Weigh in here. Does Obama deserve to be elected?
This is a moderated debate that is in the opening remarks phase. It will run to closure on June 20th, so there is time to weigh in on his actions which are impacting Americans Abroad so negatively.
Here is the comment I just quickly added. I tried real hard not to be too long! 🙂
@Steven: Lots of jobs for lawyers from FATCA, too. If FATCA proceeds and banks comply, we have grounds for a lawsuit under Canadian banking, privacy and human rights laws. If the government changes the law to allow banks to comply, we have grounds for a lawsut against the government under Canada Charter of Rights and Freedoms
Either way, lots of big bucks for accountants and lawyers with average middle class people footng the bill.
Way to go United States of Arrogance!
@30 year IRS vet
Good analysis from an entity operations POV. What’s missing is the reaction of customers, especially those who are citizens of Canada and who’s relationship to the US is limited to place of birth.
Many Canadians were born in different countries. US claims of persistent jus solie revenue obligations and the concept of “US person” have no standing in Canadian law. All Canadians are equal under law, regardless of their nationality
Canada is an advanced human rights state. A same-sex Canadian couple recently took to law before a human rights tribunal because they were insulted by a stand-up comic. What will happen when hundreds of thousands of Canadian citizens are threatened with invasion of privacy, account closure and withholding of funds, because of their nationality?
@ 30 Year IRS Vet
“I know that my comment here is going to absolutely infuriate many Brockers who read this but please don’t kill the messenger.”
No shots being fired from here. You’ve pretty much summed up what I’ve been thinking. I’m just grateful to have been given a heads up on the situation and now my husband and I are peddling as fast as possible away from our “US personhood” (my husband by birth, me by arrogant imposition). We will soon have no ties whatsoever to the USA and sadly not even a reason for my husband to visit again (his mother just passed away). I vowed years ago to never cross that border (family member lost in Afghanistan). We do not want to spend our remaining years trying to decipher the US tax code and worrying about draconian, mean-spirited penalties for an innocent paperwork error. That being said, I still think we have to keep on keeping on to make that FATCA train’s progress as painful as possible.
*@Em: you are absolutely correct. As I wrote earlier regarding a canned White House response to a Brocker which generated an interesting thread, a good idea might be to target attainable issues first rather than for example, lobby for a revision to world based taxation, or some larger goal. An attainable goal would be something simple: a no brainer like real amnesty for Americans born abroad with little or no economic connection to the USA or a simple IRS announcement which says if you are an American living in a foreign country and you have thought about the Internal Revenue Code about as often as you think about moving to a fishing village north of the Arctic Circle, then forget about FBARs, FATCA, OVDI, or flooding the over-worked, underappreciated employees of the IRS with a bunch of delinquent tax returns which show you don’t owe the IRS anything.
I have written an article about the first one–amnesty for foreign born Americans– which will be published in the July 9 edition of Tax Notes and Tax Notes Today. I cannot circulate it until it is published by TaxAnalysts but I will get permission to do so once it is.
The point is the Isaac Brock Society is not going to change the world but you have considerable clout and credibility if you choose your Queenston Heights carefully.
@30 Year IRS Vet
I think perhaps the “mistake” the US made with FATCA was trying to apply to it to “Basic” checking and savings accounts which pay next no interest anymore anywhere in the world. If they stuck strictly to “investment” accounts they may have made it go down easier. In that sense the US government like many large organizations bit off more than they could chew(the industry probably would have been able to deal with investment accounts only on a much easier basis.) I went back and read through all the Congressional hearings on the whole offshore “mess” and I saw no indication that it was at all the intention of anyone that what eventually became FATCA was intended to apply to foreign local resident basic banking.
@Everyone
In other news that human rights lawyer I recommended several of you contact over FATCA just won a pretty ground breaking case at the BC Supreme Court(I know Schubert, Sommerfugl actually did contact him).
http://www.theglobeandmail.com/news/british-columbia/bc-supreme-court-strikes-down-ban-on-physician-assisted-suicide/article4267631/
@30 years vet.
Could you also write an article about real amnesty for immigrants who left their account behind when moving to the US and never touched it except for moving money here 🙂
I also have a question regarding changes that could potentialy be made to the voluntary disclosure programs and issues like Canadian RRSPs which are often linked:
Can these potential changes or real amnesties be decided by the IRS, or do they need congressional bills to be approved?
Phil Hodgen hinted that the changes he proposed would have better chances to go through with some lobbying. (see his comment from May 10, 2012 at 8:09am here: http://hodgen.com/fatca-chases-money-away/ ). Why is that if the decision is the IRS’ only?
@Tim: I saw that article in Globe a little while ago. It was actually Tiger, Somerfugl and I who consulted Joe Arvay on your recommendation.
