizens instead you are a Canadian citizen tax resident in Canada under the US Canada tax treaty. If want to go down this route all the way to binding arbitration you probably need to get a good Canadian tax lawyer. However, you might find one interested for the novelty if for anything else.
@ Tim We used to say in pick-up basketball games, “No blood, no foul”. Since I am not covered, I think we should wait and see how the IRS responds to my case. But surely, there are many others who are covered under the exit tax law (877a). Thus, we should encourage a covered expatriate to do exactly what you are saying because so much more is at stake. I mean, all I can do is laugh with scorn over this if the IRS were to make me a test case. The requirement of filling out the form took me about an hour to do, so it is is not particularly onerous. However, I agree with you: what truck do I have with the United States now that I am no longer a citizen?
@ recalcitrantexpat
Sounds like another way to state that the USA is a corporation and it’s misnomered “citizens” are in fact corporate chattel. I am well aware of that.
@Petros
One thing I do agree with you on is you are right to be suspiscious about the whole FBAR thing and how its applied thus in some ways there is a certain degree of uncertainty as to how form 8854 relates to FBAR. That’s why I suggest holding off on doing anything for now. You have a very particular case of renouncing just before the what is it form 8893 filing into effect. Everyone after you just about is going to have to do 8893 on their on their final return so the relationship between FBAR and 8854 is somewhat mute in the future. Just from what I have seen very few expert tax lawyers even understand FBAR
Interesting thread…I would stand somewhere between the stalwart defiance of some here and what monalisa is doing. Basically, I will renounce asap, file the 8854 and an FBAR and be done with it. Do I like giving them this information or do I think that they have any right to know any of this? Of course not, but I also want to know that that CLN really means a complete termination of my former citizenship and I don’t want to have to worry for my my whole life that the US will track me down in 20 years for some unfiled form and harass my country of residence to collect absurd penalties for refusing to supply it.
I think that I am also the odd man out on the site as I am literally at the beginning of my career, so I don’t have any accumulated assets or complicated mutual funds, etc. Just simple banking accounts that are worth hardly anything…so fine away for all I care, IRS. But once you’re done good riddance and don’t let the door hit you on the way out 😛
@ Don Pomodoro
I think that is a good decision for you given that you are younger and handing the IRS the keys to your bank accounts via FBARs and 8938s will not have any significant effect on you. Getting that final and total release is imperative. You can even switch banks in the future and suffer no recourse. Sadly, for some of us it is more complicated. Good luck to you!
@Don, yes, I am with Em here: in your situation, I don’t blame you one bit.
I can certainly understand Roy not wanting to shoot from the hip. Having said that, I find it very difficult to believe that one could reasonably consider the FBAR a Title 26 obligation since it’s clearly imposed under Title 31. I understand that the IRS has been charged with enforcement, but that cannot (certainly, it ought not) transmute the FBAR into an obligation arising under Title 26. Some truly shocking authority would need to exist in order for me to conclude that the failure to file an FBAR precludes an expat from certifying as to compliance with all Title 26 obligations, for the applicable 5-year period, as required for purposes of IRC sec. 877A.
Even if a court reached the seemingly indefensible conclusion that the FBAR somehow IS a Title 26 obligation, to convict a person of perjury (or some similar offense) for taking the straightforward view that Title 26 and Title 31 are different things would seem ludicrous. I would, of course, caution readers that I have not researched the issue, and you never do know what you might find!
@Don: I wouldn’t call myself young (late 30s) but like you I have a very simple financial situation. The only thing I “own” is my home but we’ll be paying off the mortgage on that for the next 30 years. Like you I want closure and to be done with it. We are trying to have a child; I’m sure that when this hoped-for child gets older, he/she will be annoyed at me for not transmitting US citizenship to him/her. But I want myself and my child out of the clutches of what is essentially, for us, a foreign government. And if something happens to me I want my husband to NOT have to deal with this crap. I want to be able to set up savings accounts for my child without having to think about insane trust forms. I want to be able to start saving seriously for my retirement without having to worry about tax treaties and tax credits and what-have-you. One governmental bureaucracy is bad enough; US citizens abroad have to deal with two bureaucracies and, well, life is too short for that. So yeah, I’m going to file my returns as normal this year and file the 8854 next year and be done with it. I need to be able to visit the US and not worry that I’ve broken any laws (many of my family and friends are there and despite everything I still love visiting).
@Petros: you are a brave man. Invoking amendments seems to be one of those things that REALLY pisses the IRS off; I would think you’d stand a better chance just giving them the numbers. Even if someone actually decides that you should have been filing FBARS I can’t imagine them doing anything about it. But then again, if you plan to never cross the border again I doubt they have the resources to try and do anything no matter what you write.
@rødgrød: “I’m sure that when this hoped-for child gets older, he/she will be annoyed at me for not transmitting US citizenship to him/her.”
