As, rightly, suggested by badger for a dedicated post at Isaac Brock:
Jack Townsend’s OPTING OUT, Part 3
and latest comment,
Jack – Good news! I am an OVDI participant who asked to opt out into the Streamlined Program. I have been accepted into the Streamlined Program as a low risk for non-compliance. I have been issued Letter 5062 (acceptance into Streamlined Program) along with a 4549 (tax adjustments – no tax penalties, just interest) and my agent told me today that a Letter 3800 (FBAR Warning) will soon follow.
There is major news associated with this result. It is news that OVDI participants and many tax attorneys will want to know. The news is that the Streamlined Program policy is changing again. It is very much to the favor of OVDI participants. It seems that they are being given the chance to enter the Streamlined Program on the basis of the same years as new Streamlined Program participants. I am a prime example of that. I was a filer who amended returns in OVDI. I thought amending returns made me ineligible for the Streamlined Program. It no longer does. Even Letter 5062 says, “We’ve processed the returns or amended returns you submitted.”
Because I started in the Voluntary Disclosure System before OVDI existed, I first filed 2009 as part of OVDI. According to an IRSTechnical Adviser, they are only looking at 2009 as a criteria. If the
OVDI participant did not file in 2009, that fulfills the conditions of the Streamlined Program. Previous filed years do not come into question for Streamlined Program eligibility if an OVDI participant wants to opt out into the Streamlined Program. That makes sense as these years are all closed anyway if one was a filer and did not have a major reporting discrepancy.
OVDI participants will still be expected to pay any tax if they have open years before 2009. As OVDI participants had to file 2010 and 2011 as part of OVDI, these years do not affect eligibility of the OVDI participant for the Streamlined Program.
The rule appears to be a new approach in the IRS. My agent was not aware of the rule and initially told me my application would be rejected for the Streamlined Program. However, the Taxpayer Advocate has been involved in my case for more than one year and has been monitoring the many different issues I have had to face. When I reported my rejection from the Streamlined Program to the TAS, they insisted that along with allowing amounts higher than $1500, it was also okay to have amended returns. They had the Technical Adviser they are working with in the IRS contact my agent and explain this new policy. My agent said that the policy is little known and needs to be better communicated within the IRS. Lawyers who wish to verify what I say can contact the Sr. Attorney Adviser to Nina Olson.
It has taken my case 2.5 years to get to this point and I would like to thank you (Jack Townsend) for making your blog available, plus for all the information you have so thoughtfully provided.
I would also like to thank the Taxpayer Advocate, who changed my life for the positive and helped me get through the OVDI nightmare. TAS had to intervene at least 5 times including issuing a TAO on my behalf.
I would also like to commend my IRS Revenue Agent who had no clue the Taxpayer Advocate was watching and was an incredible professional the entire time. I could not have wished for anyone more helpful and who explained everything to me. I feel that my agent went the extra mile for me as an individual taxpayer. My ex-lawyers were much more difficult to deal with than the IRS ever was. However, this does not excuse the IRS for the bad policy they created.
I would also especially like to thank the contributors to your blog:
Anon123 – for being the first person I noticed protesting the penalties
Just Me – for his invaluable, indefatigable efforts to educate and share and especially for making me aware of the Taxpayer Advocate
Moby – his words convinced me to revoke my attorney’s permission and go it alone (one of the best moves I made in this process)
Sally – for the information she supplied
ij – for the great support
Asher Rubinstein and Michael Miller as they helped me to understand some issues that seem frightening, but explained them so that I could manage them on my own without panic
I am happy to provide more information to you if requested. There is a lot to tell, but I have tried to summarize the latest, most important news here.
@Not that Lisa!
The IRM lists mitigated FBAR penalties based on the size of the bank accounts.
Was your agent only allowed to mention the maximum penalty, or was he able to tell you was it might be based on your accounts and what the IRM mentioned?
@Chris – The agent calculated the penalties for each year based on NWII penalty for each account, plus gave me a valuable piece of information, which was that in the decades of experience this agent had, the agent had never seen anyone get more than one penalty. I interpreted this to be for the entire OVDI period. I stress that this was my interpretation. The only proof I could see that this was true was that big fish tax cheats who go to court often only get one penalty for many years. I am not sure of what the legal basis for this is, but it matched what the agent had said.
