Check this out. My question for all is this:
How on the basis of these facts, specifically not knowing about Mr. FBAR in the past, could this be construed to be “willful non-compliance”? Are you saying that the IRS might just make a decision to treat this as willful.? It doesn’t seem to me that in this letter you have:
“now admitted in writing that you are in willful non-compliance with your federal income tax and FBAR filing obligations for the past six years.”
Isn’t the test for willfulness: “The intentional disregard of a known legal duty?” If you don’t know of the duty, how can the disregard be intentional?
This would seem to me to be a very unlikely response from the IRS. If they do respond this way, the outcome is clear:
The word will get out and nobody will ever attempt to bring themselves into compliance again.
Love you hear all your thoughts on this.
Thank you Mr. Mopsick for a very thought provoking post!
Compliance Dilemma For Americans Abroad With No Tax Liability To The United States tinyurl.com/84ukwrj#FATCA#AmericansAbroad
— Mopsick Tax Law, LLP (@MopsickTaxLaw) May 21, 2012
@monalisa1776
Can you clarify you post of May 24, 2012 at 1:54 pm? Did you mean that the IRS regards amended/schd b returns as if you are a non-filer? Is that a good thing or a bad thing?
@all. On the day my husband and I decided to enter OVDI I asked my lawyer: It seems to me that in the past many like us wanting to become tax compliant have been given a pass on penalties. What’s changed? He said “the OVDI Q & A”. Within two days of making our submission, the IRS came out with the statement that they would consider the nebulous “reasonable cause” in determining whether penalties apply, and that they would not penalize on late filings if no tax is due. In NTA Nina Olson’s 2011 report to congress, we realized that we and our lawyer had been led to believe that the less punitive measures of the Internal Revenue Manual were no longer available, when in fact they are. We owe tax and thus a penalty, but our conversation with TAS gave us hope that we can an eliminate it with the IRM’s first time penalty abatement. We have sent payment for the tax and penalty, but not for the FBAR penalty (for funds resulting in the tax due on the sale of our principal residence in Canada-exempt to 1st class Canadians and residents). I will “fling poo” (using Phil Hodgen’s words) before that happens, as my husband and I are poster children for reasonable cause, having lived in Canada since 12 and my husband only a US citizen through his father and neither of us having ever worked in the US.
As Just Me said, there should be a filter at the beginning of the extraction process that separates the minnows from the whales, not during in the form of opt-out. OVD programs are designed for whales and the IRS doesn’t provide enough options, information or incentives for the non-compliant taxpayer to make a decision based on anything other than fear.
@Howard, it is only my accountant’s opinion but she believes that in some cases amended returns for schedule B will be treated leniently in a similar way to expats who hadn’t realised they had to file.
I personally feel that a nonfiler would appear more innocent than someone who’d not reported passive income though. But hopefully the IRS understands that I believed it was sufficient to declare it on the British tax return.
I suspect that they consider us all negligent at the very least and dishonest at worst. But I also believe they have to prioritize who to target, which could largely explain their bullying tactics with minnows, so we’re blugeoned into compliance. Scare tactics can work wonders when you have limited resources.
But I wouldn’t put it past them to randomly audit expat minnows too to show they mean business…this is what I’d do in Shulmsn’s position;I’d focus on the rich, of course, but also remind people that the law applied to everyone by doing random audits to keep everyone on their toes.
Consequently, my amended returns were anally correct.
I would guess the IRS will have been rather annoyed with me but when they saw I had so many PFICs with only a couple hundred pounds in them, should realise I’d created my complicated situation unintentionally. After all, a tax evader would have been tidier and cleverer.
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@monalisa1776
Thanks for the clarification. I’ve been told similar things – hope they’re true! I’m waiting for some final statements from long-closed accounts before I can submit my amended returns, then at least that stage of stress will be over…. Godd luck to us both (and to everyone here)!
The bottom line is this, I am here at 3.45 AM. Can’t sleep. Waiting for my US CPA to do my return. She keeps postponing and don’t answer my e-mails.Do I need this?…
I heard today from someone else in OVDI that her lawyer told her the IRS is holding onto the Canadian OVDI files in Austin and are not being forwarded to field agents for assessment and talks are underway as to how to handle them. However, other non-Canadian files are being processed.
As much as I would like to see concessions made, I don’t know what grounds the US would have in treating Canadians differently. Could any of the experts out there think of any?
@bubblebustin…
I saw a similar Anon comment, or maybe the same one, on Jack Townsend’s blog, but was too much of heresy for me to give it credulance. If I hear Jack or a well know lawyer say it, then maybe I will believe something is afoot, but hard to give much hope to an Anon comment. Whatever the IRS does, I don’t see how they just carve out Canada, unless they think it will take the steam out of Isaac Brock Society, and that will end the pseudo protest. 🙂
“carve out” duh!
