This just out from Steven Mopsick after a few week’s radio silence:
http://mopsicktaxlaw.blogspot.ch/2013/01/living-with-fatca-uncertainty-what.html
There is some interesting material in his post. Calling all Brockers, please hammer the Mopsick site with comments and spread the link around as well as the link to this thread here at IBS. Some quotes:
I will be chairing an international conference in Miami this week on FATCA compliance….
With the publication of the Final FATCA Regulations last week, we learn
the next big FATCA timeline date is July 15, 2013—the date the IRS is
opening its aptly called FATCA Registration Portal—the door to the
Byzantine world of compliance with the myriad duties of an IRS
withholding agent…If every foreign financial institution abroad with American customers
were to sign up on July 15 for their fair share of FATCA abuse, the IRS
FATCA Portal computers would pop their fuses [emphasis JDT]. Even the IRS realizes it
would be a daunting challenge to manage an ongoing reporting
relationship with every bank in the world and that it would be a lot
easier if the IRS could collect the data it wants on Americans from one
source in each country as opposed to thousands of banks all over the
world.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…3. If there is uncertainty in a country about whether there is going to
be a bilateral deal, or whether the deal can be made on time, it would
not be hard to imagine that disgruntled shareholders of foreign
financial institutions might bring legal action against current bank
managers who sat on their hands while their government’s bilateral deal
fell through and the IRS started withholding. One could easily envision a
shareholder suit claiming damages in the amount of the 30% profits the
IRS was taking from funds foreign financial institution shareholders
thought was coming to them….
* @NOTTHATLISA …. I think it is fair to say that you are probably 1 year ahead of me in the queue and reading you correctly since I have sizeable amounts on FTC`s and sometimes even carryovers with regards to general limitation and passive income the OVDI should be avoided at all cost. The good thing is that I entered the normal 2011-13 VDP and was cleared for VD in general but thats about it .. I guess I am in limbo between VDP and OVDI . The question will come back if they close the door for the VDP on me and you read the worst case scenario of $100k or 50% of highest account value per year etc if you opt out of the OVDI . I think the important aspect here is your examiner who seems to treat you fair and is actually helpful but I have heard other stories as well. Regarding your FTA : Approximately 1.45 million taxpayers (2011)who qualified for relief from tax penalties totaling close to $181 million never heard from the Internal Revenue Service that they were entitled to it and never received it, according to a new government report
@MikeT – 1) The FTC from your passive basket is not allowed on the supposed “favorable” MTM calculation in OVDI. General limitation FTCs are allowed. 2) I also entered a VD program originally, but was rolled over into OVDI. It took me over two years to get to this point. 3) The penalty you will be charged depends on if the agent views you as non-willful or willful. There is an interesting comment on Jack Townsend’s site about thow these penalties are calculated. See the recent comment on Fear Reducing Tip 2 at http://federaltaxcrimes.blogspot.se/2012/04/opting-out-3-4412.html 4) I agree in that a lot depends on the experience of the agent. I cannot say I am having a good experience, but it is a very professional one. I do not feel we are opposing parties. The goal is to get the tax and the forms correct so I go away forever and lead a compliant life (or renounce), nothing more, nothing less. The potential penalties will depend on the strength of my facts. However, it is not over yet so let’s see if I continue to feel that I am being handled in a reasonable way.
My agent doesn’t really comment on the program, but did say that the Streamlined Program is getting a lot of applicants, especially from Canadians.
*@NOTTHATLISA ……… my passive basket is < 2% compared to general limitation !
good to know that I am at least 2 years behind you now in the queue… maybe I am already dead by the time I get a tax examiner assigned to my case, btw. they do not automatically roll you over in the OVDI anymore…….Yes, that is what I wrote before….willful/not willful,specific intend or intentionally avoid/deliberately evade…. what evidence of acts to conceal income and financial information combined with the failure to pursue knowledge etc….. I collected as much as I could find on the internet with people submitting arguments/facts regarding these issues.
—–sorry but the link comes up empty—-
Try this one: http://federaltaxcrimes.blogspot.se/2012/04/opting-out-3-4412.html
*@mike, not that Lisa, Bubble, USCitizen, et al.
