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….
@bubblebustin..
Not sure why that additional got attached onto the link I pasted. For others, here is a clean one again…
http://federaltaxcrimes.blogspot.co.nz/2013/01/report-on-webinar-on-opting-out-and.html
*@NOTTHATLISA ….. one thing I still do not understand – you wrote that you initially submitted your documents under the streamlined VDP but were “rolled over“ into OVDI .
What do you mean by “rolled over“ ? I assume your tax lawyer did this for (bambuzzled) you and/or did you fill out the 4pages of “Attachment to OVD letter“ & 4 pages OVD supplement which the IRS asks you to do after the clearance letter ?
I submitted my missing tax returns with payments and FBAR forms under the IRS FS 2011-13 (VDP) with reasonable cause letter and after the clearance letter again another one refusing to enter OVDI since I qualify for the streamlined OVD. Fact is ,the IRS can not force me or “roll me over“ into OVDI against my will. Fact is also that officially IRS FS 2011-13 has not been closed or discontinued either. Key is that you get all your returns in order and are prepared for 8 years worth of audits and do not wait for the form 906
* @ just me …. If you don`t mind me quoting you : For the cheating “Whales” that have come into compliance it is a great and fair deal. However, it is a “Minnow” fertilizer factory for us. I think the IRS has gotten hung up on “uniform” penalties when they should have been focusing on an ‘appropriate and reasonable” penalties
who are for you those “cheating Whales“ ??
@MikeT You have misunderstood. It’s perfectly understandable with the confusing acronyms that exist VD/VDP/OVDP/OVDI. Its necessary to make a quick trip into OVD history to understand.
2.5 years ago, after the 2009 OVDP ended, there was nothing. No OVDI. No Streamlined Program. No FS-2011-13. The only voluntary disclosure program available for someone who had FBAR and possible income omissions was the longstanding CI-VDP – Criminal Investigation Voluntary Disclosure Program. This means that if you submitted a voluntary disclosure application during that period it pretty much went straight to a Criminal Investigation Agent – a guy with a gun and a badge. We answered two requests from this CI Agent which were similar to the kind of information asked for in OVDI. Then the IRS announced the OVDI program and publicly stated that they would be rolling over people who were in CI-VDP into OVDI. What that meant for me is that about six weeks after OVDI started, we received a communication that said I should submit all documents to the OVDI address and according to the OVDI procedures. Part of that communication was the usual long winded warning about cooperation being necessary.
So don’t get worked up. The voluntary disclosure environment in those days was very different from what it is now. While the program still is, as Nina Olson has stated, being profoundly run in the wrong way, there are more options now than there were 2.5 years ago. And yes, I have been stuck in this system for that long.
* it will be interesting to compare in a couple of years what was or would have been the best (individually different of course) decision to enter either VD/VDP/OVDP/OVDI during 2009 – 2012 or just file 1040X and FBAR`s
*@Mike, I understand that an under-reporting of just $5000 income will, under FATCA , extend the statute of limitation to six years instead of three for tax years still open as of March 2010!!
* I can only speak for myself but i.m.o the “system“ is broken if you need to spend $2-3K as an expat for a “faulty“tax return and $20K + to get you through VD/VDP/OVDP/OVDI and audit without any cost/benefit assurance.
Lawyers and accountants still see a fantastic business opportunity here and in my case where the CPA was part of the problem and not the solution I will go the same route as “just me“ doing as much as possible myself involving TSA as much as possible.
*.@NOTTHATLISA regarding IDR`s : when you send them your foreign tax returns did you have to translate the whole thing into english or were you lucky enough that there was an english version available – my foreign tax returns are not available in english.
*@Mike, I also share your ambivalence about the cross border professionals. I think they can be sympathetic to the individual but collectively believe they have actually lobbied Congress and the IRS to maintain the status quo to keep the work coming…
I agree that having to budget for up to $3000 annually to pay an accountant is indeed burdensome which is largely why I would be so relieved to be able to expatriate. I resent what I see as an imposition.
* …. unfortunately expatriation has its price too (exit tax) in many cases but this is a very personal and emotional decision
*@Mike, indeed it is!! I feel terrible about it and obviously have very mixed feelings about the whole thing. I actually have a fully British friend who thinks that it would be appalling, and disloyal. She can’t understand why I’d want to even consider it, in spite of the burdens and costs, and in spite of my trying to explain it to her. So it’s not just Americans who find expatriation shocking!!