This is a HUGE decision on the right to die. We don’t know yet whether it will be appealed to the Supreme Court, but it is giant step in any case. It also shows what a strong constitutional lawyer Joe Arvay is.
Now that we have the possible interest of CCLA on the issue of FATCA, things are looking up. BC Civil Liberties Assocation was involved in this right to die case.
If Canadians have the right to die, surely we have the right to financial privacy while we live!
I plan to send a congratulations e-mail to Joe on Monday. I suspect he’s pretty busy today.
@JustMe
I think the two key countries on FATCA all along have been the UK and Canada. The UK has taken the position of essentially not wanting to cause too much trouble for the US and perhaps one might argue being fairly accepting of FATCA. On the other hand Canada has taken a much more hostile position both at a political and grassroots level.
I do think there has been a noticable shift in attitudes though in the Canadian financial sector which seems to be moving towards more public criticism of various extraterritorial laws such as FATCA coming out of Washington and Brussels. If you go to the Canadian Bankers Association website now its hard not notice the fairly nationalistic tone it now takes.
http://www.cba.ca/?lang=en
I don’t think what they are saying is directed at a domestic Canadian audience. It is basically a thinly veiled attack on both Washington and Brussels. The question in my mind is does Brussels or DC care(I don’t necessarily know the answer to that question). I also get the sense that at least some elements of the Canadian Banking industry are losing the desire to play in the NY London financial axis anymore(which is quite notable because they have wanted to play in that world for the better part of 30 years. To the existent they were largely unsucessful probably turned out to be positive for them during the financial crisis).
@Mr. Mopsick,
Thanks for your wise words. You are right that the majority of Americans abroad are off the radar and think this does not apply to them. I do think that they would care a whole lot more than the general homelander if we could get their attention. They could better understand the consequence of living outside the US borders, personalized to pertain to their families. If only this were a bigger story for all instead of abbreviated sound bytes we get in the media, it might then resonate with more Americans, homeland and abroad.
Perhaps the only way is educating through PSAs during sports broadcasts or reality shows.
@Cristophe: Yes! “Immigrants who left their accounts behind when moving to the US,” is another no brainer.
And how about the family who came from England who had their names put on their eighty year old parents’ accounts back home containing their life time savings? There is no tax avoidance here. Their folks have started having medical problems and need help, albeit from long distance, with other life altering decisions?
Then there is the young couple from India who came to the US with their computer degrees and excellent expertise, who have been contributing to the US economy with their good work, who had accounts in India before they came here? For many, these accounts occasionally had balances in excess of the $10,000 FBAR reporting threshold over the past eight years and earned a few hundred dollars in interest income which never got picked up on their dutifully filed 1040’s.
The IRS says there is no de minimus amount of unreported income for purposes of OVDI but should that young couple from India be advised to go through the torture of the “Program”? The IRS needs to publish a common sense announcement which starts off saying the purpose of the Bank Secrecy Act which required the Treasury Department to have an FBAR program was to intercept criminal movements of money offshore to better allow the IRS and other law enforcement agencies to do their jobs pursuing individuals who were willfully violating the law. They should also add that the purpose of the law WAS NOT to be a trap for the unwary, especially for someone who has come to this country under the law and stepped right up as a working, compliant, tax paying citizen.
Until the IRS makes that public announcement, I will continue to suggest to my English family and Indian couple that a reasonable approach might be to write a letter with the so-called “delinquent” FBARs and explain their recent immigration and family situation. No arguments, excuses, or lies. I still believe we can trust the integrity of the people at the working level of government who are following their manuals and acting in good faith.
I might be sticking my neck out a tiny bit, but I think it is safe to say as a 30 year IRS vet, that my English family and Indian couple with their names on their elderly parents’ bank accounts might consider filing amended tax returns. They would report the few thousand dollars of foreign bank interest income with a cover letter cross referencing the “oops” FBAR cover letter. That’s an example of a noisy disclosure. No one at an IRS service center is going to be stupid enough to insist that they be investigated by the Criminal Investigation Division.
It would be silly and grossly unfair if someone at an IRS Service Center wrote a letter back to the English family and the Indian couple and said. “You must go through the program!!” but so far that hasn’t happened.
@30 Year IRS Vet
Thank you for the good advice on attacking the problem via baby steps.
There is no hope that the USA will discontinue the practice of worldwide, citzenship-based taxation. Do you believe there is any chance that the rule might be attenuated? For example, a US Person who is a dual national, has been a bona fide and fully tax compliant resident of their country of dual nationality for X number of years (say five), would have no further obligation to file nor pay US income taxes (as long as the status of permanent resident in their country of dual nationality remains valid).