The calculations and this little piece of information, plus an IRM regulation that the Taxpayer Advocate Sr. Attorney had told me about were major factors in my decision to opt out. Let me describe.
I combined the NWII calculations with the fact that the Taxpayer Advocate had pointed out IRM 188.8.131.52.7.4 as a basis for arguing for one FBAR penalty per year. IRM 184.108.40.206.7.4 states: “Given the magnitude of the maximum penalties permitted for each violation, the assertion of multiple penalties and the assertion of separate penalties for multiple violations with respect to a single FBAR form, should be considered only in the most egregious cases.” This rule was obviously applied to Just Me in calculating the size of his penalty as he got $5000 per year, when a direct calculation based on his balances and number of accounts was more than that. I knew I was not egregious.
So my logic was that since I felt confident that I was non-willful and I was at NWII level, the maximum penalty per year ($5000 in NWII) for all open FBAR years was roughly equal to my OVDI penalty. If I had a chance to get a penalty for only one year, then the numbers looked even better outside of OVDI. As I always believed I had reasonable cause, I also had the chance to argue reasonable cause if I opted out.
So the math showed I was no worse off outside the program, plus I could finally explain any possible failure, which is all I ever wanted to do. So it was a no brainer to me to opt out and I did so immediately instead of wasting more time in OVDI.
@Chris – Maybe the justification for the one penalty for many years is in the first line of IRM 220.127.116.11.7.4: “..the assertion of multiple penalties … should be considered only in the most egregious cases.”.
This may help to answer the question about whether those seeking to renounce (sooner rather than later) can submit 5 years via the Streamlined program vs. the 3 it asks for. Note, this is not official, and whether giving the IRS 2 more years upfront than it asks for is something to very carefully consider. I am also not making any recommendation re the Streamlined process vs. any other option. The Streamlined program is opaque. We don’t know how it is being administered.
I include this here just for information, but remind all that this is not legal or tax advice.
Friday, August 09, 2013 – 03:21PM GMT | Kevyn Nightingale
“Dear TBD: We have done 5 years under the Streamlined a number of times. We have been told by IRS agents that they have no problem with this approach, and it will not lead to additional penalties, audit, or other enforcement. Their view is that since you’re meeting the program’s requirements, there’s no evil in an additional 2 years. Keep in mind, we’ve received nothing in writing to this effect.”
Note the two comments at the link below, by Canadian taxpayers – the IRS proactively contacted them, suggesting that they opt out of OVDI and into the Streamlined program:
March 6, 2013
Phil.. I entered under the OVDI in 2010 and was accepted. I now have received a request through my US Tax preparer here in Edmonton where the IRS is requesting that I opt-out of the OVDI. I am just wondering what benefit is it for me to opt-out of the OVDI.. Is this an IRS tactic .. Any ideas..Thanks
April 18, 2013
My wife is a dual US/Canadian citizen who was born and has only ever lived in Canada. We (I say “we” because of the foreign accounts and assets we own jointly) entered the OVDI in the fall of 2011. Our case was reviewed last week by an IRS agent in Austin. She contacted our counsel with a letter that stated…”So, you want to opt out of the OVDI”. Funny thing is that neither my wife, nor I, nor our counsel at any point indicated that we want to opt out. Understand that the initiative for opting out is coming from the AGENT HERSELF. Our case is particularly well-suited to the Streamlined program, and so this is what she is softly and off-the-record recommending in order to avoid the OVDI penalty, which in our case would likely be the 5%. For us, to opt out of OVDI and go into Streamlined would be to trust an IRS agent. Another funny thing is that 5 of the 8-page letter from that agent listed the penalties that could be brought to bear if opt out of OVDI and are exposed to audit and conviction. To trust or not to trust, that is the question. Anybody want to comment on the trustworthiness of the IRS and its agents? LOL “
I am a Canadian citizen but my wife is a dual US-Canadian citizen. She was embroiled in the OVDI mess. She has been in Canada for decades. We heard about the FBARs and the draconian penalties for not submitting them, just before the 2011 OVDI deadline. We scrambled to find out as much as we could and contacted IRS agents and she faxed data in on the deadline day, asked to be in the OVDI and requested an extension to submit, which was granted. Because she was self-employed she has had multiple business, personal and joint accounts, so tracking all the accounts back for 8 years was a huge ordeal. I figured out how to do US taxes for a self-employed person and spent many weeks doing this and my wife spent as much time with FBAR issues and forms and trying to get answers from IRS hotlines. One issue was how to deal with Canadian RRSPs. I ended up doing the US taxes calculations with and without including RRSPs. In the end she got some very helpful advice from a person in the US treasury in Washington who said she could make the exclusion of RRSPs retroactive for tax purposes.