Nothing you can do at this point (other than for the child to be born in the USA) is likely to affect its nationality since for a child born in Canada of one US parent all that is relevant is the requisite prior US residence for a certain number of years at certain ages; or in the case of nonmarital births one year at any age. (Birth in American Samoa/Swan Island or Puerto Rico yields different sorts of nationality and tax obligations respectively.) Registration with a US consular office is only evidentiary and does not affect the fact of citizenship; but of course an unregistered Amcit will be unknown to the State Dept and to the IRS so the fact of a law violation in crossing the border will be unnoticed, unless a curious immigration officer asks for the facts.
I lectured once in Toronto and once at the Université de Montréal and b both times Canadians came up to me after the lecture to remark that they were dual nationals but that their American citizenship was irrelevant to their lives. Apparently there are one million Canadians like that. I suppose that some of those living in Stanstead QC don’t even speak English.
These days my only relationship to Canada is getting a few hundred dollars a month from the QPP so what do I know. I get even less than that from US Social Security. As I don’t expect to check in much more on this site I will offer a few points of advice:
— Be careful about filing a joint US tax return if there are discrepancies over foreign assets, as the benefit of possibly lower tax may be outweighed by putting the innocent alien tax-return signor at risk of joint and several liability.
— The “automatic” penalties of $10,000 and more (for not filing such forms as 5471 and 3520) are so draconian, so disproportionate that one has to wonder what the Congress was thinking. I know these forms are read closely because I have filed them and over the years I’ve made many technical errors and each time the form has been bounced for correction. Despite the dollar amounts listed being tiny.
— The “right” to expatriate (vs. perpetual allegiance) was the basis for considerable argument between Jefferson and Hamilton. There are a few countries that do not permit expatriation, Eritrea and Iran among them; also there were some Eastern European countries that used not to allow it, hence the old Bancroft treaties that allowed their expats in the USA to visit those then-Communist countries on their US passports. Curiously “allegiance”, transmuted into “citizenship” is not only an Anglo-Saxon concept but an Islamic one, although in the latter case all sovereignty is said to belong to Allah. The Christian concept is to separate sovereignty from religion in the form of nationality. And the Jewish one, based on the Diaspora, is to ignore it. Then there are the Jehovah’s Witnesses who went to prison in Canada during the War because they, like the Muslims, thought sovereignty belongs only to God. What the latter think of the Crusades I have no idea.
Here in Switzerland the USA is coming across as the big bully on the block. It can get away with that because its economy and its market are essential to the rest of the world. Thinking of what E.L. Doctorow wrote in the NY Times the other day ( http://www.nytimes.com/2012/04/29/opinion/sunday/unexceptionalism-a-primer.html ) that may not last too much longer. I doubt that the US will ever stop thinking of its expats (government employees, missionaries and certain business representatives excepted) as quasi-traitors and apostates, but foreign countries may be of less assistance. Information exchange is useful to the IRS only insofar as it has the means to enforce collection. Unfortunately some exemptions and exclusions depend upon their being claimed before the IRS makes an arbitrary assessment. And I remember after the 1976 law American English teachers in Nigeria making, say, $25,000 plus accommodation and car, in the absence of a foreign earned income exclusion and with an overvalued exchange rate suddenly owed more in tax than they earned.
— Finally: there is no point in blaming the IRS for policy. That is Treasury’s responsibility. IRS depends on self-policing by taxpayers, and it uses “in terrorem” provisions to frighten. I suppose that for Canadians proximity to the border creates its own risks. Think of Ronald Anderson http://uniset.ca/other/news/wp_ronaldanderson.html The vast database of worldwide information made available to the IRS under FATCA and through the NSA to Treasury (although “sources and methods” rules make the latter difficult for the IRS to use it) is really too large to be processed. And it is unlikely that the IRS will spend much effort on expat Americans without US assets and income. Unless they are also drug barons (or, in the case of one IRS attaché I spoke to many years ago, notorious pornographers or McDonalds heirs). One’s main concern has to be over eventual repatriation of assets (at death, say), and over “transferee liability” whereby a donee or trustee or heir is liable (up to the amount received) for unpaid tax of the donor, settlor or testator.
I don’t think I can add anything to that.
Two things… first, if we are 7 million American Abroad how come just a small percentage of us are so distressed by what is being demanded from us and threatening to us? Is that the silent majority do not know about this? Or perhaps they are employed people with less than 10.000 accounts and have just to file 2555?
I fail do understand. Then, I thought it was strange that I was able to reach the IRS through a House Representative and after explaining my particular situation which seemed impossible to survive, I got advise from the IRS to renounce the citizenship and file form 8854.That form scared me. But I amnot thinking about renouncing. I don´t know how to take this advice: “America love or leave it”? or, the IRS really felt that in my situation this was the best advice they could give? But then…should we accept that this is the best that can be done for a American Abroad who is trying to do the right things but is falling through the cracks? To be truthfull I felt kind of hurt as an American by choice(dual citizen).
@markpinetree
The 6-7 million is an estimate, no one knows how Americans are living overseas.
The 500 renunciations reported quaterly are those which meet criteria from Sections 877 and 877(a), I and most people on this site will not be listed, so that number is low.
Only those born in the US or who have exercised US citizenship will need to renounce or relinguish.
