The following article (pdf) appeared in the July 9 (2012) edition of Tax Notes. It is reproduced here with the express permission of the author.
The following article (pdf) appeared in the July 9 (2012) edition of Tax Notes. It is reproduced here with the express permission of the author.
@Steven
Wonderful article – well done, well reasoned, well presented.
Your article recognizes (what I believe to be) two important realities:
1. The existing OVDI is a ridiculous option for most people (if for no other reason than that they can’t afford the legal and accounting costs); and
2. It was never designed to fit the profile of U.S. citizens abroad.
I believe that the IRS has made a great mistake in allowing U.S. citizens abroad to suffer under the stress of this uncertainty. It will take at least a generation to repair the damage done. Most U.S. citizens abroad just want to be in compliance and just want clear instructions on how to do this.
That said,
Your article does a good job reminding people that the “in lieu of” penalty under OVDI is NOT restricted to Bank account balances.
I like your proposal. But, you are very clear that your proposal is to apply to U.S. citizens abroad who were born as dual nationals. In some cases (if not many) cases these people may not even know they are U.S. citizens.
But, I note that you make no mention of the U.S. citizens, who acquired U.S. citizenship by being born in the United States, left the United States at a young age and either:
– subsequently became dual citizens by being naturalized in a second country (for example Canada); or
– have never returned to the United States, have no economic connection to the United States, and have never had any economic connection to the United States.
This group is conspicuously absent from your proposal? Why? Is there really any reason to leave them out? It seems to me that one of the main driving factors is the fact of never had an economic connection to the United States.
Finally, what about the situation of Green Card holders. Many of them have been caught up in this. For them, the American dream has turned into the American nightmare. They clearly need relief. My God, all they have done is kept a bank account in the country of origin. Anybody would do that! They clearly need relief.
The IRS – per Commissioner Shulman – claims to want to get people into compliance or back into the system. Other countries do this by saying: hey, come back in. Pay your back taxes. But, not the IRS. It’s focus is on penalties. Because the IRS focus is on penalties, it is reasonable to believe that their objective is just to collect penalties. That’s what the system is about. If they wanted people back into the system that is what they would concentrate on.
In any case, thanks for a great article and your strong, articulate support of U.S. citizens abroad. If any article from the practitioner community has any liklihood of influencing IRS policy on this issue, yours would be the one!
Thanks again.
Great! It has been released… I will be posting another one of interest from Tax Notes, International too, later today These offshore issues are getting more attention in the professional tax information distribution. I hope we hear from Steven as to what kind of response he is getting to what he wrote.
Good work Mr. Mospick. You can tell that a lot of thought went into this article and I hope that it gets the acknowledgement from Washington that it deserves.
@Steven, thanks for this! I do hope it gets some attention from the right quarters. I have to say, though, as a Canadian who left the US at age 6, and have had nothing to do with the US since, other than an occasional vacation visit, I, personally, won’t be satisfied with anything less than an acknowledgement from the IRS/DOT that there is ZERO, $0.00, NADA, NO requirement for me to fill out any forms, submit any forms, provide any information or have anything to do with the IRS. I want them to go on ignoring my existence like they have for the last 46 years, so that I can go back to ignoring their existence and get on with my Canadian-only life.
@Steven – This is a great article. I am sure that many here, in addition to myself, are completely appreciative of how much time you have spent with us, listening to us and coming up with a way to understand us. Your support means a great deal.
I hope the message gets through. Thank you so much.
@Petros, thanks to you, for knowing about this, getting Steven’s permission and posting it for us.
@all: thanks for the kind words.
@renounceuscitizenship” wrote: “But, I note that you make no mention of the U.S. citizens, who acquired U.S. citizenship by being born in the United States, left the United States at a young age and either:- subsequently became dual citizens by being naturalized in a second country (for example Canada); or- have never returned to the United States, have no economic connection to the United States, and have never had any economic connection to the United States.”
You are absoutely correct. There was no reason to leave them out but what I wanted to do in this article was to present as much of a “no brainer” as possible. If we can get the IRS to exercise its statutory authority to fix this now without the need to wait for any additional legislation, the door will be open for application of the “no economic connection” idea to a multitude of other situations. If the IRS gives us this, there would be no rational basis for not extending it to a multitude of other fact patterns.
@Steven
Thanks for the follow up – yup, smart tactics!
“The Adams family lives in Vancouver, British Columbia, where Mr. Adams is the president of a small but successful manufacturing company. Mr. Adam’s great-grandfather, a U.S. citizen, settled in Canada in the latter part of the 19th century after moving there to take a job building the transcontinental railroad. Subsequent generations of the Adams family are all citizens of the United States, although they have no economic connection to it.”