Eventually a small box containing hundreds of pages of forms and documents was submitted. Around that time the US ambassador in Canada made some encouraging comments that the IRS was not going to go after and penalize innocent dual citizens who had been caught up the IRS “one size fits all” approach to foreign assets. The tax calculations showed that she did not owe any US taxes but she was still looking a minimum FBAR penalty that was substantial.
She was told she might hear back from the IRS in a few months and be assigned an agent but that did not happen. When, a year ago the IRS indicated that RRSP amounts would not be included in the FBAR penalty calculation, my wife’s potential penalty dropped by almost 2/3. Then when we found out about the Streamlined Procedure it appeared that she had been trapped in the OVDI and would have been better to have done nothing in 2011. Eventually in Feb/Mar this year some FAQs for the Streamlined Procedure indicated people previously in the OVDI could opt out and go into this process.
Over 500 days after submitting the OVDI documents my wife got a call from an IRS agent, someone not in Dallas. He was friendly and helpful, suggesting that she look at the IRS website because there were changes that she should know about. She mentioned the RRSP issue and then the Streamlined Procedure, which he confirmed was what he was hinting at. He could not tell her to opt out of the OVDI but essentially implied that she should – he had obviously looked at her case and come to the conclusion that this would be appropriate. He was surprised at the thoroughness of the package she had submitted under the OVDI, and that it had been done without consulting a tax professional. So she opted out of the OVDI and less than 7 weeks and a few brief phone calls later, she got papers from the IRS: she was low risk, so no fine, no penalties and case closed!
Most people in my wife’s situation would have had to consult a tax professional. I imagine she might have had to fork out $15K to cover 8 years of tax forms and FBARs. Since she would have still ended up with no fines or penalties, because she was eventually determined to be low risk, she would have been $15K in the hole – the only winner being a tax consultant.
Although the final result was good – the stress this all caused makes us both very angry.
Your story reads like so many who entered OVDI. The panic to enter, the waiting, the goal post moving on the part of the IRS. The cost, both emotionally and financially. We are a people under siege.
My husband and I have been waiting to hear from the IRS after making our OVDI submission over 20 months ago. We contacted TAS, but they said that they can’t start anything until we get a response from the IRS. We heard from Treasury a few months in, notifying us that our RRSP’s would be dealt with in OVDI and reimbursed us our PLR filing fee (which we lost money on because of currency fluctuations, ugh!) Since then we’ve been informed by our lawyer that people are being moved without notice to Streamlined, so I can only assume that your wife didn’t get moved to Streamlined where they examine only 3 years of returns. Perhaps her businesses caused her to be deemed a ‘high compliance risk’ therefore not eligible for Streamlined. May I ask how many years the IRS looked at when coming to a determination? Had she ever filed a US return in the past? Thank you so much for sharing your story.
Another stunning OVDI experience. You and your wife should be angry — all that work and all that stress! I suppose one consolation is that you didn’t send a compliance industry pro’s offspring off to college on your dime. This is all such madness.
My wife filed 8 years of FBARS and tax forms, because she was in the 2011 OVDI, so 2003 to 2010.
When she got the letters from the IRS there were a few pages of 4549 forms summarizing the data from all the 8 year’s of 1040 forms and the resulting tax calculations – including the Foreign Tax Credit which reduced the balances to zero. She has also submitted 1040s for the last 2 years so they have a decade’s worth of compliance now. She may have submitted forms in the 80’s to the IRS, (I did not know her then) but certainly had not done so for about 25 years.
If you are in the OVDI it looks as if you cannot be considered for the the Streamlined Procedure, because you have made submissions to the OVDI. The agent clarified this with my wife and the whole OVDI submission was then used as the Streamlined input, after she had sent in a letter asking to opt out of the OVDI. She also got a letter, which looked like a standard form letter, sent to people who opt out, detailing all the dire consequences in doing so.
