I am admittedly way behind in reading the many recent good posts and comments here at Isaac Brock. I also have had a couple subjects I have wanted to weigh in on, and create new posts, but for the past couple weeks my time has been seriously constrained. However, this morning a previous post by renounceuscitizenship caught my attention. It was entitled Steve Mopsick – On the “coming into compliance dilemma”. I have been thinking about it all day, and why it is that this QD dilemma is so difficult for so many benign Minnows with the conflicting advice being provided by practitioners.
I thought I would provide some thoughts I have had, especially as it relates to the comments that Michael J. Miller posted. Now I know, I am getting into dangerous territory when I am seen to be taking sides with one good attorney over another. I certainly have no legal expertise or special knowledge that qualifies me to make comments on matters such as this. So, I am sure what I have to say is probably misguided, or wrong in some manner or another, but it is how I see this problem. It is just my novice and naive opinion. Take it for what it is worth.
QD advantages for benign Minnows
If any of you have been reading Jack Townsend’s blog recently, and hopefully you have, Jack seems to be in Michael Miller’s camp about QDs and the risks vs benefits associated with going this route. In theory, if I understand Jack correctly, he says a QD audit examination for the Minnow with benign facts and with IRM discretion applied should not be materially different than an ‘Opt Out’ examination for the benign Minnow with the same discretion applied. In fact, because of this discretion, the penalties outside the OVDI for these benign offenders should be less then the “in lieu of” penalties inside it.
However, the QD does have one significant advantage over the OVDI, IRS advice/protestations aside. It does not require one to spend countless LCUs in an extremely inefficient 2 year process and pay thousands of dollars to a practitioner for advice and help just to get to an Opt Out point where normal IRM discretion should apply in the first place.
Practitioner responsibility.
It does seem to me, on a non legal common sense basis, that a practitioner has a first responsibility to their client and not the IRS! They should present all the various options available for compliance and the risks associated with each, depending on their client’s facts. This doesn’t necessarily mean that they have to covertly compel the client to choose the IRS favorite route over another to reach a compliance objective. I don’t see it as an attorney’s obligation to tell the client they have to join the OVDI, as the only approved route for offshore compliance.
The fact that you have to examine the various options speaks VOLUMES to the stupidity of the OVDI design. The choice for compliance should be a simple straight forward one, not the convoluted, anxiety ridden, perverse and expensive process that it is now. It should be just as easy to become offshore compliant, as it for you to become tax compliant before you become Treasury Secretary!
Taking a side
I thought Michael Miller’s comments about the QD were right on point as related to the article Steven Mopsick cited. With all due respect to Steve, that article looked to me as if it was dictated and written by an IRS ghost writer by the name of Randall P. Andreozzi. I wonder if the IRS commissioned him to write it, or is he a past IRS attorney writing from a perspective that he has a predisposed inclination to support? To me “the tell” were these sentences that indicated this was not just an ordinary unbiased scholarly writer, who was pointing out the OVDI conundrums.
“People will not respond to such a program unless they are sufficiently frightened by or concerned about the consequences of remaining in the weeds. As a result, the government must generate interest in voluntary foreign account disclosure through well-publicized prosecutions and penalties to establish to the public that the risk is clear and it is present.”
That told me all I need to know about the author and where his sympathies and bias lay! I can understand why Steven, 30 years working for the IRS might have similar opinions, and I don’t hold that against him. If I had been there that long, I might self identify with that perspective. Frankly there was some aspects of the alternate way Steven has suggested to Expats about a possible different approach to compliance that I think it merits consideration. In some ways it is a QD with a microphone! Kinda a halfway house to Voluntary Disclosure. Will it work? Don’t know, and haven’t yet formed an opinion, but it has me mulling it over.
