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.
@Petros
I only brought it up because I heard that Nina Olson told a bunch of people if they were unhappy with FBAR to take it “upstairs” so to speak to the US Treasury Department. I don’t at all let the IRS off the hook for the way they have handled the OVDI etc which is VERY much in their control. I actually though we would have had some additional news on this whole issue today but I guess not.
@Petros
I agree totally with your regarding of the Bank Secrecy Act.
Tim said: “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.”
This administration doesn’t seem to be fond of legal options to solve problems. They’d rather waste their time engaging in other activities which are bound to be overturned by the Supreme Court anyway i.e. their fight against Arizona’s attempt to control illegal immigration and Obamacare.
@Tim
I want to reiterate your point about OVDI beginning under the complete control of the IRS. This has nothing to do with Treasury or Congress. On January 9, 2012, when they reinstituted OVDI, they promised procedures for U.S. citizens abroad to come into compliance. The IRS has NOT published these procedures. Of course, we are well into tax time. I wonder how many peoples lives have been destroyed by this.
Furthermore, the IRS is perfectly aware that the “cross border professionals” are encouraging people to enter OVDI. They are doing nothing to distinguish the “minnows” from the “whales”.
The unwillingness of the IRS to address the issue of U.S. citizens abroad and OVDI, given that they have knowledge of the problems, means that the IRS is perfectly content to use OVDI to destroy the lives of U.S. citizens abroad. Although expats and immigrants may have started out as collateral damage, they are now intended targets.
@Petros
When it comes to FBAR either Treasury or Congress can exempt U.S. citizens abroad from FBAR. Neither has and there is no indication that either well.
The point is that problems can be solved by the Executive
Branch of the U.S. government. There is no way that the buck can or should be passed to Congress.
@markpinetree- I honestly that he was giving you the best and only real possible solution to this problem.
I sometimes wonder if the U.S. now doesn’t see non-resident and dual citizenship Americans as a security risk that they would rather not have to deal with. It is much easier to deal with things if you either are or are not a citizen.
Since the Federal government can no longer make people give up their citizenship when the become the citizen of another nation, this leaves the only option of forcing renunciations. And the only legitimate tool for doing that is the tax code.
I see your point Petros. We can´t be soft with people who are unfair r to us and who show no understanding or wish to be helpful. I will take this in consideration. How about my other considerations? Do you have a view on those? And another question are the IRS agents paid a percentage of the moneythey collect? Do this affect their careers?
@Recaltrantexpat, it would be a huge relief if I learned that the US would prefer us to renounce. I’d always assumed that we’d be considered essentially traitors by doing so.
I’ve spent over half my life in England and it’s where my heart is….my mixed feelings are more out of a sense of loyalty but life would be so much simpler if I just had the British passport. I have been embittered by all this and definitely know I’m going to remain in the UK forever.
I am crying as I write this. I will never be able to fully forgive the US for all the financial losses and especially anxiety I’ve experienced. But I hate how I may be forced to become exiled from my homeland just to be able to lead a normal life.
I’m sorry if I’m a postwhore but it really helps being able to vent on here…
@monalisa1776,
You are not alone. I feel similarly, and I’m sure that there are many others. Now I wonder, was it ever my ‘homeland’?
@monalisa1776- don’t think that you are putting up too many posts. Talking about how we feel is one of the reasons that this blog exist.
@monalisa1776- we were already deemed to be traitors when we left. The naming and shaming is just the U.S. being able to get the last word in on our treachery. The publishing of the names of those who have renounced is purely gratuitous and unnecessary. It put those who renounce in the same league as “johns” or “drunk drivers”, “drug addicts” – eg. those whose behaviour is a threat to the fabric of American society.
@monalisa1776: Post all you want. We need to support each other. I had a great talk with the consular when I renounced. He wished me the best of luck. He didn’t make me feel at all like a traitor. A few loudmouthed ignorant congressmen may have created this “name and shame” list but those aren’t the Americans who matter. If you choose to renounce then you are renouncing the bureaucracy, not the people.
@recalcitrantexpat – That’s actually literally true: see http://www.atf.gov/firearms/how-to/identify-prohibited-persons.html
(If you relinquish, you retain the ability to buy firearms and be federally licenced to transport hazardous materials.)
After months of studying these issues I still can’t read the phrase “transporting of hazardous materials by renunciants” with a straight face.
I lived and worked 30 years in the USA and I love d the Country as much as I do Brazil. Sometimes more. I always saw the USA as a fair Country a place you could trust. I have my two daughters and son in the USA. Never brough one cent I earned there to outside the Country. I have assests there. I go to vist my family once or twice a year and I unless I see no way to be able to cope with the dual citizenship, I will not resign.
Punktlich wrote:
Based on Garner v. United States, Jacqueline R. Konovitz writes, about a hypothetical taxpayer named Sam:
Punktlich wrote:
7a At any time during 2011, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions
My Answer : “YES”
If “Yes,” are you required to file Form TD F 90-22.1 to report that financial interest or signature authority? See Form TD F 90-22.1 and its instructions for filing requirements and exceptions to those requirements
My Answer: FIFTH AMENDMENT
b If you are required to file Form TD F 90-22.1, enter the name of the foreign country where the financial account is located:
My Answer: FIFTH AMENDMENT
There you go; the statute of limitations can run out because I’ve filed the 1040 and I have not committed fraud.