The agent was very helpful and sympathetic with all the trouble my wife had been put through. He also spoke to me briefly to clarify some of the details of the tax forms that I had to deal with for her case. We had gone overboard in clarifying everything which seemed to have been a good approach.
In late 2011 when we were both dealing with all this my wife spoke to many people on IRS Hotlines – most were pleasant but sometimes gave conflicting, incomplete answers. One was belligerent and left my wife in tears and even more stressed. Thank goodness the agent was so helpful and professional.
You and Not that Lisa! are providing extremely valuable insight into how each taxpayer’s experience can vary as they go through the OVDI process. Not that Lisa! it would be beneficial if you and CanCan could do a side-by-side comparison to determine if there are any serious discrepancies in your treatment. The process is still about as clear as mud to me.
It sounds as though you weren’t in contact with the Tax Advocates Service at any point. Rather than wait, did your wife make her initial request to opt out before she heard from the IRS? You suggest that people in OVDI would not be considered for Streamlined, yet your wife was, and that the IRS used the eight years of submissions within OVDI as part of her Streamlined submission. The Streamlined Procedure is 3 years, with 6 years of FBARs. My lawyer has also informed me that the IRS is moving people to Streamlined without any request from the taxpayer to do so.
Naturally, my husband and I too have submitted 2 more years of tax returns since entering OVDI. In a less complex world, you’d think that one could opt out of OVDI and use 2010, 2011, and 2012 as one’s Streamlined submission.
It’s horrifying that talking directly with the IRS left your wife in tears. It should come as no surprise that a bloated out of control institution like the IRS would have hands that don’t know what the other is doing. From what I hear, an agent’s experience plays a big part in the outcome for many. The first thing I’ll do when I hear from the IRS is to get our TAS agent on the line, and hopefully she’ll be able to alleviate a lot of the frustration you experienced in dealing directly with the IRS.
Boy, I’m so looking forward to this. NOT!
Only after being contacted by the IRS agent did my wife opt out, based on indications he gave that her case could be settled quickly. She never had to get in touch with the Tax Advocate. I think one just has to wait until contact is made and that the IRS person is reasonable.
The big question of eligibility for the Streamlined Procedure (SP) is Question 2 (Form 14438) – asking whether you have filed a tax return for 2009 or later. Since by being in the 2011 OVDI the answer is YES this means you are not eligible. However the FAQ for the SP says that people in the OVDI can opt out and go into the SP. Also if one had a tax liability of $1501 one year and zero for other years you seem to have a problem. However it looks as if they are not being rigid about this.
It is also not clear how to answer Questions 13 and 15. That is why you need to make sure, with your agent, what the appropriate answers to these questions are, if you are going to opt out and go into the SP.
It seems that when you opt out of the OVDI into the SP it is as if you were just submitting all the OVDI documents for the SP. At the top of the form for ‘Enter Tax Years’ the appropriate entry seems to be ‘2003 to 2010’ if you were in the 2011 OVDI.
It is very strange that when the IRS sets up an initiative they do not think things through and think of scenarios where their regulations make no sense. Then, when they issue FAQs they generate even more questions. It is all a moving situation which does not help all those who want to get into compliance but who cannot see a way though the mess.
I hope my comments here give people some hope that some cases do get resolved happily.
The two magic words you want to eventually see are ‘Low Risk’.
@bubblebustin – CanCan’s account confirms everything that was in my experience.
1) I had to say that I wanted to opt out of OVDI. The agent could not do that for me. The agent cannot even tell you that you should opt out. They can only present the option.
2) It shows that some agents in the IRS know a minnow when they see one and they will steer one towards opting out.
3) It also shows that some IRS agents are very helpful and nice people.
4) It shows that when a Revenue agent sees a Canadian OVDI file, the agent is pretty likely to look at the possibility of Streamlined Program eligbility immediately. My agent initially told me that the Streamlined Program was for Canadians. That was the agent’s initial impression, but after speaking with the Streamlined Progam Technical Advisor (they have one for each program), my agent learned otherwise. CanCan’s wife’s experience is in line with this policy.
5) It confirms exactly what the TAS and my Revenue Agent told me about opting out into the Streamlined Program from 2011 OVDI. It did not matter if I was a previous filer or not. The bottom line was that OVDI required submitting tax returns before 2009 and no one who would otherwise qualify for the Streamlined Program should be ineligible for it because as part of OVDI they had filed returns that were earlier than 2009. That seems to be the basic policy that is being followed. That is consistent with what is stated in the Streamlined FAQ 3 that CanCan mentions.