Mission Impossible
When I consider these past 3 years of IRS offshore jihad, for the life of me, I do not understand why the IRS continues to assert / imply with their FAQs, that all those who are FBAR and offshore income non compliant must just join the OVDI. Surely, in the bowels of the beast, the IRS must have one non intellectually challenged analyst who has done projections of the 25-40 million “non compliant” offenders around the world. They must realistically know they would be totally incapable of handling the all these applicants should they decide to follow the OVDI procedures the IRS has created. They could not do it. It is impossible! They do not have the budget resources for the 10s of thousands of examiners necessary to handle the additional workload that their insanely complicated, inefficient and tediously redundant program requires.
Additionally they know, that millions of benignly non compliant Minnows would actually get a better deal outside the program, in an Opt Out, using normal IRM discretion should they be audited. However, since they can not possibly process them all inside the OVDI to the Opt Out point, for the above stated reasons, they are totally disingenuous in their assertions that such Minnows should not do a QD as a route to compliance. Hell, they should be begging them all to do QDs, so they can just pick and choose who they want to audit as a much better way to screen for the egregious failures, while allowing the Minnows reasonable cause escape from the draconian penalties. Let’s face it, just amending and filing back returns and FBARs plus paying some taxes and interest penalties with the associated LCU cost and professional fees is penalty enough for the new found need to be compliant! Why does the IRS want to pile on?
It’s the Penalty Money!
I have come to the conclusion that someone has callously came up with projection of how many they can actually force into the OVDI through their threats of more serious penalties outside the program, and can therefore take them for more penalty money then would otherwise be possible given the IRS resource constrictions and IRM penalty reducing discretion in normal audit processes.
This is not about improved compliance, Commission Shulman’s assertions not withstanding. This is about the best (worst actually) way to produce maximum penalty revenue, pure and simple.
Looking Back
What is obvious to me now, is that going back to when the 2009 OVDP was designed, it was intended for the egregious homeland Whale. It was conceived as “easy money” that could be generated off the UBS client lists about to be exposed, without having to go through lengthy DOJ criminal prosecutions. It then evolved over time to create technical adjustments with lesser penalties for more benign non compliance, as they realized their nets were filling up with Minnows for which the program was never intended. They started to lower the penalty levels and threshold amounts for certain financial conditions, going all the way down to the most “innocent of innocent”, the non resident accidental American who didn’t even know they were American!
Under the program, should this poor non resident fool join the OVDI, they would “only” have to pay a 5% penalty of their entire “offshore” assets for the privilege of now being compliant to an obligation they did not know, could not have known, was required! Say what? Read that again.
FAQ 52.2 states: Taxpayers who are foreign residents and who were unaware they were U.S. citizens,…. is entitled to the reduced 5% offshore penalty.
Why would the IRS insist that a person like this have to join the OVDI process in the first place, and then grant them an “entitlement” of a reduced 5% penalty for a condition by their own definitions has a “reasonable cause” exception to any penalties outside the OVDI program using IRM discretion? For this they are supposed to be thankful and forever grateful for the benevolence of the IRS and the leniency of the 5% OVDI penalty entitlement? Geez, lucky them!
What Should the Penalty Be?
So let me see if I get this right. The IRS uses hyperbolic threats with DOJ press releases of criminal prosecutions, and produces examples of severe penalties in their FAQs, to frighten even these most innocent non resident accidental American Minnow into joining the OVDI, so they can extract a 5% tribute for the new found knowledge of U.S. Citizenship and its bizarre taxation and reporting requirements? That sure is a new definition of an “entitlement” in the perverse world of IRS logic. 5% is 5 basis points too high! They should pay nothing, nada, zilch, zero! Instead, the IRS says, “5% please, thank you very much!” It is stunning when you think about it, and let it fully sink in what they are doing!! I hadn’t really focused on it until Moby pointed it out to me. He is right! It is beyond stunning, it is bizarre! It is the “smoking gun” that apparently shows their OVDP program has now morphed beyond good intentions to ferret out homeland Whales to premeditated and deliberate actions to fleece the most innocent of Expats abroad. I just don’t know how any attorney can defend these actions, and with a straight face blindly follow IRS OVDI guidelines and not advise clients about other compliance routes with this glaring example staring us in the face.
