As, rightly, suggested by badger for a dedicated post at Isaac Brock:
Jack Townsend’s OPTING OUT, Part 3
and latest comment,
anon5percent
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.
This would be a very good development, however as a non-filer this stand out to me:
“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.”
For those who’ve never filed, these years would not be closed, as there is no SOL for non-filers. My husband and I have never filed before, leaving us out in the cold it seems. We did not have a major reporting ‘discrepancy’ on the proceeds from the sale of our home in 2008, which was the only taxable event over the 8 years of reporting. Opinions?
@bubblebustin,
Next step for you must be communicating with Nina Olson. You and your husband should NOT be left out in the cold. If anyone can present your case, YOU can.
Thanks Calgary411, but it is hard to say where we stand, when we haven’t heard a word from the IRS! Maybe they don’t know what to do with us.
@Bubblebustin
It is difficult to know how to interpret this. When the streamlined compliance program was introduced it was unclear whether to be eligible one must:
1. Have never filed; or
2. Have not filed for the preceding three years.
If the test was “never filed” then this means that the fact of previous filing would NOT NOW be a bar to streamlined compliance.
I am sure that there will be a “bulletin soon”.
@calgary411,
Thank you very much for giving this its own spot. It is shameful though that those attempting to grapple with this burden must glean important current information by combing the internet.The IRS and Treasury are not publishing information that would help us, and which in the long run, would help them – IF their real true purpose was ‘bringing people back into the system’ – rather than obliteration or penalty revenue maximization.
@ bubblebustin, I see what you mean about the SOL, but as anon5percent seemed to have more to say than we could glean from that one post, it seemed a hopeful sign that there might be other changes either coming, or that have not been reported anywhere. It appears though that only the TAS (only TAS international agents and TAS counsel dealing specifically with ‘international’ issues and the OVDI and Streamlined programs?) are up to date with where things stand and where they might be going? Otherwise we’re relying on serendipity (ex. anon5percent’s generosity and altruism in sharing) or on the information published by the IRS – which is NOT up to date or comprehensive.
For example, this opt out guide http://www.irs.gov/pub/newsroom/2011_ovdi_opt_out_and_removal_guide_and_memo_june_1_2011.pdf has not been updated since it was issued in June 2011? – a full year before the possibility of an alternative or Streamlined process and the June 2012 announcement of the Streamlined process (guidelines published August 21012, taking effect September 1st, 2012) existed. It also predates the announcement (or even December 2011 factsheet “Information for U.S. Citizens or Dual Citizens Residing Outside the U.S.” http://www.irs.gov/uac/Information-for-U.S.-Citizens-or-Dual-Citizens-Residing-Outside-the-U.S. specifically directed towards NON-filers abroad. We’re now more than a year and a half since the September 2011 deadline for OVDI, and the relationship between these programs is changing somewhat. We don’t even know if the movement of minnows from OVDI to Streamlined is considered an ‘opt-out’ – as it seems to be evolving into something less rigid – and the IRS is pro-actively moving or encouraging some cases out into Streamlined, as you mentioned. The published information is getting stale, and the factsheets say things like ‘generally’, or ‘similar to’. Does that speak to wiggle room? We don’t know.
@US CitizenAbroad, another issue is whether those who entered OVD programs because no equivalent to Streamlined existed, (and the December 2011 factsheet offered not enough clarity) will be judged on the content of all the years they disclosed (8) or were to have disclosed (for those still in the process), whereas if they had hung back, Streamlined would only have subjected them to 3 years of disclosure and judgement if they were successfully considered ‘low risk’. It isn’t guaranteed that more wouldn’t be required, but it seems to be a possibility for those who the IRS considers fits their criteria.
So, should OVD low risk participants be judged on 8 years – like those who OVD was ‘designed’ for, or be judged like their fellow low risk minnows newly entering Streamlined?
That is a fairness issue not yet addressed, though it seems certain that it would be something the TAS would tackle.
Hi Everyone, anon5percent is me and I am revealing that here because my case is over and I want to tell what I have experienced in order to help everyone stuck in OVDI as much as possible. I wanted to post my result first on Jack’s site as a thank you to him for his helpful blog. Along with the Taxpayer Advocate, his blog is what led me to obtain the result I did. So please ask your questions and I will tell you what my experience was and hopefully provide some comfort or possible strategies to follow.
I will start by answering some immediate questions and then post some things I have wanted to say for months, but did not want to reveal until my case was decided. By the way, my examiner told me that I was processed under the Streamlined Program, which is faster than a regular OVDI opt out in terms of processing and paperwork, but had I gone the traditional opt out route, my reasonable cause arguments were going to be accepted. So in either case, OVDI opt out, or opt out into the Streamlined Program, , all penalties, both tax and FBAR were removed.
