I just want to draw your attention to the recent decision in the Williams case which some of us have been following. Robert Wood, just posted this story late last night.
The Fourth Circuit Court of Appeals has handed the IRS a victory in its war on offshore accounts and income. In United States v. Williams, the appeals court reversed the district court’s holding that Mr. Williams didn’t act willfully when he failed to file FBARs.
Jack Townsend has also blogged about this. Fourth Circuit Reverses Williams on Willfulness (7/20/12)
Jack says, “The basis for the holding, I think, is the notion that the Court repeats that defendant’s signature on the return puts him at criminal as to anything that was not correctly reported on the return. The notion is that, even if he did not know about the incorrect reporting and the leads that he might have found to the FBAR, he is willfully blind — and thus willful — as to the failure to file the FBAR. I think that is a dangerous and wrong notion that is not facially limited to just FBAR situations and very bad facts. “
IRS Moving on “US Persons” in Toronto
@Just Me
The penalties are not worse. What is “worse” is the way that “willfulness” is determined. Frankly, I think this decision is so bad that it won’t mean much.
But, we will see. Remember that the facts are extremely bad here.
Ok, a better one!
IRS Moves on “US Persons” in Toronto
Heads up on this…
http://finance.yahoo.com/news/wealthy-stash-21-trillion-pirate-160830668.html
Apparently “offshore banks” now means “pirate banks”. Just loving this dialogue.
@Joe, that’s a really interesting video. The only problem is that the little guy with the mustache is not saying what the captions say he’s saying (I do understand sufficient German to catch that point). He’s really saying:
Dan,
That one is getting wide circulation on the internet. Google it and you will see it is getting endlessly repeated. I made this response on Linkin….
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Then there is the BIG FATCA push, damn the unintended consequences or collateral damage to the U.S. abroad community. Full speed ahead with the final regulations due out soon. There is the almost monthly drip drip drip of sensational stories about those who renounce their citizenship to supposedly evade taxes, or the monthly trumpeting of some DOJ prosecution success.
Now, I don’t know if this story fits into that larger narrative about why we must have a new International Tax order, or GATCA to stop all of this, but that certainly is the impression that is being created, and is that what we really want? REALLY? Are you sure?
As another commenter said,
So maybe some critical commentary will begin appearing in the press soon to analyse what this author is saying about the “hiding” of funds, and what his agenda is. The headline certainly is written to drive you to a conclusion that fits the OECD and the DC FATCA Fanatic narrative about offshore tax evasion.
Therefore, I would suggest that one should be a bit more skeptical, IMHO. I speak as one who is just an average guy with no funds hidden in any secret accounts, but I do have funds offshore America. NZ is offshore last time I looked. From American perspective, maybe NZ is a tax haven, if it has any tax table rate less than what the US has! So, am I swept up in this characterization? By the way the IRS has conducted its Voluntary Disclosure programs, yes I am!
@renounceuscitizenship
I understand the fine point. Was just repeating Robert Woods headline. He means the application of penalties could get worse. The “non willful” argument might be more difficult.
mvh
*Thanks, I’m going to do one more patch job on it…
I wonder good Mr Williams is at picking cucumbers?
http://www.guardian.co.uk/commentisfree/2012/jul/06/prison-labor-pads-corporate-profits-taxpayers-expense
*Final One!
IRS to move on US Persons.
@Joe Smith
Sorry! I liked the first version better….
http://www.justice.gov/usao/fls/PressReleases/120426-03.html
Read paragraph 10…
Does US government willfully mislead immigrants/visa workers in US on their filing obligation by narrowing down to “US citizen ….”
Luis A. Quintero is US citizen also US resident. Why DOJ narrowly states “US citizen …”
Why didn’t they use US taxpayers (including US citizens, immigrants etc) ?
As immigrants, we do see ourselves different from citizens, we can not vote, and we can not apply for federal job. So this kind narrowing down to “US citizen” in government press release has impacts on immigrants perceptions of their own obligations (often that should match to their rights)
@ij, yes it is inaccurate and misleading.
They must run a disclaimer somewhere.
@bubblebustin,
There are many of this kind misleading press releases. US government failed to welcome us with this FBAR requirement warning (which could have easily confiscate our life savings) , and plus this kind misleading information from top law enforce department DOJ, — and now with interpretation of Williams case — “willful avoidance”.
Calling it a conspiracy of robbing immigrants is not a over statement.
.
@ij, you’re right. And it is continued irresponsibility on the US government’s part – not to warn would-be immigrants about the effect on their pre-existing assets and accounts – that is criminal negligence. And, the use of the word ‘citizen’ leads readers to believe that only ‘citizens’ are being described -which we know is entirely false – since those deemed taxable is so much broader. If it isn’t merely incompetence in writing the notice, (strange coming from a department that deals with precision and legal terms) then it is a deliberate choice in order to obscure.