5) It confirms (and you won’t like this) that the IRS is looking at 8 years even if one is accepted into the Streamlined Program. I was told this more than one year ago by the OVDI Hotline (call them and see if they are still saying this). The idea was that an OVDI participant had “voluntarily” submitted past tax returns and therefore all would be processed. The eight years was confirmed by the Streamlined Program Technical Advisor to both my agent and the Taxpayer Advocate Service as both of them checked on the 3 year limit on tax returns on my behalf. My take on it is that if the IRS knows you owe taxes, no matter what the Streamline program term,s are, they will want them paid. Again, maybe by the time they get to your application, the policy will change, or maybe you have a super fantastic lawyer who can get them to look at your case differently.
7) As to what CanCan say about limits on income, FAQ 2 of the Streamlined Program states that the IRS that will consider people for the Streamlined Progam who owed more than USD 1500 a year. The TAS confirmed this and so did my agent.
8) The way to answer questions 13 and 15 of the OVDI questionnaire is simply to say, “Yes, filed as part of OVDI.” It worked for me.
Yes, Not that Lisa! and CanCan, everything seems to be in constant flux, from that lying piece of incompetent sh*t Doug Shulman telling everyone that OVDI was the non-compliant’s last and best chance to avoid jail time and having 50% of their bank account balance confiscated, to the tweaking of Streamlined to include more scenarios, to the possibility of switching to RBT.
The ambush that OVDI was for many of us is made even more egregious by the fact that the IRS was (and still is) offering the sweet deal of a reduced 5% in-lieu-of penalty for those who could present evidence that they were not wilfully evading taxes (which, btw, includes those who did not even know they were US citizens!) In fact, if the IRS hadn’t worked to entrap us with something which seemed to be specific to people in our situation, we probably would have told them where to put their OVDI. We were faced with weighing what we thought was our only option against doing nothing, something we felt would deem us ‘wilful’ tax evaders at risk of maximum penalties if the IRS was to ever catch up with us through FATCA. These circumstances and the fact the QD was being warned against, pushed us right into OVDI. You’re angry CanCan? The most unfortunate part for us is had we instead entered Steamlined in the following year, the only year we incurred any tax liability would have been in a year prior to what’s required for the three years of Streamlined, the year we sold our principal residence. It’s unknown, however, if the six years of FBARs would have warranted a further look into our past should we had instead entered Streamlined.
This being said, I cannot change the past any better than I can predict the future and I have to try to be more accepting of where I am today as the anger is consuming me. The irony of all of this is had we known about our tax obligations to the US we would have done better tax planning to have avoided the liability, or, if my husband and I been what the IRS and Shulman claimed we were we’d have ignored them and would be six figures richer today. C’est live, and with any luck karma will catch up to them, because with how well the IRS seems to be listening to the NTA, it’s the only thing we’ve got on our side.
Thank you Not that Lisa! for your always informative detailed synopsis of your OVDI experience. Only time will tell if what you and CanCan have experienced will apply in my case.
Oh, by the way, when the IRS claims that my entering OVDI was “voluntary”, I’m going to see to it that they tell me in writing what my other options were in seeking compliance.
I hope you (bubblebustin) can get through this happily some time soon. We understand how you must feel. The stress and anger is not fun dealing with.
For much of the time in the last 18 months I’ve followed news here on IBS, the IRS site and elsewhere. My wife did not want to think about the situation so I only told her about news or experiences that were hopeful for her situation. Otherwise she would have spent more sleepless nights.
In Spring 2012 we were worried that the IRS might contact her and demand the FBAR penalty that she estimated, so we bought US$ to cover the total amount. The Canadian dollar was above par so, now that we don’t need the US$, we can sell them and make a little profit – for which we will pay Canadian tax on. Some small consolation.
Although the weight is now off our shoulders if anyone asks either of us about the experience they will get a long, angry rant, especially from me. Even then some people don’t understand why she would want to renounce.
Thank you, CanCan. Part of our rush to enter OVDI was to get this behind us as soon as we could. It adds insult to injury that it’s taking this long for no less painful an outcome. My husband (he was born in Canada and is a USC through his father) should be more angry than I am. I guess because he’s still working he has more to distract himself with than I do, but then it’s a matter of priority because as I’m writing this I’m making blackberry jelly!