In the case of these non resident accidental Americans who didn’t know they were American, they would surely get a “go and sin no more letter” and no penalties at applied at all if they were audited under “reasonable cause” provisions of the IRM. Now, why would an attorney advise this type of client to enter the OVDI and pay 5%, when this is obviously not appropriate in the first place? If audited, after doing a QD, this Minnow should get the same IRM “reasonable cause” discretion as in an Opt Out or normal examination. In my non legal opinion, it would almost be criminal for an attorney not to provide consideration of the QD, as an alternate route to compliance.
To be truthful, I would wonder why this non resident accidental American would now want to complicate their life with this new compliance regime. The preferred IRS OVDI alternative is actually another form of an Exit tax piled on top of the accidental American who surely would want to renounce their citizenship, if they only they could jump through this newly discovered expensive hoop!
Dystopian Program
So it has come to this. The IRS has created an Orwellian monster in this OVDI program that penalizes the most innocent of innocent, threatens them if they don’t to do an OVDI, presents examples of terrible penalties that can apply outside program, knowing full well, that such a person would never be levied those penalties if they Opted Out, or if they were audited after doing a QD.
It is just morally bankrupt for the IRS to continue to imply that “all” must chose the OVDI route, or threaten attorneys with circular 230 sanctions for advising alternative compliance paths for benign Minnows. Frankly, the cost to the government to process all of them, and the cost in LCUs and practitioner fees to the Minnow just to get to a point as much as 2 years later where they can Opt Out to receive a lesser penalty under IRM discretion than applies inside the program and equal to a QD audit examination represents “Stupidity on Steroids” and is beyond belief.
Why didn’t they redesign the OVDI?
So why, one may ask, didn’t they pause and reconsider what they were doing, as the OVDP nets begin to fill up with Minnows? They should have said, “Whoa!, we need to redesign our OVDP to let these Minnows have a safe harbor escape at the front end, rather than continue a back end Opt Out process. We need to concentrate our limited resources on the Whales.”
However, they don’t think that way. Their mindset is different than yours and mine, and I would say they are not normal rationale operators. They are lost in a technical and legal maze of such complexity that they are trapped in their own Gordian Knot. So it is probably not so amazing that the IRS did just the opposite, by consciously eliminating the FAQ 35 discretionary relief half way through the OVDP. Instead, in its place, they have instituted at the lowest level a 5% penalty to be sure they extracted some pain from those that could not have known they were non compliant in the first place!
They obviously don’t get it, or worse, do get it, and don’t care. This is the equivalent of financial water boarding for Minnows.
This is just a callous attempt to raise revenue on the backs of the most innocent and vulnerable! They just want the money.
In the meantime, millons/billions of dollars are lost to fraudulent anonymous Corporate shell games, that they and Congress don’t have the time to bother with while they continue their offshore Minnow to fertilizer conversions.
Or, maybe, it is just a Big conspiracy with Senator Carl Levin, using little known FBAR penalties and the 2010 Hire Act FATCA provisions to provide full employment for life for their all their examiners! This was job creation after all. (I joke, I think?)
In conclusion, what this tells me, is that the IRS, once it is set upon a course of complete irrationality related to world wide citizenship tax compliance, is like a drone heading for a GPS waypoint. It is locked in, and incapable discerning there are innocent women and children inside that compound it is targeting. And just like the FAQ 35 withdrawl, they remove any discretionary control levers from the hands of the remote operator to assure that the mission remains on auto pilot and can not be recalled. It is frustrating to watch, even now that I am no longer being targeted myself.
@Broken Man: I just told Saddened off line that the crown and title for World Champion Worry Wart used to be held by my mother, but they have recently been been passed to Saddened.
I haven’t mentioned the selective service (draft) issue to Saddened about her son. Fortunately, he is over the age for registration (I think he’s 28 or 29), but this piece of news may make Saddened the Universe Queen of Worry Warts.
@Saddened: Stay cool. Don’t panic.
@all, How I can I ignore it now.. The accountant is almost finished with his returns, I still have to pay for his returns. He just got his SSN about a month ago just for filing. I was told by another Brocker that he did not need to get a Passport to renounce.