Had I been much younger and knew then what I know now, I would have kept everything completely simple, like avoiding mutual funds and pension plans, full-stop. I will always regret that I even joined my workplace pension scheme because it could arguably be a ‘foreign trust’;My accountant admits that it’s a grey area and that the IRS may feel differently. But to file these forms would double my accounting bill.
Likewise, if I were already retired and receiving my pension annuity, then I wouldn’t see so much need to expatriate, as I’d have also probably cashed in on all my investments and just be drawing money off a simple saving’s account and annuity.
But at my age, I could be working for another twenty years. I also have to consider my British husband’s preferences. He’s actually disappointed that I decided to become compliant but felt I had no choice due to all the threats.
If I only had myself to consider, I would have probably stoically soldiered on.
If I’m no longer able to manage on my own, it wouldn’t be fair on my family stateside to have to manage my affairs, especially with all the risks for making mistakes.
If I expatriate, it wouldn’t be a denunciation as such; it would be an act of self-defense. I actually relate more strongly to Britain than America now, having lived there for over 24 years…as I keep saying, it’s not the d*mn tax, it’s the d*mn compliance burdens that make keeping it seem toxic.
The first step in getting out of an abusive relationship is to realize that you have the right to be treated with respect and not be physically or emotionally harmed by another person (ANOTHER COUNTRY?).
SIGNS OF ABUSIVE RELATIONSHIPS
Important warning signs that you may be involved in an abusive relationship include when someone (OR SOME COUNTRY THAT PRACTICES CITIZENSHIP-BASED TAXATION):
•harms you physically in any way, including slapping, pushing, grabbing, shaking, smacking, kicking, and punching (NOT YET, GIVE IT TIME)
•tries to control different aspects of your life, such as how you dress, who you hang out with, and what you say
(TRIES TO CONTROL DIFFERENT ASPECTS OF YOUR LIFE, INCLUDING (BY FBAR AND FATCA) THE FINANCIAL LIFE AND FUNDS ENTIRELY EARNED AND TAXED IN YOUR “FOREIGN” COUNTRY, WHO YOU GIVE ALLEGIENCE TO)
•frequently humiliates you or makes you feel unworthy (for example, if a partner puts you down but tells you that he or she loves you) (BLAMES THE VICTIM; FREQUENTLY HUMILIATES YOU, CALLS YOU A TAX EVADER — GUILTY UNTIL PROVEN INNOCENT, MAKES YOU FEEL UNWORTHY SINCE YOU LEFT THE “HOMELAND” — WILL NOT LOVE YOU UNLESS YOU GAIN YOUR SENSES AND RETURN TO THE HOMELAND)
•threatens to harm you, or self-harm, if you leave the relationship (SEE ANY RELEVANCE HERE? INCLUDING, WILL CLAIM YOUR FOREIGN-BORN CHILDREN FOREVER IF THEY HAPPEN TO HAVE A DEVELOPMENTAL DISABILITY AND YOU DO NOT HAVE THE “RIGHT” TO RENOUNCE ON THEIR BEHALF .)
•twists the truth to make you feel you are to blame for your partner’s actions (MORE BLAME THE VICTIM — BY YOUR OWN CHOICE AND RIGHT, YOU LEFT THE HOMELAND (WHERE YOU WERE BORN BY THE ACCIDENT OF BIRTH OR ELSEWHERE BY US CITIZEN PARENTS); I.E. THERE IS A VAST DIFFERENCE BETWEEN “RIGHT” AND “PRIVILEGE” OF LIVING / BECOMING A CITIZEN OF ANOTHER COUNTRY. THE “VICTIM” WILL BLAME HIM/HERSELF OVER AND OVER AGAIN AND STAY IN THE ABUSIVE RELATIONSHIP, CONTINUE TO ACCEPT THE ABUSE AND TAKE THE BLAME — FOR HAVING LEFT THE HOMELAND?)
