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.
I’d still like to know what notification obligation the IRS thinks recent, back-dated, pre-1986 relinquishment cases have or don’t have. There doesn’t seem to be any concrete information available about this scenario. I plan to do nothing else after I receive my CLN, based on what I’ve gleaned so far. We already know that State is supposed to inform the IRS internally anyway. The IRS is now so far behind on its guidance that it might as well be running backwards.
The IRS text that Roy cites as a warning about taking a frivolous, refers to two warnings regarding the Fifth Amendment (emphasis mine):
Please note that point e regards “due process”; this is not the part of the Fifth Amendment that I am invoking. Point f, however, is. But note that it says “not to file returns”; I am definitely filing the forms, so this is not frivolity. Point f also states, it is frivolous to claim the right to withhold “all financial information”. Now see how carefully this is stated? It says “all financial information” because the IRS is well aware that the Fifth Amendment may be invoked to withhold some financial information, such as the source of the funds, provided that the tax payer reveals all income and all tax liabilities. This I have done. I have revealed the information that they need to assess my taxes.
@ Tim: I could take an automatic extension to June 15, but alas, I am weary with this process. I was going to send 2010 too, and this one is already late. If I wait, they could assess a tax liability to my 2010, then I won’t be able to answer the question of satisfying all tax liabilities, making me a covered expatriate. Also, I can send it in one package together and save some money on stamps. Let me think about it.
@ Petros, we take our clients on a case-by-case basis. we make recommendations only after considering all of the surrounding circumstances.
my reason for participating in on the blog is to remind folks that that these are complicated isues.. even when they seem rather straightforward.. and caution is warranted
One suggestion is to just put a final number on the net worth line of 8854 and be done with it(Not putting anything under 1 or 3). If anyone ever comes back to ask and I highly doubt they will, you can say you forgot. I don’t really know what the best solution. I think your concern over FBAR is warranted. I actually think question 3 is the problem more than anything question 1 is fairly vague.
@ Roy Thanks. The comments from you and Punktlich have made me think about my position, and I think it is stronger now. This is what I see as my two options:
(1) File nothing except the 2010 taxes (to get some American trades cleared as to tax liability).
(2) File the Fifth Amendment 8854 and perhaps completely clear up the exit process. Or watch the IRS make an example of me to the further damage of their own reputation of going after innocent minnows in an attempt to extort taxes form expats.
Filing FBARs is bull crap. I’m not doing it. So if I do not file the Fifth Amendment 8854, I do not file the 8854 at all, and then I will surely receive a $10,000 fine which I will not pay, and I will become a covered expatriate–though I’m not sure that makes any difference to me, since I have no US heirs.
In any case, I’m not paying any fines or taxes; and we will then see if the Canada will do anything to help the IRS. So far, we’ve received strong assurances to the contrary. I think that the Flaherty and the Ministry of Finance are inviting all Canadians to take a strong stance similar to mine. You can say that they have encouraged all Canadians to laugh at threats of the IRS. And I do: Ha!
The only concern to me is if I can end this circus by filing the Fifth Amendment 8854, then perhaps I can visit my dad, an octogenarian, a couple more times.
Petros, Even if you file nothing, there is no reason not to visit your dad. They aint gonna issue an arrest warrant for a measly 10K or so. Not worth the trouble or the bad publicity. They have enough problems with billionaires, fraudulent refund claims and identity theft.
Chester12, however, I might want to check if there are any outstanding warrants for my arrest. I have publicly said that I will not file an FBAR. This is a criminal offense. The reason for the Fifth Amendment 8854 and 1040 is to maintain an information distance between what they know about my finances, giving them insufficient warrant to indict me on criminal FBAR charges.
Once arrested on FBAR charges, they could send me to prison on obstruction of justice. Conrad Black gets out this week. I doubt that it is worth it for me to risk the kangaroo court of US federal criminal justice.
I hate to say this, but this whole situation of Americans Abroad is beginning to change my views (positive) about the USA. I guess I am naive but I keep hoping that they sooner or later will realize the harm they are doing to innocent citizens trying to live their lives in a country other that the USA. But my question remains: what the silent majority of American Abroad are thinking and feeling? Any guess?
I don’t know but I have a few acquaintances in the US that going to try to find out for me. If you read the US media you hear almost no discussion at all anymore of the whole offshore banking thing.
…what the silent majority of Americans Abroad are thinking and feeling? Can’t guess — it’s a “puzzlement” to me that this is not a huge issue in the media and with all the others who are affected.