As most of you now realize, you should never have entered any of these OVP or OVDI programs in the first place.
These programs are designed to benefit one class of persons and one class of persons only: persons who A) have knowingly evaded US taxes or criminally misrepresented their income and/or tax liability and B) could reasonably expect criminal prosecution should their misconduct be discovered before they enter the program.
Anyone in a position to even CONTEMPLATE drafting a “reasonable cause” letter is, by definition, not a candidate for OVP or OVDI.
The IRS provides a method and form (1040X) for correcting errors made on past forms. This method and these forms have always been available regardless of the source of the under or misreported income.
If you had simply filed amended returns and/or FBARs for the years in which you made errors and – if necessary – paid the additional taxes, regular tax penalties and interest you would not be exchanging stories in this forum.
How and by whom you were persuaded to get into the OVP/OVDI rather than simply file amended returns would make for interesting reading.
*@TodundSteuer………….. unfortunately the verdict is still out if these “soft disclosures“ or 1040X were the way to go. The IRS has made it clear that they will come after those taxpayer especially hard. We have to wait and see there are no statistics out yet.
@Tod
Unfortunately the OVDI made no effort to exclude minnows. Based on the information at my disposal, my instinct was to error on the side of caution at the time I made the decision to enter OVDI. Unfortunately, Nina Olson didn’t come out with this statement until after the deadline to enter OVDI passed. It is what has compelled us to contact TAS:
“Nina Olson, the National Taxpayer Advocate also wrote another point of contention in her report – the IRS Offshore Voluntary Disclosure Initiative (OVDI). The OVDI is meant to weed out those with taxable assets in offshore accounts and allow them to pay up their taxes with penalties but without criminal prosecution. But according to Olson, the OVDI punishes the guilty and the innocent. She wrote in her report that the OVDI’s one-size-fits-all approach does not differentiate between “bad actors” and “benign actors”. Olson said, “The program has caused excessive burden and fear for taxpayers who had reasonable cause for not filing FBAR (Foreign Bank and Financial Accounts) forms or whose failure to file was inadvertent.”
I take full responsibility for the actions I took and no individual ‘persuaded’ me to do anything. We discussed many options with those we chose to advise us, one of which included doing nothing at all. I’m a victim of the IRS, not of my own judgement, thanks.
@ Mike T., Bubblebustin Please read this post: Eighth Amendment: The IRS is bluffing, bad faith in OVDI
It is clear to me that the IRS is bluffing and that Tod und Steuer is absolutely correct in his comment. The IRS is bluffing. This is bad faith. That is why if you can write a reasonable cause letter, or you can opt out, you should do so. The IRS is very much aware that they would lose an Eighth Amendment challenge and that is why they will only apply the draconian penalties in the make-believe world of the OVDP.
@TodundSteuer – “Persuaded” is not the word. “Bamboozled” is a better description. Right now where I am with my opt out is the same place where I thought I would be when I made the mistake of contacting U.S. based tax professionals. Unfortunately, I became FBAR aware at a time where the IRS policy was to threaten tax professionals by intimating that they would not be complying with Circular 230 if their clients did go into the program. The first accountant I talked to was so terrified, he refused to speak to me. The only thing he asked me is if during the course of my life overseas, I had ever had a mutual fund. When I said, yes, the conversation went cold and he told me I needed legal counsel. The lawyer he referred me to did not want to hear my facts. All he kept saying was that the only way to explain and correct my error was to enter VD. He did say I could do a go forward strategy, but stressed that as I would not be correcting my situation, I would be running an audit risk (I was not worried about that) and that it would be difficult to find an accountant to help me do the go forward strategy if I did not correct the past. Everything he said was cast in a light to get me in the program. When I think of that conversation, I see him with $$ signs glowing in his eyes. The proof for me now comes out two years later and 10s of thousands of dollars out of my pocket later. Everything that I wanted to correct by just filing correctly at that time is exactly what is being corrected in my opt out. All I wanted originally was help in filing correctly. It became much more than that.
The whole process has been totally unnecessary. If I had made a QD, we would be looking at exactly the same audit I am having now. If the FBARs came into the picture, I would be giving exactly the same reasonable cause arguments as I am supplying now. I have lost a lot of time, money and LCUs to OVDI.