@petros, I missed your Jimmy Carter Redux where you lay it out quite clearly your thoughts on what a true amnesty should be.
@steven, the letter I wrote and included in our OVDI submission was for reasonable cause. It was my intention to make it clear that we entered OVDI as the most immediate way to become tax compliant, but also emphasized that we until then had been completely unaware of our obligation to file US tax returns. It seems the more you have to lose were the IRS to penalize in the fullest extent, the more you’re inclined to enter OVDI. There are other factors too, like just wanting to be, for want of a better word, “upstanding”. After Nina Olsen’s report to congress we realized that in our objective to become compliant we had been denied the IRM’s more discretionary approach and contacted TAS. Our agent told us that the IRS is in fact negotiating within the guidelines of the IRM within OVDI, which we were really surprised about because of what we thought was the IRS’s desire to keep the integrity of the OVD programs in tact. So it would seem that there is a filtering process going on within OVDI, maybe for the sake of expediency? I’m nervous, when lawyers who are experts on the subject are arguing about which course of action to take, what’s a minnow to do besides morph into an ostrich?
To my fellow Canadians (on paper or not):
Why not a toe in the water approach for non-filers? Start with 2011 and send in your Mr. FUBAR and Mrs. 1040 forms. Send no letter. Wait and see what Sir IRSS does. If he does nothing then continue on filing and try to rearrange your finances to at least reduce the amount of paperwork you have to do each year. You can also work toward your ultimate tax freedom by acquiring Canadian citizenship (if you don’t already have it) and the precious CLN.
If Sir IRSS sends you a letter saying where the heck did you come from and I demand to see previous returns from you then write him back and say, so sorry, you only became aware of Mr. and Mrs. recently and here “kind” Sir IRSS are more forms for 2008, 2009 and 2010. Now chances are 2011 and those three previous years will all come to naught for the purposes of tax collection because you will owe nothing or next to nothing to Sir IRSS. If Sir IRSS gets cranky and says bad tax slave I am going to collect penalties from you, big penalties, you can “respectively” write him back and say that the Canadian government does not take kindly to the USA extracting wealth from our country in this manner and it will have nothing to do with acting as a collection agency for Sir IRSS. You can add that you did your best for Mr. and Mrs. and that you really think that that should be the end of it. Just keep assuming Sir IRSS will be reasonable, even though you know he probably won’t be. Sir IRSS might insist that there is no excuse for ignorance, but ignorance is as ignorance does, and it’s absurd to say there is no excuse for something that just is.
And of course, this is where things can get messier because Sir IRSS may make threats of not allowing you entry into the USA to spend your tourist dollars or visit granny, taking you to court (not going to happen – court is across the border), snatching your first born child, holding your granny as hostage, perhaps a drone attack?, etc. But stand firm because all of this will take time and while letters are going back and forth between you and Sir IRSS you can be quietly acquiring Canadian citizenship (if needed) and then quietly renouncing your US citizenship. You will then be able to cross that border with a Canadian passport and a CLN in your hand and I really don’t think there is much they can do to you at that point. I think my approach would be to do my best with Mr. FUBAR and Mrs. 1040 and not hire experts to help because the experts are perhaps too efficient and the idea is to string things out until you have a CLN in your hand. If things still look dicey regarding that border crossing you can always do a legal name change I suppose. Snail mail can be a many splendid thing in this case and I’ve heard that Mr. IRSS is adverse to e-mail. Phones have those little thingies called talk to my voice mail and I can see you are someone I don’t really want to talk to by your caller ID.
Now if that American citizenship is just too precious to give up then by all means pay the penalties and tell yourself that it was worth it even at twice the cost. This is, of course, just my toonies worth and you know all the disclaimers which amount to you may have to take all this with a grain of salt. It’s just my opinion and I know I have a tendency to over simplify things. I couldn’t really follow the Steven-Michael discussion because it made my head hurt.
@blaze,
Unfortunately, there are probably many others in the running for that title – ‘Universe Queen of Worry Warts’ – a contest no-one knew we’d entered regarding our US status as a credible threat to wellbeing.
and @saddened;
You’ve got at least one serious rival!