I keep running into people who know NOTHING about this and it is my contention that it really is the case. Many who do know about it are convinced it in no way affects them. This leads me often to second-guess myself — have I blown this whole thing out of proportion? Am I creating my own problems? Am I the one deluded that there is a problem?
My attempts to explain are not clear and the persons I have communicated with come back to me asking if I have gotten my tax situation resolved (i.e., thinking I somehow owe the US back taxes and I am to blame for not paying what I owe). If they have had even an inkling through some media piece, the whole story is so beyond comprehension that it would have anything to do with them that the entire thing hasn’t registered in their brains.
Hi again Calgary. A friendly confirmation that to some extent you have blown part of this at least out of proportion.
Your attempts to help others who are unable to renounce for people in their care are very commendable. With respect for your devotion to and love for him
THERE IS NO WAY THEY CAN TOUCH YOUR SON.
I think video below about Magaret Thatcher poll tax is pretty interesting and weirdly relevant.
I’ll modify some of the comments made in the video to make them more relevant.
Who ever came up with this crazy idea that if you were born in the United States and technically were a citizen you had to file a tax return wherever you lived no matter how many years had passed since you lived in the US even if all of your income had never been US sourced.
We had a problem with wealthy Americans living in the US hiding money in banks in Switzerland. Thus we tried to come up with a system(FATCA) where we could without foreign government involvement by imposing a witholding tax get foreign banks to turnover information on their US clients. It was never intended to go after grandmothers or “accidental” Americans.
The US Treasury ultimately told foreign banks, US Banks, and ultimately the people of the world your going to get FATCA whether you like it or not and ultimately the people of the world said NO.
Its terribly depressing to meet constituents who are grandmothers and senior citizens crying who are facing 600% fines under FBAR and OVDI programs.
Thanks, Chester. I agree, if he does not cross the border with me, his mom, he should be safe as his Canadian passport does not identify him. I will make sure that’s the case. I just wish it all to be very legal for all concerned so these people have the same rights as any other Canadian (or any other citizen of whatever country). I know I’m anal on this — it is the principle of it I can’t let go of.
Why would most people be aware of the details of US citizenship, tax compliance requirements, FBAR, passport enforcements, etc.? People have lives. The same lives they have had for a long time. Lives that still work as well as lives ever do. Why would they speculatively go looking for trouble and severe anxiety? A wild guesstimate is that maybe 5% of 750,000 affected in Canada could be compliant.
Of the people I’ve checked with or observed, many are just lying low and keeping on with keeping on. I sleep well at night because there is the feasible fallback if glitch comes to rule – never enter the United States again. I’m going to considerable nuisance to appease glitch, but ultimately glitch could run off in any direction. That is how irrational the whole scenario is. The more that the US jerks around Canadian citizens who just want some freedom, the sadder that failing state looks. In hindsight, the exit signal was their multiple idiot responses to 9/11. Coulda and shoulda. But didn’t.
Look at the month-by-month media stats over at USxCanada and see that the peak of the story so far spreads from September 2011 (end of OVDI 2) to January 2012 (announcement of OVDI forever). After that, really not a lot, especially on the Canadian front. Brock hits have leveled at 4000 to 6000 per day.
Think about the numbing repetition that is the essence of effective advertising. The US may look toward the termination of even the façade of “reasonable cause” defense in light of the media coverage, but that would be just one more idiot technicality. The message really has not gotten across very much.
The big question is when some precipitating incident will cause hits on Brock to double overnight. I don’t see anything on a near horizon. Maybe if Obama gets a second mandate and one of his flunkies does something super stupid?
” I keep running into people who know NOTHING about this and it is my contention that it really is the case. Many who do know about it are convinced it in no way affects them. This leads me often to second-guess myself — have I blown this whole thing out of proportion? Am I creating my own problems? Am I the one deluded that there is a problem? ”
@calgary: I have the same experience and wonder about the same thing. I do believe that I HAVE blown this out of proportion and that the many expats I meet who are not worried will probably never have any problems. But still, I need to be able to sleep at night. 🙂
@ USX I agree with your assessment. I think it is actually much better that the vast majority of people ignore the posturing and requirements of the United States. Let the brockers deal with this problem so that they can carry on their own lives doing what they always do. Hopefully our fight will able to resolve the issues before anyone else has to worry and lose sleep, or worse, do something drastic like send money to the IRS. That’s what I am working to stop. I am trying to get people to listen to what the Canadian government has said. It has said, “Don’t worry about FBAR.” And, your best protection is to become a Canadian citizen, if you haven’t done that already. The defiant stance that I’ve taken, the more I think about it, is exactly what Flaherty wants all of us to take.