I fault the IRS for its poorly designed policy and I view my ex-lawyer as complicit. My current accountant says, “Well, they just wanted to cast a wide net and see what they got.” He’s probably right. That shows that the individual taxpayer was intended to be collateral damage. It also shows the stupidity of the IRS. How much thought and effort would it have taken to put out a notice with other instructions for Americans resident abroad? The IRS could have easily had the little bit of taxes I will owe. I doubt this amount will cover the costs of the hours the agent has spent managing my case. As for penalties, well, let’s see how I am handled.
@Not that Lisa!, and the Tax Advocate, Nina Olsen agrees with you, not with Obama, Schulman and Geithner.
*Just filing amended returns outside the program will eliminate the 20% accuracy related penalty under the qualified amended return (“QAR”) regulation. However, it will not eliminate the civil fraud penalty.
@Mike Yes, however, the IRS knows a minnow when they see one. I am wondering if as a result of all the pushback on the OVDI/P program by TAS, people like Just Me and Sally, as well as the ACA, it is easier for the IRS to state this now when it is clear they are dealing with a minnow.
In my very first conversation with my examiner, the examiner volunteered that the IRS viewed me as non-willful. The reasons given were the typical ones: no entities, no evidence of trying to hide anything, etc. I suspect there were a few other things in my facts that showed this, but I do not want to be specific at this point.
Similar to bubblebustin, I included a letter in my submission about my facts. I think it may have helped, although the examiner never mentioned the letter.
*for what its worth I hear that these reasonable cause letters end up most of the time in the trash until “high noon“ … that is why resubmit them with every correspondence…………..but be cautioned against the use of the deliberate ignorance instruction.
Ignorance of the law is a defense. Further, even if one knew the law, ignorance of the facts that would invoke the known legal consequences would not be willfulness as defined. (Supreme Court has said somewhat expansively (Bryan v. United States, 524 U.S. 184, 194 (1998))
willfulness in tax crimes required knowledge of the specific tax section violated……….United States v. Mousavi, 604 F.3d 1084, 1092 (9th Cir. 2010); United States v. Patridge, 507 F.3d 1092, 1094 (7th Cir. 2007), cert. den. 552 U.S. 1228 (2008)
willfulness requiring specific intent to violated a known legal duty.
I am not so sure I agree with you about the letters ending up in the trash. There is a lot more I can tell, but I am going to maintain radio silence at this point. The final result will be the important one and based on that, it will be easy to put everything into context.
@Todundsteur
The people who entered OVDI did so during the summer of 2011 when few Americans abroad:
1. Even knew they had to file U.S. tax returns
2. Knew nothing about information returns
and were hit with a media blitz from the IRS/Shulman saying:
You as a U.S. citizen abroad are tax cheats. We are going to come after you. We are going to ruin you. OVDI is your “last best chance to come clean” – you filthy citizen abroad.
As a result, many terrified (terrified only because they thought of themselves as law abiding citizens) contacted lawyers/accounts. Few of these lawyers/accountants knew anything about these programs. But as @NotthatLisa points out people were told that their only compliance option was OVDI. Very few lawyers had the courage/common sense to explain other options (if they even knew about them). It has become clear that the lawyers who specialize in “compliance issues” are a small group.
Some of these lawyers – are you ready for this – suggested that the FIRST thing to do was to get a “pre-clearance” from CI. Now, I emphasize that this was before taking one look at the person’s “facts” (as Lisa describes).
Take a look at the following post from Phil Hodgen suggesting what happened to people who got that “pre-clearance” and then failed to enter OVDI.
http://hodgen.com/yet-another-fbar-minnow-to-the-guillotine/
To quote in part:
“Rebecca Sparkman, CI director (operations policy and support), said that CI checks to ensure that taxpayers who undergo a pre-clearance check for acceptance into the voluntary disclosure programs follow through with disclosure. “Those [taxpayers] are suspect, and we are looking at those who decided not to continue to come through. Will it be Criminal Investigation? I don’t know; it could be a civil audit,” she said at the annual meeting of the California Tax Bar and California Tax Policy Conference in Coronado, Calif.”
A large number of U.S. citizens abroad who were “bamboozled” into OVDI owe their “financial ruin” NOT to the IRS but to the Lawyers who supposedly “counseled” them.