Just as the use of the terms ‘offshore’ and ‘foreign’ misled those abroad to think that the ‘foreign accounts’ didn’t have any possible or logical connection with our local everyday banking. Our local basic accounts abroad where we live, aren’t ‘foreign’, and I can’t bank in the US because I don’t live, work or earn there. That is such an insane and ridiculous concept – that any bank – even next door to the account holder, is ‘foreign’ just because the US says it is. No-one outside of the IRS could ever have imagined that banking outside the US when that’s where you live, could lead to such jeopardy and automatic and entirely unfounded presumption of criminality on the part of the US. No-one I describe it to can believe it – because it is entirely irrational.
When I hear politicians in the US brag that they have only ‘local’ bank accounts, meaning in the US – local to where they live, I ask, well then, why is my ordinary, legal, post-tax, registered ‘local’ account – held where I live – outside the US, under automatic suspicion and penalty, but their ‘local’ account is blessed and virtuous? What hypocrisy and convenient double standards.
@badger,
I fully understand the common sense of local and foreign from residency point of view.
An agent was telling me “ignorance of a law is not an excuse of violating it”. I don’t agree. Does anyone learn kidnapping is against law from US code ? I guess only criminal defense lawyers would know exactly from US code (for your reference it is under title 18, part I, chapter 55 section 1201)
We learned this from the media, and some of violation of laws, we learned when we were little as “right and wrong” such as hitting and stealing etc. So a lot of us learn from common sense.
Filing a FBAR is not something you can learn easily from the common we learn “right and wrong”.. To expect every taxpayer to know this kind law is just absurd.
@IJ: Are you sure you don’t want to return to Canada? We will welcome you back with a bit of common sense.
The Globe and Mail is reporting today It Is Possible To Fight The Taxman And Win. Of course, the Taxman in question is CRA–not IRS.
However, this case is interesting because it relates to a penalty for late filing form T1135 relating to ownership of foreign property over $100,000 in one year when income was low and taxes were nil. The assessed penalty was $2500.
However, The Tax Court of Canada (Did anyone else know there is such a court?!? I didn’t.) overturned that penalty and said:
Justice Woods also found:
At least there is still some common sense in Canada. It also renews my faith that Canadians will be protected under Canadian law by Canadian courts from any attempts of a foreign government to impose their tax laws here.
@Blaze, Thanks.. too late and too old. I am gong down with USA -:)
@ij, I get angry when people repeat rules incorrectly, like what your agent told you. The principle that “ignorance of the law is not an excuse” is not a law, it’s a judicial tradition from the Roman Empire, and it’s not universal or always applied. In two US Supreme Court cases, concerning taxes and licenses, the court ruled that ignorance of the law is a valid excuse. I wonder if the FBAR would fit the precedence.
I also don’t agree with this principle in general, you can’t expect people to know something if you haven’t told them. You’re right, we learn “right and wrong” growing up. Arbitrary “crimes” such as failure to report things or to obtain permissions have nothing to do with “right and wrong”.
Now, I don’t want to be annoying, but the FBAR is indeed mentioned in Schedule B. Even so, applying the penalties to the value of the account is totally disproportional, even the FATCA penalties are applied only to the unpaid tax, if any. If someone has rental income and doesn’t report it, the penalty is not on the value of the house, not even on the rental income, it’s on the tax that wasn’t paid. Same thing for interest from a bank account in the US if it’s not reported. Why is a foreign account any different? Is it implied that having a foreign account is somehow a bad thing? Why did Congress suddenly decide to increase the FBAR penalties in 2004? Why does the US treat anything from another country like it’s from another planet? Anyway, I think that the FBAR penalties are by far the largest problem among everything that we discuss in this blog.
@Shadow Raider
Given FBAR penalty can be so harsh, it should be highly-lighted on each of f1040 form and on each immigration application process. I have to admit that I hardly look at Schedule B, and I saw FBAR (TD form) after the fact I learned about OVDI. The question is why so many immigrants are so blinded ? I guess it is very common we don’t read much detail of our credit card agreement either –until we have disagreement with the credit card company.
As for why foreign bank accounts are treated so differently, I think it is because there is no reporting from bank to IRS — and it is very hard for IRS to discover on tax evasion — more true for US residents.
Also if OVDI is all about offshore tax evasion, then why not let penalty applies only on the total tax evaded instead of high balance — for immigrants that is taking away of their life saving.
@ij, I think you’re right, the penalties on foreign accounts are higher because the US has no information about them except from what the taxpayer voluntarily reports. However, if FATCA is really implemented, this reason is no longer true. I wonder if they created form 8938 to replace the FBAR after FATCA is fully implemented.
I think I’ll remove the FBAR completely in the bill that I’m writing, as form 8938 already has the same information without the draconian penalties. This way it would solve the problem for immigrants too. I think Congress already agrees that FATCA is much more powerful than relying on penalties to enforce disclosure by taxpayers.