@USX Again, I think your assessment of our traffic at Isaac Brock is also right. It always goes up when a Canadian main stream media does free advertising for IRS (which leads to Isaac Brock comments); or our highest day was after the Reuters article and the Peter Dunn interview–but 6500 hits that day was a glitch. So we have a regular traffic, but it is steady. I don’t think that the level of anxiety in the population is not rising. When it does because of something stupid, like a generalized harassment of “US citizens” at the border, then we are primed and ready to go viral.
An article referred to at Townsend’s blog by an anonymous blogger (Criminal Tax Investigations and Current-Year
Returns: New Thoughts on a Perennial Issue pdf) , says there is more than one Fifth Amendment strategy; regarding my particular suggestion here, Scot D. Michel writes:
@Petros
this should also apply to any forms submitted with the return.
@Rivka It applies to all forms that must be filled under the Internal Revenue Code. The filing requirements under the tax code are “constitutional” because of the 16th Amendment. FBAR, for now, is not under that code. Therefore, it is still possible to argue that the entire form my be omitted on Fifth Amendment grounds, for the revealing the existence of a account creates a situation in which the filer essentially admits to having committed a potential felony. One court has upheld such an argument. Another court has invoked the Required Records Doctrine, to say that the Fifth Amendment doesn’t apply. But that is a lie. The United States government requires the information for one purpose and one purpose only: to enforce crime. Therefore, I believe and hope that sanity will prevail and the FBAR requirement will be struck down until such time as Congress actually rewrites it to put under the Internal Revenue Code–which may have essentially taken place with FATCA and the 8938 requirement.
@Petros, I believe you’re correct about the 8938 enabling the IRS to more easily collect fines than FBAR because it’s a title 26 vs 31 penalty.
rødgrød, I have the same question. Am I worrying too much about these things? I ask other people, Americans Abroad, Green Carders and they don´t seem to be concerned at all. This puzzles me. When I became aware of FBARS penalties and FATCA I thought that millions of Americans Abroad would protest and become very distressed. Today I went to a site of Democrats Abroad and asked the question directly: are you worried about FBARs and FATCA? So far, after 5 days… no answer. Why? And they are all supporting President Obama as I am too because the alternative is terrible. Let me recapitulate what bothers me. First the paper work that I can´t do by myself (expensive to hire a CPA in the USA). In my particular case, because there is not SS Treaty bertween the USA anf where I am I have to pay SS Self Employment Tax in two countries, withou any return. Then I have to pay US taxes on incomes that are not taxable where I am: pension and savings. Then some difficulties finding data where I am to enter in the IRS Return (takes a lot of time), And now the worse: not knowing what is going to happen in terms of FBARs because I only learned and started filling them in 2009. This is what take my sleep at night. I guess that people who are employed (the great majority) only have to file 1040, 2555 and send FBars if they have more than 10,000 invested. It may be simpler for them and perhaps this is why they are silent. To end this long poster I think I do feel annoyed with all these forms, demands and threats because I don´t understand the need for that. If we have an Earned Income Exclusion and Tax Credits and if the great majority of countries either have the same taxes or even higher taxes than the USA, what is the IRS looking for? I guess it is just for our mistakes and omissions (for not knowing) with their incredible draconian penalties. But again why Americans Abroad are not more annoyed and expressing themselves?… Mystery. Petros, thank you for this Society where we can share our views and concerns.
@markpinetree
Democrats abroad is going to be at the May 15th hearing. The discussion points they will be bringing up are linked to below.
http://bsmlegal.com/PDFs/DemocratsAbroad.pdf
@Mark, I am equally bewildered. But the more I think about it, the more i believe that there is a lot of posturing, both from the IRS and especially the cross-border professionals making a living from our paranoia.
I suspect that the majority will continue to be non-compliant and that the IRS will turn a blind eye if they lay low and focus on whales or tax evaders living in US but hiding via offshore accounts.
In retrospect, I was bludgeoned into complying but now feel duped…I now suspect that with no assets over there, I could have probably carried on living and investing like a Brit and if I had been blissfully unaware, would have never known the wiser.
But I also felt that once I became aware, to not have rectified it would have then been willful. In many ways I wish I had never found out because knowing means I now have full accountability.