My personal view is that U.S. citizens abroad who want to come into compliance should stay away from any lawyer/accountant located in the U.S. Again, this is just my opinion, but it seems to me that:
1. Homelander lawyers don’t have a clue what it means to live abroad;
2. Very hard to get any independent legal advice from them.
How it God’s name (as you point out) could any of these people advise that the only way to tax compliance is through OVDP? Yet, today on January 30, 2013 there are still lawyers counseling this one size fits all approach for everyone.
*btw. I have been trying for weeks to get in contact with the NTA without any response because I agree and would like to stay away as far as possible from a tax lawyer
@Mike Tarantes
Have you been trying to call them, and from where? We were able to fax something through and got a call back from an agent who would be assigned to our case. The details are kind of fuzzy since that was over a year ago and my husband’s not around to get the paperwork on it. She told us she couldn’t do anything until be got a response to our submission, which has not been forthcoming as of yet…
* yes I called at the time from europe…559-4426444
@Mike
Try mailing a letter to:
Tax Advocate Services
290 Broadway, 14th Floor
New York, NY 10007
and leave your phone number. I believe that’s how we ended up getting a call from them.
@Mike – The TAS number for international taxpayers, i.e. taxpayers resident outside of the US is +1 787 522-8601. It is in Puerto Rico, but that is just a processing point. They could assign you to an advocate anywhere in the US. You might want to tell them if an advocate located in a specific time zone would be better for you to communicate with.
Your case is not accepted by the TAS until they assign you a case number. Within 10 days of being assigned a case number, your advocate will contact you. The case number is critical because once you get that, the TAS can access many resources and tools at their disposal to help you resolve your case. If your case is more urgent than 10 days, stress this and they will likely get back to you sooner.
The advocate you are assigned will be extremely diligent about Follow-up Dates and NCDs (Next Contact Dates). Unlike the regular IRS, they operate in the the 21st century. They are allowed to call outside of the continental US and they also communicate by email.
Reasons why they might accept your case (specifically OVD related) could be among the following:
Hope this helps.
@USCitizenAbroad – In my case, the attorney I spoke with told me, “There is no negotiation. I do not need to know your facts. They do not matter. There is no negotiation. The only way to correct and explain your situation is to enter a voluntary compliance program.”
Ultimately, my facts are what is making a difference.
@Mike Tarantes
I just got caught up on reading this thread. You have been getting some pretty darn good advice and very sorry to hear that you are caught up in this mess. If you can’t seem to make contact with the TAS, just try Nina Olson’s office in DC and quit mucking around.
Regarding what to expect from the audits outside the OVDP, Jack Townsend had a good report from a Webinar he attended. I trust you saw that…
http://federaltaxcrimes.blogspot.co.nz/2013/01/report-on-webinar-on-opting-out-and.html
* lets put it this way if you have time to do your research you will find >90% on the web 🙂 in the end it is just money – even if it means we lost all of our life savings and more
*Although not related to expat tax problems I have had excellent results in dealing witbh TAS with respect to tax audit priblems. I may have had to wait on hold for several minutes until my call was answered “by the fist available agent”, but it was answered and in both cases action was taken to rsolve my problems with the IRS swiftly and effectiverly. So don’t give up, Hang in there! I have nothing but kudos for Nina Olsen and the tight ship of which she serves as captain.
Roger
@Roger Conklin
I appreciate the NTA too, but she appears to be a toothless tiger when it comes to persuading Congress to even acknowledge her recommendations, at least when it comes to matters effecting non-resident USP’s. Have you heard anything to the contrary?
@Just me
Thanks for the link to federaltaxcrimes blog (there’s a problem with link-I had trim it to get it to work) Being in OVDI, it’s of great value to read what these experts have to say even though there haven’t been enough cases processed to confirm much of their speculation. After nearly 14 months, I had to wonder if our submission got lost. Not likely it seems. The experts are just as much in the dark as we are. My lawyer consults with Mark Matthews, and didn’t have anything new to offer a couple of weeks ago, not one of his OVDI participants has heard anything…The IRS has made a fine mess not having a way to divert minnows from OVDI, haven’t they?