By Amy Feldman
NEW YORK | Mon Jan 28, 2013 3:25pm EST
(Reuters) – When Andrew Winfield applied to become a U.S. citizen in 2011, he realized he owed taxes on accounts he had left behind in his native England.
So he paid what he believed he owed — $2,800 in back taxes, plus the estimated interest and penalties – and entered the U.S. Internal Revenue Service’s overseas disclosure program.
But when the IRS assessed its penalty in November, Winfield was stunned to learn that it would be $28,000 — 10 times the amount of tax he owed from 2003 to 2010.
“My first reaction was: ‘There’s no way in hell I’m going to pay that,'” the 39-year-old Wake Forest, North Carolina, resident says. “It’s kind of crazy when you look at the numbers and compare the penalty to the $2,800 (in back taxes) due.”
The IRS has been aggressively seeking out taxpayers with offshore assets, asking them to come in on their own to avoid further prosecution and requiring foreign financial institutions to send information about American accounts.
But the voluntary disclosure programs have lumped together overseas Americans and immigrants with relatively small accounts and those trying to evade taxes by putting their money offshore….
my comment did not make it through. I only see one comment about the taxpayer advocate service. Amazing what a lockdown FATCA has.
So I take it this British guy had a green card before becoming a US citzen, and thus was subject to FBAR. Still, this is rediculous, the money was clearly not earned in the us. The falling of the pound also results in confiscation, this is unfair.
@Deckard1138 @bubblebustin You mention Mopsick’s comments in the article about the British guy. By the way, I just got notice that Mopsick has another article out on his blog:
“Living With FATCA Uncertainty: What Should A Foreign Financial Institution Do
Until A Bilateral Agreement Is Signed?”
http://mopsicktaxlaw.blogspot.ch/2013/01/living-with-fatca-uncertainty-what.html
Nobody has commented yet at Mopsick’s blog to this new article. What do you say we pay him a visit?
@bubblebustin
See, even 30-year uses the LOTR metaphor:
“But the reality is, for most countries, this is unlikely to happen in time for the FATCA effective dates. Once they kick in, the IRS will have no choice but follow the law and start demanding a 30% haircut from all US source income flowing out of the United States, until each country signs up. Until they do, both the impending FATCA effective dates and the inaction or delays of foreign governments are in effect, leaving foreign financial institutions no choice but to enter the Portal to Mordor.”
Just posted this to 30-year’s blog:
This disaster will simply collapse under its own weight. It can be neither administered nor enforced. It is the worst piece of legislation to come out of Congress in the last century and everyone knows it.
Thanks Deckard, I just did too. I also put a comment on Maple about the new Mopsick article as well as the UK guy whom FATBARDT is trying to shagg for 1000% percent penalty.
This is a great article to show the people who don’t worry about the law–it’s no big deal, just Another law to ignore, or whatever passive reaction you can imagine is going on for 7 million people
@Mark Twain. But the rest of the 7 million people could probably make a difference if they all woke up and pushed back at once. Right now, minnows are just getting caught up because IRS still has enough time and a microscope to cut them up. If we all could gang up on them, things might be different.
http://www.weeklystandard.com/blogs/obama-fly-over-9-hours-just-speech-immigration_698171.html
This is a good investment. Infinite Return on Investment.
“Jefferson Thomas. I have talked & chatted to a hundred people about this. Zero have risen from their chair. Repubs Abroad. Dems Abroad. Friends.
Most of them are busy posting pro-Obama information on their facebook sites.
*Looks like Mopsick is still cleaning up with his “Good Shepherd” schtick.
He terrifies the lambs with stories of the Big Bad Wolf and then offers to lead them to a place of safety.
Yea, verily, his rod and staff comfort them beside the still waters as they wait their turn for the protection of the shearing shed.
@Octavist If Scott Adams won’t help us, how about a Shaun the Sheep satire of the situation?
*………..If we all could gang up on them, things might be different…………… I am with you but how ? The Mopsicks of the world have made enough $ over the last 4 years it is time to take control 🙂
@Octavist
That would be the 30% shearing shed? Those are the lucky ones who avoided the 300% abattoir.
@Mark Twain, they censured my comment too. Yet nothing was obscene about it. I basically mentionned the tax payer advocate report to Congress, IBS and Jack Townsend’s blog as good resources.
*So much for free press
*Free press? America is a censur-happy nation and I’ve gotten used to my views being censured. Huffington Post is by far the worst, in my experience. Over the past decade, many Americans censured my opinions simply because I believe and argue that it is wrong to hate Semites regardless of language, religion, culture or nationality. On this issue, it appears to not be much different and some of America’s hunger for censurship appears to have even infilterated IBS. 🙁
Mine is the only comment that made it through (Imabroad) so far. One comment? Bizarre.
This is a second interesting article on “offshore accounts” by Amy Feldman. You may recall that she did a story a year ago on this topic:
http://www.reuters.com/article/2011/11/09/us-offshoreaccounts-irs-idUSTRE7A85AT20111109
Although the facts in the article are sparse, it looks to me as though Mr. Winfield entered OVDI on his own without understanding the program. Of course, it may be better for him that he did enter on his own rather than paying a lawyer to guide him to the same result. One more example of the unbelievable damage OVDI is inflicting on a man – who clearly wanted to be “FBAR Compliant”. I would guess that the IRS just applied the 25% penalty to accounts with a maximum balance from 2003 – 2010 of 112,000.