I’m happy to hear that you did a little better than we have with currency fluctuations. They cost us many thousands of dollars.
“Part of our rush to enter OVDI was to get this behind us as soon as we could.”
Sounds familiar! We heard though a piece on CBC’s The Current in early September 2011. So much for thinking it would get resolved quickly. In a way the longer it took the more hopeful it got (e.g. RRSPs not being included in FBAR penalty calculations), and the IRS started to realize that not all foreign accounts were owned by tax-dodgers.
Ha ha. I am done and I am still not done. There have been issues with refunds getting lost. I am still in the Taxpayer Advcoate System and have logged around 520 days there. I was on my own 485 days before they got involved. So I have surpassed 1000 days and am still counting. On top of that, there is an issue if one of my accounts is a trust or not. The IRS does not know what to do with the account so we removed it from the OVDI issues and I get to stay in touch with my Revenue Agent until a decision is reached. I consider this excellent treatment from the IRS. I am really getting something for the roughly $133 a year in taxes I paid for the OVDI years.
Boy, they sure want to make CBT work, don’t they? Willing to spend way more than they take in just to have control of their subjects.
We’ll see if the information hinted at *below will include any updates for those minnows and others who are ‘non-willful’, with ‘reasonable cause’, stuck in the OVDI who should have been given a clear path to a noisy disclosure like the Streamlined program right from the beginning. While some have apparently been redirected from OVDI into Streamlined, there are those who have opted out into it but whose submissions have not been processed by Streamlined. One Brocker has been enduring for more than two years. There are anecdotal accounts of others who were cleared to move from OVDI to Streamlined, some proactively selected and moved by the IRS, some on their own initiative.
I am not vouching for the accuracy of the content at the link but it will be interesting to see what follows. And given the IRS threats and statements since 2011 (and before) I doubt that much substantive ‘transparency’ or ‘education’ will be forthcoming, but we’ll see.
.”.One of these submissions resulted in a request for a follow up telephone conversation during which the Service clarified which taxpayers could use the SCP. We were asked why we did not use the program for the specific taxpayer that was the subject of our submission. We responded that the Service had not yet changed any of the guidance, most particularly the warnings about the amount of tax and the “simple” return criteria that appear in the questionnaire that must be submitted with an SCP filing..”………..
…..”..the telephone conversation confirms that the Service has heard us. It will be providing updated guidance that will confirm more clearly that the SCP is available to all truly innocent delinquent non-filers even regardless of the amount of their tax liability and the complexity of their returns. Based on this discussion and the genuine interest expressed by the Service to broaden the reach of the SCP….”….
I NEED HELP AND ADVICE!
I need advice on whether I should enter the OVDI, the Streamlined Program, or try to do a Quiet Disclosure. Allow to preface this by noting that I have done a great deal of research on this issue. I have spent many hours reading http://isaacbrocksociety.ca/ and http://federaltaxcrimes.blogspot.co.nz/. I know what the options are; I just need to know the best choice for me.
• US citizen; maintains an American mailing address at parent’s house but lives abroad
• Have stocks and cash in American bank accounts and brokerages totaling ~$150k
• Lived abroad since 2001 (Country A 2001-2004, Country B 2004-2006, Country A 2006-2009, Country C 2009-present)
• Have never made more than $40k while living abroad
• Have no investments, property, etc. other than stocks in the US.
• Unmarried, no dependents
• Filed taxes 2001-2006, always taking the FEIE
• Last filed taxes 2006
• Stopped filing taxes because my tax owed was always $0. Made no stock transactions 2007-2012.
• Have met the Physical Presence Test every year (including the years I have not filed)
• Incorrectly reported my cost basis for stock sales in 2006, resulting in a ~$3k lien
• Received notice of above lien too late, as I had moved from my address and forgot to send forwarding address. Lien was deducted from my American bank account and letter mailed from my bank to my American address notifying me of lien. By then, it was too late to appeal.
• From 2007-2012, had nominal American income (<$500 a year from bank interest); made no stock sales during this time.
• Made stock sales in 2013
• Made excess IRA contributions of ~$2k in 2006 (the last year I filed a 1040), ~3k in 2007, and $5k in 2012. I have not yet corrected these and they are therefore each subject to a 6% penalty per year that they remain uncorrected.