@30 Year IRS Vet: They should also add that the purpose of the law WAS NOT to be a trap for the unwary, …
Thank you for your balanced comments. I appreciate your view and please don’t take this as shooting the messenger.
Sadly I don’t share your optimism for a reasonable solution from the IRS or congress. Your view has been repeated over and over by multiple tax professionals ever since the first OVDP in 2009. And most recently raised by TAS itself. However, nothing has changed. Nothing. There remains a permanent gulf between what the IRS should do and what it does.
I believe the IRS is deliberately using the threat of FBAR — note, not the law itself, just the threat of it — as a short term, short sighted fix for congress’ budget problems, and congress is happy for them to do this. FBAR may not have been intended as a trap for the unwary, but it is one nevertheless. Congress has had decades to fix it if they had wanted to, but they have not.
The original goal of splitting the atom was to generate electricity, and look how that turned out once governments realized its other purposes.
@30 Year IRS Vet
I do appreciate that you are ….” sticking my neck out a tiny bit”
However, I take the view of the Watcher. I have a “Show me the money”, view of their intentions. I keep looking for the baby steps that they would need to take to show they are “acting in good faith.” That 5% OVDI penalty on accidental Americans is just the opposite of good intentions.
Individually, I agree that there are some who qualify for your characterization of ” integrity of the people”. That can not be doubted. I met some of them through my ordeal. However, collectively as an organization, and with a stonewalling Leadership like Shulman, I have lost all faith that they will ever do the “right thing”.
I really want you to prove me wrong. But let’s face it. They have had 3 years now to take corrective action, and the best they have done is some very technical adjustments to the OVDI, and an Opt Out at the back end of a very arduous and LCU sapping process. That is not “Change I can believe in. “
That said, I do somewhat like your “call their bluff” approach using a noisy disclosure, rather than an OVDI. Will not belabor the disagreements between this and the QD. What you are doing, essentially is playing more aggressive hand in this poker game. For the IRS now, it is “put up or shut up” with your FBAR penalty threats! You are essentially saying, “Show me your FBAR threat cards”, so to speak.
Worst that can happen is that your clients go into the standard audit examination, which with normal discretion should not have an outcome worse than an Opt Out, but without all the OVDI drudgery!
I will watch with interest how this works out. Also, look forward to seeing your article in the International Tax Notes.
@*oohlala: yes, I think it is possible for the IRS to extend a common sense approach to a whole variety of situations.
@watcher: well put. I think we are talking about perceptions here as we all try to figure out what the reality really is. My perception of Congress is there is no collective wisdom, no common goal, and no vision of anything. When you see CongressMEN (not the women in my experience) in action up close and personal, whst I see is a bunch of egotistical opportunists with one goal: to advance their own personal power, influence and wealth. In Washington there is absolutely no agreement, implicit or otherwise, between the IRS and Congress to do anything at all about the budget short fall.
@ Just Me: good points. You are absolutely correct. I am calling the IRS’s bluff. Show me your cards. Make MY day. Don’t you dare tell my English family or my Indian couple that they have to pay a 27.5% tribute OF THEIR PARENTS’s MONEY BACK HOME, to get into compliance based on statutes which were designed to make it easier for law enforcement agencies to lock up felons who are stealing from all us. And as @Watcher says, there may be a perceived threat that the IRS is getting ready to pounce on the unsuspecting, but I have not seen one single case where the agency has actually pursued an off the wall position on FBAR penalties which every one is so afraid of.
@30 Year IRS Vet,
Caveat; I’m not shooting the messenger!
But,
Re; common sense and the IRS. Then why not just exempt all who are banking in the same country where they hold their dual citizenship or permanent residence, live permanently, work and pay their taxes there in full? Obviously those accounts aren’t ‘hidden’ since they are registered with the Canadian government. Obviously there was no plan to ‘hide’ them since any interest is reported directly to the CRA, and subject to tax and legal oversight by layers of legislation where they are located. Obviously people need to save for retirement and disability – so why are RRSPs still subject to form nation annually in order to be exempted from US taxation – after years of discussion? We can’t/don’t bank in the US, because we don’t live there. That is common sense.
I used Canadian examples, but that pertains to all the other countries as well.
And, where is the common sense in making a deemed US person report FBARs for their kid’s soccer team if they’re a volunteer treasurer? Or their non-US employer’s monthly petty cash account if they can co-sign as part of their work duties? You know it is common sense that a non-US employer, or voluntary organization is going to tell that US person to go jump if they said the US needed their account numbers, balances, and transaction records.