Anyone born outside the US can go stealth and ignore the IRS and travel on their birth country passport without attracting scrutiny
It is easy to think of the IRS as unemotional glob, but is was a person who answered your call and gave a human response to your compaint.
As a Vietnam era veteran, I sympathize with your hurt, but my emotional attachment to the US ended many years ago.
I see. These things are complex. And not enough data. But I would think that more Americans Abroad would be member of ACA for instance. But time will tell. I also don´t want to demonize the IRS. They are doing a difficult job and yes in my experience they are too impersonal. But they are human beings like us trying to do a job. Nom I did not talk in person with someone from the IRS. I wrote a letter to a Representative from the State where I last resided in the USA relating my difficulties complying with the demands and he sent my letter to the IRS (without revealing my name). They first rsponded by a signed letter in a very formal way. I then answered calling the attention to some difficulties I was having in a more specific way. The same way, the Representative sent my response to the IRS. And then I received a signed letter through the representative saying that if things were so difficult for me I could renounce the citizenship. At first I felt king of hurt but then I start considering that perhaps they wanted to be hekpful pointing out the best solution. But isn´t this a little odd? To be truthful I don´t want to draw hasting conclusions on the signer motivation on this sensitive matter. I always try to understand the other side when I am debating something. I can´t believe that people want to do harm others, especially public servants trying to do a job for us, taxpayers.
Thanks for your interesting, useful views, commentary and participating in this forum, punktlich11.
@ Markpinetree: As long as we fail to see the demonic activity of the IRS and name it as such, we will continue to make excuses for them. Let’s be straight: there is no excuse for tyranny. Saying that you were just carrying out orders or that you were just doing your job does not exculpate the tyrant or his minions. Thugs who have orders from the king to pillage citizens are evil just like the king, for no king without such thugs can ever carry out aggression against his people. The minions empower the beast.
The whistle-blowers, the men or women who stands against the system, will pay a high price for their stance. They will lose their jobs. So the typical IRS agent will not stand against this tyranny. But saying that they are just carrying out the will of Congress, of the commissioner or the Treasurer is no exoneration for the suffering that they have caused upon the people. President Obama himself has claimed the right not to enforce laws that he thinks are unconstitutional. No one could stop him if he ordered Geithner not to enforce FATCA, FBAR or extra-territorial taxation on the expat community. This evil is done with the intention of finding a source of revenue that will not affect their voter base. The IRS workers are complicit and they receive a pay cheque for their efforts; so they have their personal wealth at stake. So this is my view: if they want to come and take my wealth through FBAR fines, they are evil, because they will carry out orders and unjust laws, and they have caused us to suffer, only so that their own personal comfort will not be affected.
Please stop making excuses for the evil of the IRS. What if it were the Soviet bureaucracy (note: this is not a violation Godwin’s Law), which came to take your possessions and lock you up in the Gulag. Would you say the bureaucrat is just doing his job then?
Hi, rødgrød.
Good luck on that hoped-for child and your being able to get on with your and your husband’s life in Denmark. You are going to do fine in your new country with all of your wise planning — at your young age (as compared with my retirement age). I am so glad you are not going to face so many obstacles of many of us older and too late wiser “Brockers”.
It is my feeling that by cutting loose from that US citizenship, you will provide your child much more opportunity in the world by the time he or she grows up than the perceived benefit of being able to claim a US citizenship.
Good work — all the very best to you and your family!
I agree the minority that many of the problems are not the fault of the IRS but Congress and the US Treasury tax policy branch. However, there are a few suggestions I would make to those involved with the US political.
# 1. Have the IRS move international processing activities from its Philadelphia processing center to its Andover Massachusetts Center(Yes Andover as in Philips Andover. Rich, Cosmopolitan Andover, Massachusetts). The IRS really DOES have a processing center in Andover and I used to stay on business in a hotel right across the street from it. From my casual knowledge of the area in the past the employees in Andover always thought the were a cut above the rest of the service and had the performance statistics to prove it. In general New Englanders always think their a cut above the rest of the United States and quite often there right.
2 #. Have some any public discussion of the matter. All of these rules are basically put in place by omnibus legislation.
@ Tim In reading the Bank Secrecy Act, it is very clear that Geithner can exempt classes of people from FBAR.
If the Secretary has this discretion, then he could waive the FBAR requirements for expats. His decision to force expats to do this requirement shows that they have violated the intention of Congress in creating the law in the first place: to monitor money laundering, terrorism, and criminal tax evasion. Finally, even when confronted with the knowledge of the tyranny that he is creating the tax-cheat Treasurer does nothing, and his minion Douglas Shulman does nothing. Or do you think that they did not get Nina Olson’s memo?
Petros:
I agree with you that Obama and Geithner have many perfectly legal options under US law to change the implementation both FATCA and FBAR and as of yet have refused to do so. I have heard third hand in particular in the case of FBAR not to blame the IRS but in fact the US Treasury on that one.
@ Tim: I have a hard time distinguishing between the tyrant and the minions. Sorry.