• Have never filed an FBAR.
• Value of foreign bank accounts have never exceeded a combined $50k combined.
• On two occasions I held bank accounts in two countries simultaneously; in 2006 and 2009. This was due to the fact that I was moving from one country to another and needed to leave the first account open until I opened an account in the second country.
I have three options:
1) Quiet Disclosure: Submit 1040X for 2006 to reflect 6% excess IRA contribution tax. Submit 1040s for 2007-2013 that reflect 6% excess IRA contribution tax for 2006 (2006-2013), 2007 (2007-2013) and 2012 (2012-2013) and submit FBARs for 2007-2013.
Pros: Above-board, completely fulfills tax liability.
Cons: IRS frowns on QD; fact that I filed and then stopped filing may be grounds for willful neglect, resulting in devastating penalties.
2) Streamlined: Submit 1040s for 2010-2013 and FBARS for 2007-2013.
Pros: I could get tax compliant for these years. Once I clear streamlined, I could file a 1040x for 2006, 1040s for 2007-2009, and 1040x for 2010-2013 to clear up the excess IRA contribution taxes.
• The fact that I had filed overseas taxes until 2006 and then stopped may raise red flags
• The IRS says “This procedure is available for non-resident U.S. taxpayers who have resided outside of the U.S. since This procedure is available for non-resident U.S. taxpayers who have resided outside of the U.S. since January 1, 2009, and who have not filed a U.S. tax return during the same period.” I have not filed a return since this date; however, I did file one while living abroad in 2001-2006.
• The fact that I held bank accounts in two different countries will raise my risk level
• If I pay the tax on the excess IRA contribution in 2012, the IRS may look back to my 2006 and note that I did not pay the tax on that
• If rejected from Streamlined I cannot apply to OVDI and will almost certainly get audited
3) Enter OVDI
• No risk of being accused of dishonesty
• Have the option of opting out of OVDI and/or joining Streamlined
• Subject to draconian penalties
• Get caught up in a massive bureaucratic nightmare. From what I have read online, it took years and years for people who made seemingly innocent mistakes to resolve their problems.
Based upon this information, what should I do?
And the story goes on……….
Saturday, October 31, 2015
‘New Case Filing Challenging Streamlined Transition Disparity with Streamlined (10/31/15)
In Maze v. United States (D DC Dkt. No. 1:15-cv-01806) (complaint here), three citizens who are in OVDP complain about the disparate treatment afforded them under the Streamlined Transition requirements as compared to the better treatment afforded other citizens who delayed joining OVDP until the new Streamlined rules were announced in June 2014.’………
Thanks for that post, badger. if the IRS really wanted to create an amnesty program for benign actors, it would allow people to just file going forward.
“if the IRS really wanted to create an amnesty program for benign actors, it would allow people to just file going forward.”
And their intransigence and threats and maltreatment of expats only stiffened my and other people’s resolve to sever completely any official connections with the US as our only lasting and real remedy. I and many others would have been far far better off filing going forward or quietly than coming forward as I did. Not because I would have been ‘evading’ any actual US taxes, but because the compliance costs and the fear factor and anxiety were made so unconscionably high for reporting such paltry ordinary sums. The FBAR and “foreign trust” obligations caused needless harm to myself and my family. and the only people who benefited were the US tax compliance industrial complex. I tried to do it myself but could not.
The US treatment of those who actually were attempting to do “the right thing” just as they were directed just shows the core of the US Treasury/IRS/government mindset and egocentric worldview. As a result, fewer people came forward, and many probably only did so in some manner in order to renounce and sever all even only vestigial US ties.
Almost everyday I feel anew the freedom and relief from the burden that US citizenship unjustly imposed on me. And I sorrow after the family savings that was wasted in demonstrating with yards of paper that I still owed zero and was still not a crminal-money-laundering-tax-evading-drug-running-terror-funder.
The US can KMA.
This is something that scares me, Badger. That is the pain and level of resentment that continues beyond renouncing US citizenship, almost made worse by the fact that one has been forced to renounce. It’s part of what causes my hesitation to take that step, that although I’ll surely feel better not being under the US’s thumb any longer, I may just be angrier for it. I can’t imagine being any angrier than I am – they may just find me as a pile of ashes one day.