I don’t want to win the silver cup – even a seasoned champion worrier (like me) could never have imagined up this state of affairs – it’s so fantastical in scale. On the other hand, it has displaced other worries – and moved them way down on my list.
: )
@Badger: I don’t know if it will help Saddened to know she has rivals–It may give her something else to worry about. Then again, anything we can do to get her mind off IRS is a good thing.
Tiger quietly and happily conceded her rights to the crown last night. Tiger can be Miss Congeniality instead.
@blaze, I’ve got an extensive list of alternate and credible threats to well-being if anyone needs a diversion from this one.
Congrats on your new title @tiger!
@Badger: No thanks, I have enough of my own.
@blaze and all. You know when 911 happened one of the first things I thought was how this event and the US’s reaction to it is going to overshadow everything else we as members of this planet should be concerning ourselves with, the environment, poverty and the multitude of plagues we face. This was a horrible atrocity against the US and I stand behind the US in preventing anything like this from happening again but I am tired of how it has become a premise for so many oppressive and aggressive policies against the other members of this planet, which in turn are not helpful in its efforts to deter acts of aggression from the outside. America, you aren’t the only people on Earth!
Some of you may find this funny:
Aliens out in space were looking down on Earth. One said, “It seems the dominant life forms have developed satellite-based weapons.”
The second asked, “Are they an emerging intelligence?”
“I don’t think so”, the first responded, “They have their weapons pointed at themselves!”
@Badger, I will gladly hand over the title to you,but then that would mean you are the Queen Worrier and I wouldn’t want you to be, because it is a horrible thing. I wish it would just go away.
@bubblebustin
Regarding your “a real amnesty would be to allow the IRS the discretion to reduce the penalty to “zero”.
I agree with Petros, they already have that discretion!! They had the discretion to create the OVDP and OVDI in the first place, and they have the discretion not to apply penalties. Congress, as far as I know, never says they “shall apply” this or that penalty in relation to taxes. They leave it in the world of “Mays”.
So, they had the discretion, and they just blotched the mission because short term penalty revenues trumped long term compliance goals.
Look at that $4.4 billion collected as Shulman reported in his Press Release(s), as their political “chest thumping” equivalent of AGIs London Financial Division’s big bonuses on the short term gains from selling Credit Default Swaps (CDS) that later blew up and Treasury bailed out. The brokers that sold them, kept their bonuses for their short term profits on sales, and the U.S. Treasury was left with the mess and the bill. The IRS keeps its “bragging points” and we are left with the damage.
The goal of IRS actions is supposed to be to increase compliance, but however, as we have seen, it seems to take second fiddle to short term penalty collection, as contrasted to a longer term mission of better compliance from a tax and enforcement system that is deemed fair and just.
The unintended and exactly opposite impact of the OVDI type programs is that it blows up on the IRS, just like CDS’s blew up on AIG. It creates a whole new community of tax resisters that weren’t there before. It creates extremely negative PR. It pushes folks to renounce their citizenship. It recreates even more stupid legislation, i.e., Ex-Patriot Act, and destroys the IRS reputation, respect and credibility. It does create more fear, but it is hard to see a positive in that! Although the IRS hubris mongers might love it.
However, in the meantime the OVDI designers got the political benefit (bonus equivalent) of the program. They received the accolades from those “inside the beltway” who believe the proclaimed success of this misguided program. They then moved on to Bigger and Better things, going out the revolving door, while someone else (like a Nina Olson) is left to try clean up the mess and repair the damage, or worse still just add to it (if we get a temporary commissioner like Steven T. Miller.)
The type of IRS action that we have seen the last 3 years is always a negative for what is supposed to be a voluntary compliance income tax program. They did not have to create an OVDP to give UBS cheats a chance to come clean and pay set penalties. They could have pursued DOJ prosecution actions using existing statutes without creating a “one size fits all” penalty regime which did not include discretion while threatening everyone else that they had to join. Normal and lawful QDs were highly discouraged! However, in their victory flush over UBS, they were not thinking rationally and long term. They wanted the money and the success now, during this administration!