@justme, we all know what you meant 🙂
Is Brock even registering with the IRS?
Well, I have heard rumors, but who knows. They should be worried about all the Tax refund fraud, and not wasting their time worrying bout us.
Yes, they’re loosing a lot of money with the identity theft tax refunds fraud. Also, there are some articles saying they should pay a lot more attention to the illigal immigrants filing with an IRS tax number who claims multiple child tax credits.
@Howard, it’s been 11 months since my amended returns and delinquent FBARs were filed and so far, so good (apart from some minor ping pong over my 2010 payment).
But of course it’s still early days because the statutes of limitations could be six years in my case due to the degree of previously under-reported passive income along with the FBARs. And as they probably won’t submit my 2011 tax return till the late autumn (due to extension because my main accountant is not well), my SOLs for 2011 won’t even start running for another six months. It will thus be July 2016 at the earliest that I can feel safe.
@Markinpinetree, I sympathize with how frustrated and stressed out you’re feeling…I still have no idea when they’re going to complete my 2011 return, nor do I have any idea how much they’re going to charge me. It could be anywhere between $2,500 and even $10,000 because they know they have me over a barrel. I’m guessing it will be approximately halfway between the two ranges though slightly towards the upper half…Just can’t wait to get this regrettable predicament behind me.
@Monalisa1776, is this possible for an expat to use programs like Turbotax to file their US taxes? Or the program is just not suited for expats because it does not ask all the information needed and file additional forms needed? I was just wondering….
@Christopher, as far as I’m aware, expats could use their most premier version but don’t think it can cope with complicated PFIC taxation calculations or foreign grantor trust forms such as 3520. I plan to stick with my accountant at least till my examination window is closed, which would be 2016 for the 2015 tax year at the earliest.
I would guess that they would only offer to represent a current rather than former client. I thus believe they will use my vulnerability to charge a premium for their services but believe I’ll subsequently be in a much stronger position to barter or find a less expensive accountant afterwards.
My situation will be simpler going forward because I will have gotten out of mutual funds and my personal pension consolidated into my employer’s scheme which looks more acceptable to the IRS.
I’m guessing accounting fees of $5000-7500 for 2011; $3000-4000 till the SOLs have run, then $1500-3000 after that unless I wanted to by then start filing via turbo tax, myself. Part of the cost will be because of 8938 and relying on 1116 rather than 2555.
I’m not happy about any of this ‘tax on tax’ but feel increasingly resigned to having to budget for it, thus no early retirement for me.
No two ways about this. Americans Abroad from now on need to have a US CPA EA and most likely an US Tax Lawyer. I guess that after a few years it will be easier and repetitious. Let me venture to say (hope) that the IRS is going to be fair with us if they see that we are not trying to hide anything. I can’t believe otherwise.
About my comment ‘I heard today from someone else in OVDI that her lawyer told her the IRS is holding onto the Canadian OVDI files in Austin and are not being forwarded to field agents for assessment and talks are underway as to how to handle them. However, other non-Canadian files are being processed.’
I posed the same question to my lawyer and was told today that he has heard the same rumour, not directly, and he’s guessing ‘it’s true’.
Looks like they’re looking at how to handle RRSPs. Thanks Phil Hodgen!
@Thatisme, actually I don’t believe most will need a tax lawyer unless they’re in a fairly murky situation. Agree that most will need an enrolled agent CPA and perhaps a US qualified financial planner to help them file and report everything correctly as well as move out of non-compliant investments and into more user-friendly types of holdings.
This is what’s costing me so much but am assuming that even from next year that my accounting bill will be much less and especially once I’m safely thru the statutes of limitations. Will hopefully be able to by then rely on turbotax while perhaps paying my accountant to check it over…thus a more affordable compromise.
Welll, as things sink in…this is what I see. The IRS has created at least two new profession (or especialization). Americans Abroad Tax Lawyers and CPAs EAs. At least at this time we will need them. Eventually FACTA will setlle in and we will have to deal with it. Better not wait for it. Most likely – if there are enough interest – TurboTax and others will cater to us with programs that will work for us. And I can’t believe that the IRS will not use good judgement before messing people’s lives. It may seem strange, but I do trust them. I would be more careful with the lawyers because their earn a living – justly and honestly – from litigation…
@Thatisme…
Well, my friend, I would just say to you, read my story, and then come back and talk to me about trust! 🙂
“If the people cannot trust their government to do the job for which it exists – to protect them and to promote their common welfare – all else is lost.” (Barack Obama).
That about sums it up, doesn’t it?
@Just Me Yes… Let me admit that probably there is a wishful thinking on my part. Helps me to sleep.
@Thatisme… I understand the need for sleep aids! 🙂 Just don’t let them delude into complacency!