Obviously he should consider both contacting TAS (is the first time penalty abatement available on a Title 31 FBAR issue?) and/or doing an “opt out” (reasonable cause).
Based on the facts here (although there are not a lot) he should be able to argue “reasonable cause” on an opt out. Where he needs to be careful – and where he may benefit from professional advice – would be on the “reasonable cause” letter.
This is another incredible story of how the U.S. tax and compliance culture is destroying peoples lives. Unfair or what!
Moral of the story: do NOT enter OVDP without a very compelling reason!
It’s also interesting that the article suggests that his motivation for entering OVDI was because he was applying for U.S. citizenship. It would be interesting to know what he was thinking (rightly or wrongly). To what degree is “FBAR Compliance” related to becoming a U.S. citizen? On this topic, here is a comment that was posted on another blog yesterday (perhaps motivated by this story??).
http://renounceuscitizenship.wordpress.com/2011/11/16/ovdi-collateral-damage-u-s-immigrants/#comment-3233
“What is also unclear is the impact of OVDI on (potential) future citizenship/green card applications for those that have been through the OVDI process. Does this count as a ‘crime’ that was committed but not detected? The legal definitions in this area are ambiguous and not being able to apply for citizenship (or chance of denial) is a tough penalty for not knowing to file FBARs.
Has anyone been in this position (applying for citizenship post OVDI) and can you talk about it? or does anyone have any information about this?”
Yes, if anybody has any experience with this, your thoughts would be helpful.
We do know that a conviction for tax issues can result in deportation (see this article from B. Mahany):
http://www.mahanyertl.com/mahanyertl/file-a-false-tax-return-add-deportation-to-your-list-of-worries/1470/
Interesting question – the relationship between citizenship applications and FBAR compliance.
Pingback: More on #immigrants and adventures in #FBAR « Freedom from the tyranny of U.S. citizenship-based taxation for U.S. and dual citizens outside the U.S.
@USCitizenAbroad, I found this article that talks about the issue you mentioned, titled “FBAR for the Immigration Bar“.
Yes, the issue is tricky, and worries me a lot.
For green card applicants, the article says:
“When NIV clients apply for LPR status, they must be found eligible. The Application to Adjust Status to Permanent Resident on Form I-485 asks at Part 3 C1 if the applicant has “ever knowingly committed any crime of moral turpitude … for which you have not been arrested?” A willful failure to acknowledge at Schedule B of Form 1040 that the applicant has a foreign bank account and the willful failure to file an FBAR could be construed to constitute a crime of moral turpitude and, thus, could jeopardize the applicant’s eligibility for LPR status. Thus, before filing Form I-485, immigration practitioners should ask whether the applicant has had foreign bank or financial accounts since entering the United States. If the answer is in the affirmative, tax returns must be reviewed, and if necessary, amended to reflect the accounts. If the accounts exceed the FBAR threshold of $10,000, FBARs should be late filed.”
FBARs and the Naturalization Client
“Immigration practitioners should consider the relevance of FBARs to LPR clients applying for citizenship. While Form N-400 does not yet mention FBARs, it has two questions which should raise FBAR concerns:
Part 10A (General Questions) Question 4:
“Since becoming a lawful permanent resident have you ever failed to file a required federal, state or local tax return?”
Part 10D (Good Moral Character) Question 15: “Have you ever committed a crime or
offense for which you were not arrested?”
The FBAR is not a “tax return”; it is an information return or report. Unless and until Question 4 is revised, FBARs are not covered by Question 4. However, the willful failure to file an FBAR when required to do so could be considered “a crime or offense.” Thus, if the LPR client was required to file one or more FBARs and has not done so, the client should be referred to a tax attorney to evaluate how to file the FBARs and whether a
voluntary disclosure is necessary. Recently an immigration practitioner reported that
a New Jersey client had been denied naturalization because while the client had timely filed tax returns and had entered into a payment plan with IRS, he had failed to make the agreed-upon monthly payments to IRS. While the question raised by the naturalization
examiner was not related to FBARs, it shows that examiners are increasingly aware of tax issues and they may inquire further into a person’s IRS records.
Potentially, failure to file an FBAR, like failure to honor an IRS payment plan, may affect one’s ability to establish good moral character for naturalization purposes.”
@Christophe, If the US government calls not writing numbers on a piece of paper a “crime of moral turpitude”, it has lost all of its standards of morality.
@Christophe
I will read the article later – thanks for finding it.
What strikes me though is that the focus is on the commission of crimes. It is only the “willfulness” that would make this stuff a crime. So, I suspect that the concern is overblown.
The problem with lawyers is that they manage to create trouble where they might be no trouble at all.
It will be interesting to see what I think after having read the article.
Question: Do you really think that a lawyer should have to be part of your life if you want to live in the US?
@Christophe
All new terrain since the recent stepped up enforcement of FBAR reporting. What you suggest would certainly create increased awareness, making a lot fewer people left ignorant of what it entails being a permanent resident or citizen of the USA, as far as tax and reporting obligations go. One more way of telling the world about the US’s best kept secret, citizenship based taxation. I don’t think that this is the type of immigration reform Obama wants to announce to the nation and to the world.