@monalisa,
Don’t ever think you are a postwhore or whatever you called yourself. It will be a day of celebration for me when I can see that you out of everyone on this blog might accept the fact that the US is not your friend (our friend) and you can make decisions to move along in your life.
When it comes right down to it, it is true what has been said by many that we can really change no one but ourselves. What makes us think we are going to change the way the US thinks and acts, especially with such a dysfunctional Congress? We can work on ourselves and the way this affects our lives and how we are going to solve US abuse in our lives. We can also continue to petition the governments in the countries we live in to protect US persons in each of our countries. In the end, we must protect ourselves — life is too short. Hopefully, we are on this earth to do better things than bow in supplication to such abuse.
[I am also glad when I see an abused wife (or husband) has the guts to get out of a relationship that is deadly and move on. One usually gains respect all around, including from our family members, when we have found the courage to do so. I know a little bit about that — I’ve been there.]
Not to foment the already high emotions running on this entry, however, readers must be extremely cautious when using the 4th Amendment or 5th Amendment as a defense for not filing returns. Section 6702 of the Code imposes an additional $5,000 penalty for arguments that it has deemed frivolous.
Examples 9.d, e, and f of Notice 2007-30 http://www.irs.gov/pub/irs-drop/n-07-30.pdf deem arguments based on the 4th or 5th Amendment to be frivolous, thus resulting in the $5,000 additional penalty.
The Section 6702 penalty applies only to returns required to be filed under title 26 and FBAR is required to be filed under title 31. It is possible, however, that the filing requirement for FBAR could be drawn into title 26 by virtue of the administrative provisions under the HIRE act. This could be a stretch, but it is something to be considered.
@ Roy Again, I am just trying to get this filing obligation out of the way, without at the same time revealing information that could incriminate me; the information that could incriminate me is privileged under the Fifth Amendment, and therefore I will not waive that right under any circumstances.
Now, my returns are not frivolous. I have withheld only such information that could lead to criminal charges. I have not withheld any tax owing or any information that the IRS needs in order to assess what I owe. I have withheld only incriminating information that is not necessary to assess my tax obligation (1040) or information that is unnecessary to determine if I am a covered expatriate (8854).
I have in any case a firewall if the IRS decides to make an example out of me. That firewall is my physical presence in Canada, and Canadian government that will neither extradite me nor collect FBAR penalties.
My question is this: Do you warn your clients as sternly when they file belated FBARs that they could potentially face criminal charges and potentially steep FBAR penalties? Or do you warn them not to enter the OVDI if they would pay $5000? I think my approach is reasonable. I am filing in keeping with the obligation, and I am withholding information that incriminates me based on my Fifth Amendment rights. Do you really consider this approach more hazardous than actually giving the IRS and the Treasury department a full inventory of your financial assets? Consider the fact that these assets are, and will remain in Canada. Do you trust the IRS not to use the information in FBAR to assess fines to filers who are belated? After the OVDP of 2009, I do not believe the IRS is worthy of trust.
Renunciants are in a strange situation, as they are no longer subject to US law when filing back taxes.
Form 2555 asks for the identification of my Canadian employer who does not want this information given to the IRS. It would be a violation of Canadian privacy laws to do so without his permission. Since this information does not affect my income or taxes due, I will simply state that it is a private party.
Which applies? My current status at the time of the filing and signing of the document or my status duting the reporting periods of the back tax returna?
Hi Roy: again, $5000 fine per “frivolity” is still less than 300% of my financial assets.
Hi Roy: Also consider that the IRS has three years to assess back taxes due and ten years to collect. So I figure, I’ll be able to visit the United States again in 2025. By that time, the Caribbean tourist industry will have made tens of thousands of tourist dollars off me and my wife, and the United States share will be a big fat “ZERO”.
@ Rivka, the answer to your question depends on who you ask. The IRS would like to think that it still has jurisdiction over you and can boss you around and force you to provide information on the 8854. But as far as I am concerned, I don’t even have to file the blasted form at all. I have the CLN. I took it to TD Waterhouse when I opened up new accounts–I showed it to them and they took photocopies of it. As far as the bank is concerned, I am no longer a US person. The only thing I have to worry about now is the 15% withholding tax on US dividends, which I will never have to deal with because I am no longer investing in the US ever again. So if the IRS wants to hound me with $5000 fine for this and a $5000 fine for that, then they are wasting their time, just like they made me waste my time filling out a dozens of useless forms because I don’t owe them anything and they will never ever be able to collect from me.
The IRS is in an no-win game. They can not ask for the form 8854 before you renounce, that would clearly be a violation of your right to renounce. Once you have renounced they have no right to ask you to file anything. That may be the way they want to play the no-win game, they just hope most people file. Anyone that does file the 8854 has done so voluntarily, and can not claim they were forced to.
@Petros
I have seen some discussions some place over the legal requirement to file from 8854. I wil try to find them again. As I suggested earlier I would hold off on 8854 for a while as I suspect even in the next month or two we will find out more information. I know there have been proposals to use the Reid Amendment against those who don’t file 8854 however there is no actual law in place to do so.