•demands to know where you are at all times (FATCA — REGISTER ALL YOUR CHILDREN AS US CITIZENS. WITH FATCA, THE US WILL KNOW ALL YOUR FINANCIAL BUSINESS IF YOU ARE A CITIZEN OF A “FOREIGN COUNTRY”; OR WILL TRY TO KEEP YOU IN THE HOMELAND WITH FURTHER PUNITIVE “EX-PATRIOT” LEGISLATION, NO DIFFERENT THAN THE OTHER “BERLIN WALL”)
•constantly becomes jealous or angry when you want to spend time with your friends (THIS “MAY” BE THE BEHAVIOUR OF FAMILY AND FRIENDS AND CONGRESSPEOPLE STILL IN THE HOMELAND — AND THOSE WHO INCREASINGLY FEEL TRAPPED IN THE HOMELAND.)
Emotions Anonymous is indeed a source on how one deals with such abusive relationships, and how one goes about taking action to address it. This is indeed such an issue for many in the population affected.
@monalisa1776
You aren’t abandoning the US, the US has abandoned you and are now treating you as sub-grade! I know what you are wrestling with: If only the US would do the ‘right’ thing, all of this would change. By sticking around for the abuse, the message is “I am a loyal subject, and no abuse you can heap upon me is too great”, whereas renunciation would say “you’ve gone too far”. The only hope for change is to throw the baby out with the bathwater, imo.
*@Bubble and Calgary, I’m agreeing with you!! I’m just, again, emphasizing how difficult it all is. It doesn’t help that I even have fully British friends who can’t understand it, no matter how many times I’ve tried. I realize that we can’t please everyone in this life.
@Mike and monalisa,
Yes, lawyers and accountants (especially the cross-border variety) do see a fantastic business opportunity with FATCA and US-based citizenship taxation issues and the growing US FATCA Compliance Industrial Complex. Other professions will also see the opportunities with FATCA and will grab those opportunities. Do not many, many look for fantastic business opportunities, whatever and wherever they may take them, even to a foreign country) to further their careers, make a “better” life for themselves and their families?
Should these trained lawyers and accountants just say, no I’m not going to touch any of this or provide help for you US Persons to get through whatever to your way to compliance. I will just look for other opportunities to use the education I have paid for / the expertise I have gained through years of tax and accounting practice.
This is not different than other professions or persons seeing a fantastic business opportunity and taking it if they have the tools that apply. Some will be exploitive; some will not.
Some people will need their expertise and will see a way to pay for it if they are lucky enough to have some savings to do so (that is me — I resent that I have to pay one penny for this to be done, but I value what the professionals I’ve dealt with have provided for my family — I do not begrude what I have to pay them to help me – for their education, knowledge and expertise. My anger is the fact that US law and the extra-territorial IRS has made this necessary for someone like me.
Some people will be exploited just by not being able to pay for such professionals and are left out completely — immoral in my mind.
And, some of those seeing the “fantastic business opportunities” will rub their hands in glee and find out the best way to exploit those who do have some $$$$.
Nothing new or particularly sinister about this particular “fantastic business opportunity”; it just affects us, US Persons Abroad, so adversely.
@monalisa,
That is your British “friends?” problem if they cannot understand and abhor the abusive relationship you are in. The only person, really, you need to please is yourself — along with your gained self-respect. It will continue to be difficult for you as long as you have the need to have others understand and somehow give you permission to do what you decide you have to do for yourself. It’s very hard, I know. You are valuable and strong and need to believe that completely before you can be the one in control of your own life.
*Calgary thanks for trying to help Mona Lisa in a kind and loving way. I’m afraid I would have been much more blunt. Therefore my advice would not have been helpful.
@monalisa1776
I realize you are in agreement, I just wanted you to know that you aren’t alone in your trepidations. If I thought that the US would one day value its expats as every other nation of the world does theirs, I would be looking at renunciation much differently. Unfortunately because of American narcissism, exceptionalism and perhaps a good dose of jealousy that results in a myopic and suspicious view of the outside world, I don’t see how those who choose to ‘abandon’ the US can ever be cast in a good light. It would take lot of evidence of a shift in mentality to change my mind. Thanks for the conversation on the subject!