I’ve not seen any discussion of that ‘common sense’ aspect of things in spite of the Small Business/Self Employed SubGroup Report that says that “The Filing Requirements for the Report of Foreign Bank and Financial Accounts (“FBAR”) are Confusing and Extremely Overbroad” http://www.irs.gov/taxpros/article/0,,id=250746,00.html Page Last Reviewed or Updated: December 07, 2011 which still does not go far enough in looking at the requirements from the point of view of an average, innocent, taxpayer (where they live and work) outside the US, but at least was something. Those recommendations have not been implemented. And they were proposed by objective professionals with no personal gain at stake.
@Badger: Harry Truman was known as a man of common sense. His mother said “Harry got his common sense on the farm. He didn’t get it in town.”
Maybe we need to send politicians and bureaucrats back to the farm, instead of looking for it in the well-educated, intelligent, moral and caring folks in Washington Steven likes to tell us about.
Then again, the Mike Harris years in Ontario were known as the “Common Sense Revolution” and that didn’t turn out too great.
@Badger: thank you for reminding me about the IRS Small Business task force which made a number of recommendations regarding FBAR penalty administration last December. I will republish it on my web site to help send the message that practitioners read these things and to let the IRS top brass know the whole world is watching. The final language of these reports is often hotly debated amongst the task force members and the final language is always very carefully selected. The second paragraph of the Executive Summary is worth re-reading and I reproduce it here:
Remember we are reading this on an IRS web site, not some public interest law firm with an agenda. Item (c) is interesting because of the use of the phrase “substantially reported” which appears no where in the instructions for “The Program.” Item (d) is surely a common sense idea and (e) certainly appears to suggest that someone at the IRS understands that retirement plans should not be viewed by a law enforcement agency in the same light as a secret Swiss bank account.
I think what the IRS is saying with the publication of this report is, “don’t read my lips; read between the lines.” And talking about common sense, I would humbly suggest that someone who is the treasurer of their kid’s soccer team who is worried about his inforation reporting filing obligations to a foreign country has too much time on his hands!
@ 30 Year IRS Vet;
Thanks for your comments, and for posting the Small Business task force recommendations where they will perhaps receive additional consideration. It will be interesting to see if they take any notice of, or act on those professional recommendations.
Practitioners have also flagged problems with the FBAR and FATCA forms and requirements in the recent GAO report about ‘duplicative reporting’, which noted their professional warnings about the significant opportunities for taxpayer confusion and inadvertent errors. However, contrary to common sense, the status quo prevails, leaving the average person who is trying to be compliant, facing unnecessary complexity once again – this time for even higher stakes in the jeopardy lottery. I would expect that given this complexity, there will be inadvertent practitioner errors as well.
There is no reason why sincerely trying to do one’s tax reporting duty should imperil the taxpayer, and expose them to significant jeopardy on an annual basis – and why reporting fairly ordinary income and savings (usually with zero US tax owed) should require extremely expensive specialist assistance. However, unless you’re actually inside the US, there are none of the volunteer assisted low income, or senior’s clinics available – and all of our required reporting ‘abroad’ is extensive, confusing, time-consuming, and labyrinthine.
Yet, there are low income, seniors, and people with print and other disabilities who live outside the US, but face even greater challenges because of the nature of reporting from ‘abroad’.
The introduction of form 8938 this year probably is a sign that the IRS is moving toward streamlining the process, and maybe move away from FBAR that needed to be sent to a different place. We can also note that the reporting threshold on that new form is higher than the one on the FBAR, addressing point d). My guess is that in future years, they might get rid of the FBAR altogether and only use that new form. For some reason, they might have wanted some overlapping between the 2 reporting processes for now.
But I agree with @30 years IRS vet that FACTA is likely not going to be repealed. It doesn’t make sense for the US to go away with citizenship based taxation at a time where the deficit is skyrocketing. The timing cannot be worse with the cost incurred with financial institutions, which are potentially facing with another crisis with the Euro. This may be why we might see a delay in its implementation.
@Christrophe,
I have seen similar speculation that the FBAR might go away now that they have the FATCA form, but realistically, I think that is just hopeful thinking. Have you ever heard of the government doing away with any requirement or form unless it is Glass-Steagall? Has any form ever been eliminated on the IRS list of forms? No votes in it, and if someone proposed it, it would leave them open to a lot of demagoging, so I am not holding my breath on this.
As for delay of FATCA implementation, I am willing to bet you that the IRS will not provide any additional significant relief. It is an election year. FATCA is seen as a promise kept, and we can’t delay the promise without a political attack. Nothing will be done that might be seen as benefiting the rich hiding funds offshore and giving them more time to escape the clutches of the IRS. If implementation is a mess, with lots of confusion and problems for the FFIs, so be it. They will not extend anything significantly over what they have already delayed, is my opinion, and BOY do I hope I am wrong!