They could have said, “OK, guys, we have cracked open the Swiss secrecy door, and if we get you, we will throw the book at you UBS types, but if you voluntary disclose, no penalties are going to be levied. Just pay up your taxes and your interest penalties, and bygones will be bygones.”? They have that discretion! Now, in my opinion, that would have really increased compliance.
However, this is truly just about the money with compliance just a passing thought, a throw away line on a press release. The OVDP was seen as an easy (albeit bureaucratic) way to extract penalties without spending lawyer and court time actually prosecuting the laws already on the books. They naively thought that providing so called certainty as to penalties (because we must punish, as it is our culture’s way of doing things) would improve compliance. However, in fact, due to the large number of minnows in the sea (which they did not consider) it may be driving more taxpayers underground or totally out of the system via renunciations. And, they have created a huge negative marketing campaign that will continue to have negative consequences for years and years to come!
I reckon it is about time for another Shulman proclamation, as his days in office are numbered. He will be trumpeting all his successes making the IRS the envy of the world. He will tell us he has collected $XX more Billions for the U.S. taxpayer from those offshore cheats, as he walks out the door to a lucrative practice advising victims of his wonderful programs. Mark my words! This offshore victory will dutifully be reported by our journalist scribes without one question! I could write the Reuter’s story now and just mail it in, and save them the time.
It would seem that Congress is America’s biggest impediment to good, sound legislation.
@ Just Me
I think you just rewrote Aesop’s Fable of the Sun and the Wind. Canada (other reasonable countries too) is the Sun 🙂 and the USA is the Wind :(. We know who wins this. We know it will take awhile to win though.
@Just Me: “I’m a believer in relentless and myopic focus on priorities.” (Douglas Shulman to National Press Club, April 5, 2012).
The problem is the priorities are all messed up and no one in Congress or IRS can see the big picture because of the “relentless myopic focus” which Shulman so proudly promotes to journalists.
@Blaze…. Yea, I have referenced that quote many times! LOL It is a beauty!
@Em…
I do get carried away! 🙂
@Saddened: Good for you for seizing the title, but being willing to hand it over to Badger when you finally stop worrying.
Look everyone, Saddened’s new gravatar is a crown. She really has earned it–but she has a lot of competition trying to unseat her from the throne of Universal Queen of Worry Warts.
@bubblebustin: “With Congress, every time they make a joke it’s a law, and every time they make a law it’s a joke.” (Will Rogers)
No one is laughing at their jokes.
@justme, please continue to get carried away-you manage to put into words what many of us are feeling. If it’s not appreciated (as I’m sure there’s few to speak of) they have the option of driving on!
@bubblebustin, sorry but did your agent tell you that it might be possible to obtain benefits within the OVDI program without opting out ? Did you have to talk to the TAS to get that concession ?
@amr our TAS agent said that they were negotiating within OVDI and that we may be able to get our cap gain tax penalty eliminated with the first time penalty abatement under the IRM, there was no discussion about benefits and we did not discuss opt-out. She said that she could not open proceedings yet as we have not gotten a response from OVDI (and still haven’t).
@blaze and @saddened123,
Relinquish all in-voluntary crowns together!
@Michael
Are you, Steven or any other practitioner of your acquaintance aware of any case now pending in any US court where the Justice Department is seeking to enforce a civil fine for a FBAR violation?
Are you aware of any such past case that has ever been tried to a verdict?
Were such a case to be filed would the DoJ be bound by a “quantum” previously proposed and challenged administratively or would the court be free to assess a civil fine in its own discretion.
Since both the constitutional validity of the law as well as the quantum of punishment will depend on the gravamen of the offense in relationship to the punishment sought would this not open the door to wide-ranging civil discovery requests directed against the plaintiff by the defendant concerning the past, present and future law enforcement and/or regulatory utility (or futility) of the FBAR itself?
Would such discovery possibilities not also be available to a defendant faced with a criminal FBAR charge?