THIS IS NOT ACCURATE. IF A PERSON HAS NOT SPENT FIVE OR SO ADULT YEARS OF HIS LIFE IN THE USA, CITIZENSHIP IS NOT TRANSFERRED TO THEIR FOREIGN BORN CHILDREN.
Proposed New Policy for Dual Nationals
Assume that instead of filing under the OVDI, the Adams family takes advantage of a temporary amnesty program announced by the IRS. Under the program, a taxpayer will receive complete amnesty from penalties if he:
1. is a dual national born in a foreign country;
2. has lived in that country most of his life; and
3. has had no significant economic connection
to the United States for the past five years.
WHAT ABOUT IF HE WAS BORN IN THE USA, WHY CAN’T THEY RENOUNCE AS WELL.
http://www.legalzoom.com/marriage-divorce-family-law/family-law-basics/is-your-child-us
*But this process only applies to children permanently residing in the U.S. If the child is under 18, was born outside the United States, but lives abroad in the physical and legal custody of a U.S. citizen parent or U.S. citizen grandparent, the parent or grandparent must apply for naturalization of the child. In addition, more criteria must be met.
The U.S. citizen parent or grandparent must have been physically present in the U.S. for five years before the child’s birth, at least two of which were after age fourteen. Further, the child must be temporarily present in the U.S. for the naturalization process and to recite the oath of allegiance. Of course, if the child is too young to understand the oath, this requirement may be waived.
I AM AFRAID THIS MAY RENDER THE WHOLE ARTICLE IRRELEVANT AS IT HAS A MAJOR ERROR IN FACT.
At this natu
*Steven, we seem to be always thanking you!.. While my personal situation isn’t one of the scenarios mentioned, (Been living in Canada for over 15 years and a citizen for over 8 years and simply didn’t know) your noble and just efforts to stand up and speak on behalf of these individuals who were living their entire lives almost exclusively as Canadians and are now caught in up in one of most vile witchhunts ever witnessed makes me proud of one particular 100% American tax lawyer living in California….or wherever it is that you’re holed up these days! Bravo, Steven!
Thank you Steven!
Once again, thanks for your valuable professional support, Mr. Mopsick.
This is super article, Steve! It points out so clearly not only the absurdity of the US’ bizarre, convoluted and mind-bogglingly unfair method of trying to get innocent people (many not or barely even US persons) into tax compliance, but also how counter-productive such an absurd method is for the IRS itself. Perhaps the latter, in particular, will catch the attention of the IRS!
As most of you probably already know, taxpayers who reside outside the US and have been fully compliant in their home countries, can have the 27.5% penalty reduced to 5%, provided that they didn’t have too much US-source income.
Based on a quick read, I didn’t see any discussion of the 5%. Did I miss it?
*Thank you very much Mr. Mospick. If we had representation I would encourage you to become one for all of us, and I am sure you would be elected. Since 2009 when I – by chance – learned about FBARS my life has become a nightmare. Not only for me but for my family and my work. When I first learned about it I thought, “well the USA has always been fair to me” and I will do what they want under this amnesty. In my mind all I had to do was to start sending the FBARS from that year on, and everything would be OK. What a mistake. Now, three years later I still don´t know what to do, and I remain scared and sleepless at night. Is this a way to live? At times I regret having become an American, feelings that I never, never had before!
@Steven, and @ACA members out there;
Am wondering what the progress is on the Freedom of Information request filed by the ACA on the actual composition of those in the OVDI/P programs – re proportion of minnows vs. Whales. And didn’t the Taxpayer Advocate also ask for that breakdown?
That would really bolster the serious consideration of your proposals Steven, and also the IRS final design of their forthcoming guidelines and problematic definition of ‘low compliance risk’ in the ‘alternate’ method of coming into compliance for those abroad – since, as always, the devil is in the details. Otherwise, it will only be the usual imaginary creatures and some few specific minnows who might qualify.
*Quicksand…this is where we all are, trying to survive.
*From 1958 to 1967 I had Green Card. I was well received in the USA. In 1967 I became a dual citizen. I have been a dual citizen now for 45 years, have lived and worked in the two countries. Never had one problem with the IRS. Always lived the US. Was grateful to have lived and worked there. I have family there. Now for the the last couple of years all of this changed. I will be 80 this year and, for the first time in my life I am changing my views of the USA. I believe now that people like me that dream about going to the USA must be warned – before they move – of what is waiting for them in terms of taxes.