*@bubblebustin & monalisa, don’t hold your breath believing that the the US will “do the right thing.” I remember so well when I testified before the House Ways & Meaans Committe on the taxation of overseas Americans back in 1978. That was after hundreds of thousands. including myself, had come home as a reslt of the Tax Reform Act of 1976, and Congress was tryhing to figure out why there had been such a sudden and drastic drop in the US trade balance between 1975 (when the US recorded the highest trade surpljus in history) and 1976 when a massive trade defict was recorded – by far the largest ever.
Seated next to me and testifying was George Schultz, president o Bechtel Corporation who had been Secretary of Labor and Secretary of the Treasury in a prior administration. He recounted the situation of one of Bechtel’s engineers in Saudi Arabia whose salary was $43,000. But because Bechtel provided him with housing in the middle of the Saudi desert and furnished meals and paid for the educatomn of his young children in English (equivalent to a free public school education in the US) to its employes the value of these non-cash benefits were taxed as “income in kind.” So his tax oboligation on that $43,000 salary was $51,000! He had less than zero left to live on. The engineer ask “Do you suppose Congress with do the right thing?”
It didn’t. The taxation on US citizens abroad became even more severe with the law that replaced the 1976 legislation. Unable to compete, US engineering and construction companies, who were #1 in that market, simply folded their tents and came home. Our tax laws made them totally non-completitive. And also gone were the export sales of US manufactures as the German, Japanese, French and Korean engineering companies that took over that market sourced the materials to implement those projects from their own countries rather than from the US.
So don’t ever just assume that the the US Goivernment “will do the right thing.” It is much more likely to do the wrong thing and make things worse, rather than better. The Voice of Experience.
And for those of you who still haven’t read Rogers most recent report to the House Ways and Means… here it is…
*@Mike, I don’t know the IRS rules now, but back when I was living abroad in Brazil copies foreign tax returns in an foreign language had to be submitted together with the US tax forms when claiming the foreign tax credit or the foreign earned income exclusion. If not in English, then a “Certified true and Correct” translation into English had to accompany the tax return as well.
With today’s electronic filing I presume the rules have changed, but I don’t know what they are today.
Roger, at least when I submitted my returns, [using TurboTax] I just got lots of verification questions for the Foreign Earned Income Exclusion, but no message to submit additional documentation.
By the way, today I drove about 200 kilometers through rural areas. Don’t know if you know it, the Serra de Mantiqueira. Such a pretty area. I came back to see that Obama plans to grant amnesty to illegals. I just wish he’d reform the tax system. The US system is polar opposite of the Brazilian system. Whenever I buy a farm, I plan to put it into the SIMPLES nacional system. They tax on gross receipts/sales. They discourage people with even higher taxes and audits if they want to be taxed on the net profit system. But I don’t have the slightest clue on how to reconcile the two different accounting systems… Ahh, the joys of not being able to choose your birthplace!
no, forms 2555 and 1116 do not require originals, or I haven’t used them in 16 yrs nor did the Corporate tax professional we had during my first 3 years.
However, the misery that one is supposed to go through is to account for the difference between the amount that is withheld from the foreign paycheck over the course of the year. That info is available when US 1040’s are due.
To do things correctly, one must account for the ACTUAL tax bill which is known after the US 1040 is filed. This would be done by 1040x (not good) or by using the previous years info and tax credits in a way that I cannot understand how to do.
Difficult. Expensive.
*@Petros, Obama commited during his first campaign to level the playing field for US citizens living and working abroad. If FATCA is his concept of leveling, that is hardly what Americans abroad expected when they voted for him. Its not the playing field that has been lveveled but they instead have been leveled like Long Island was when Hurricane Sandy went through that area a few weeks back.
So illegals, don’t count your chickens before they hatch. Although they will undoubtedly come out better than overseas Americans because they are potential voters who can reward the favor as soon as they becomre citizens. And where no voter proof of citizenship is required to register to vote or even to cast a vote, it is highly likely that many of them will vote before they obtain US citizenship.
American abroad, on the other hand, are “out of sight and out of mind.” Their votes are so diluted over the congressional districts of the 50 states that if they vote at all, their votes are highly unlikely to decide the outcome of any election. Dispised by Congress as tratious tax evaders, there is little interest on Capitol Hill of doing anything that would make their life more tolerable. The byword seems instead to be more misery.
Where oh where is Serra de Mantiqueira? Sounds like it could be in Portugal or Brazil. Have never been there and don’t recognize the name.