If after nearly 8 years of the enhanced FBAR penalty regime and nearly 3 years of OVDI no such civil case has ever been filed, one is compelled to ask:
Why?
Why has no practitioner yet advised or encouraged their client to “call” the government by refusing to pay any FBAR fine or refuse to plea bargain (at least until after discovery is completed) thus daring Schulman & Co. to bring such a civil enforcement action?
Forget Steven Mopsick’s offer of pro bono assistance to anyone faced with a 300% FBAR penalty. I am ready to offer my assistance pro bono to anyone faced with a FBAR collection suit for ANY amount who is prepared to get it on with the DoJ.
It is time to bring this shameful FBAR farce to an end and either expose the naked venality and lawlessness of Shulman’s revenue enhancement through extortion policy for what it is or go down fighting.
Renounce?
I have not yet begun to fight.
@Todu, you’ve got yourself a deal. 🙂
Are you, Steven or any other practitioner of your acquaintance aware of any case now pending in any US court where the Justice Department is seeking to enforce a civil fine for a FBAR violation?
Yes. there is a case currently pending US vs Williams. The Justice Department actually lost the case in trial court and is now appealing. Williams was an acknowledged felon and tax evader.
Why has no practitioner yet advised or encouraged their client to “call” the government by refusing to pay any FBAR fine or refuse to plea bargain (at least until after discovery is completed) thus daring Schulman & Co. to bring such a civil enforcement action?
Most clients aren’t interested in long fights, and want to get on with their lives. A practitioner would likely not serve clients well by urging quixotic fights on weak grounds.
Personally, I think the constitutional arguments are generally quite weak EXCEPT an Eight Amendment argument if excessive fines are invoked. So far that may be why the government has not gone beyond 50% of max account balance.
Now, for the right client, I think a practitioner might suggest a fight. The government has generally picked its fights carefully, against people who are clearly willful tax evaders. For someone with reasonably good facts, I don’t think the government would bring a case, largely because their burden of proof is quite high.
A practitioner’s duty is to suggest the best possible solution given the facts of the situation (that is consistent with the law). In most cases, a quixotic fight will not be a solution, and I doubt the government will pick one either. HOWEVER, the best solution can be VD (for people with serious criminal risk), or QD or going forward comply. Practitioners can differ on which is best for which client, but I am astonished that Steven would not even consider QD for clients. Of course, if you make a noisy disclosure and the IRS does not hear it, does it become a QD 🙂 ?
@ plodder, The Constitutional arguments are weak. Why? Because the Constitution isn’t worth the paper its printed on any more. The courts have interpreted the laws without understanding the meaning of Constitution much to the detriment of the rights of the People. When that happens to the degree it is happening today, a new revolution is inevitable, because free people will not stand for their rights being systematically trampled upon. Or have Americans become passive slaves of the IRS? I guess so.
The reason they are weak, is because the US government doesn’t have to worry about people fighting them. Conrad Black tried it and was mostly successful even up to the level of the Supreme Court. Look where it got him: millions of dollars poorer and a few years in prison. The justice system in the United States is broken.
On historical grounds, the FBAR law, FATCA, 8938, extra-territorial taxation etc. violate the 4th, 5th, 6th (if ever goes to trial), 8th and 9th amendment rights. They also violate the Declaration of Universal Human Rights. The arguments for this, just getting started, are on the side bar. No one, absolutely no one, has said that these arguments are WRONG. Some have said, however, just say that there is no chance of winning in court unless you have millions to spare on a court challenge.
Consider that extra-territorial taxation without representation was at the heart of the abuses which caused the American colonies to revolt against the King, and then you get an idea of how angry the expat community is over these issues. We have no representation, and our wealth is being systematically attacked by the IRS. Many of us, including myself, have given up our birthright to live in the United States just to escape the clutches of the evil monster, the IRS (sorry Steven, the IRS is an evil monster keeping poor expats awake at night in fear and trepidation). This is Hope and Change, Obama’s America. But the Republicans offer us no hope either. Boehner’s support of the Ex Patriot Act is shameful. He is a disgrace.