@markpinetree;
I am very sorry, and angry that someone such as yourself, at 80 years old is being forced to carry the heavy burden and pain of grappling with all this. That is not how someone should be forced to spend their time in their retirement years. The US should be ashamed of how it is treating you (and all the rest of those affected).
Try to get some rest – (I know you have said that it is causing you sleepless nights).
take care.
*That you badger. I don´t want to play a victim but indeed I am in distress, perhaps even getting depressed. I am a psychiatrist and I love my profession. I still have a home office in my country of origin after returning to it in 2001. It is a small practice, semi retired.. I was living in peace with my wife and I had an USA CPA who was doing my IRS Returns. It all started when I went to visit my son and two daughters who live in the USA and by chance I learned about the FBARS. From that time on my life changed, I have no peace of mind. I have consulted US CPAs and Tax Lawyers (I can´t spend all this money) and I live in fear of losing the small life savings I have to survive after I no longer will be able to work. I really don´t mind FBARS and FATCA because as soon as I learned about them I have been sending the FBARS every year. And FATCA will confirm the information I am sending. What is keeping me awake at night (past night I woke at 4 AM and could not go back to sleep) is not knowing about the penalties I may incur for not having filing the FBARs when they started. I have avoided this because it will cost me a lot, but know I have a US CPA wno works with Expats and finally had to hire a US Tax Lawyer ($300.00 an hour). I don´t know what will happen to me. On the top of this, my health is failing (heart and kidneys) and I am worried what will happen to my wife in case I am not here. Sorry for bringing these personal matters but I just could not help.
@MarkPinetree: There is no need to apologize for sharing your story, your fears and your realities. We have all been there at some point in this debacle. Many still are–just like you.
I can’t believe what the United States of Arrogance is putting you and others through for simply being a good citizen. I’m certain you contributed significantly to the US personally, professionally, medically, socially and financially when you lived there. To now be stalked by the US government because you have chosen to semi-retire in your country of origin is criminal. How dare they call us cheats?!?
I’m glad you are getting legal advice. What has your accountant and lawyer said about the likelihood of penalties? I hope they have been able to reassure you. I especially hope you have not entered OVDI.
I hope you find support here at Brock, along with information. We’re all in this together, even though our circumstances are all so different.
@Mark, that’s one reason we’re all here, to provide emotional support as well as practical info to each other. I think of Brock as a place I can express my feelings, because I can’t in my real life because no one would understand because it’s such a strange unprecedented situation. I really hope that your US matters get straightened out and you get the peace of mind you really deserve, especially so because you chose to go there and as an adult actually have contributed to US society through your life and work.
*It is not my style to talk much about myself, but I am a Distinguished Life Fellow in the American Psychiatric Association, I have published papers, and I worked in the US in several capacities, including State Hospitals and Public Psychiatry. Through my country of origin professional organizations I have invited American Psychiatrists to come here to participate in Congresses and Conferences all at our expenses. I am still in touch with my colleagues in the USA. I have two married daughters and one son in the United States, and I try to visit them about once a year, spending in the US money earned here. I also have been able to help them in the USA with money earned here for college and other things. I never invested one cent of what I earned in the USA in Brazil. The money I earned there I invested there. I am not wealthy at all. My savings and investments are just not enough for me to stop working at this time but I am being forced not to do it because of fear. I can´t go through this every year.
The US keeps saying that people who renounce do so to avoid paying taxes. As a matter of fact a friend just told me that when applying to a visa from the USA there was a question if she renounced her citizenship before. Even though the US has advised me to renounce ( I have their letter to a Representative of the State where I last lived ) I am afraid that if I do so they may not allow me to go and see my children. This letter also shows that even themselves believe that in certain situations it is better for a Dual Citizen Abroad to renounce.
Yes, I am having legal and CPA advise.
Thank you all very much.
@Mark: Thank you for sharing that information about yourself. It confirmed what I thought–you contributed significantly to US when you lived there–and still do.
I understand your concerns about being able to visit your children in US. There does not seem to be any restriction presently, but who knows what will happen in future. I relinquished 40 years ago when I became a Canadian citizen. In four decades, I have had no problem crossing the border. I now fear US may at some point prevent me from visiting my 89 year old mother who is in failing health.
This is no different from what former Soviet block countries did. Why can’t US see what they are doing to their current and former citizens–and what they are doing to themselves in the process?!?
*@Markpinetree, Please try to be strong, I know it is hard. I am so sorry what is happening you to and to all of us. It is a real crime. Please hang in there we are all here to support you and anyone who needs it.