First, @bubblebustin – Unfortunately, you are right. If you had open years before 2009, you are stuck paying them. I had one open year before 2009 and had to pay that. However, the filed years were all considered closed and I am getting a huge chunk of money refunded for those years. I had amended returns in all other years, but 2009 ended up being the key year for the reasons I explained in the comment on Jack’s blog.
I have thought a lot about you because I find your situation with only owing tax in the year before the years that are covered in the Streamlined Program is unfair. I also find it even more unfair because the only reasons you owe tax is because of incompatibilities in the two tax systems. I would go nuts if I had sold my house thinking I would have a certain gain and then suddenly finding out a few years later that another country wanted a large percentage of it.
When it was being explained to me why I had been accepted into the Streamlined Program, I used your situation (at least my minimal understanding of it) as a check on what years were open and what years would count for eligibility. From the answer, my conclusion is to tell you that your attorney should seriously consider the Streamlined Process for you. My examiner said that the determination process flows like this:
1) Has someone in OVDI not filed in 2009 (and earlier)? If yes, qualified for Streamlined.
2) Is the OVDI person a low risk or high risk? I asked what high risk was and the examiner mentioned two types of trusts and said that heavy movement in PFICs would be considered high risk. As I had some PFICS and would trade them every now and again, that is obviously okay. I do not know what your “sophisticated tax planning” is, but it might still be worth pursuing the Streamlined Program for the next reason I will give.
3) My examiner told me that if I had been considered high risk, I would have received the same audit I had when I opted out of OVDI. While my examiner was tough in that audit, there were always explanations about why the documents were wanted and what changes it might lead to. As I had nothing to hide, I was not afraid of the audit. It really was not that bad.
4) So in my view, one only has to gain by getting out of OVDI and into the Streamlined Program ASAP.
5) The only disadvantage with that is that you might be put to the end of the queue behind new (not OVDI ) Streamlined Program entrants. After waiting two months, I brought this to the attention of the Taxpayer Advocate as a matter that needed policy change due to the fact that people like me who have been in the system for over two years (2.5 in my case) are facing refund statutes of limitations. Magically, after I raised the issue, one week later my case was handled and approved. I can only hope that this is a permanent policy change and not just a one off movement.
@Not that Lisa! Please accept my most sincere congratulations in finding a conclusion you are satisfied with. I hope that you will continue to advocate for all of us who are still not through.
Our situation is not the same. You knew about your obligation to file US taxes, had been a previous filer and therefore had the means by which to avoid ‘discrepancies’ in tax filing years.
In our situation, we were unaware of our obligation to file and as a result of our ignorance the IRS was allowed to ambush into paying US taxes we would not have paid if we were already filing. In other words, we would have done better tax planning available under US law if we’d known about it. Had we been doing ‘sophisticated tax planning’ we would not have suffered a liability! So regardless of how ‘sophisticated’ the IRS deems my husband’s company tax planning was, it was not done with the intention to evade US taxes, and therefore should not be allowed increase our culpability, imuo (in my uneducated opinion).
@bubblebustin – This is also for you. You say that you were accepted by the Taxpayer Advocate. Your case number is key. So if you have one, it is time to activate it. The TAS is one of the most conscientious organizations I have ever dealt with. Just Me will also tell you that once you have a case number, you will know who your caseworker is and he or she will set up two types of regular calls with you that they never miss. One is a Follow Up Date (FUD) to follow up on a specific issue and the other is a Next Contact Date (NCD) just to check how things are going. They do this whether you have your final result or not.
Most Case Advocates in the TAS work with identity theft issues and collections issues. OVDI cases are not that common and are are complex. Most Case Advocates do not know what to do with OVDI cases.
What anyone who is accepted by the TAS needs to do is make sure that your Case Advocate contacts Nina Olson’s Sr. Attorney Adviser. He is monitoring the OVDI cases that come in to see how the system is changing. Once we got a hold of him, things began moving on my case. Handling in the OVD programs is still a Most Serious Problem in the IRS and while the IRS is trying, they are not there yet in terms of managing the program or participants well. Nina’s Sr. Attorney Adviser was aware of all the issues that began to come up the longer I was in the system and helped to solve them – and a I had a lot of them.
@Not that Lisa
I’m sorry if I sounded harsh in my last post. My blood’s boiling again and I hope it didn’t sound directed in any way toward you.
The value of the help you’re providing cannot be measured.
The last thing TAS told us was to contact them after we hear back from the IRS. Now I know how Miss Havisham feels.
@Not that Lisa!
So happy for you that your ordeal is finally over with a good outcome. Congratulations.
I wished they would open the streamline program to US immigrants as well. If they wait much longer, I will not be able to take advantage of it since next year, I will be compliant for 3 years.
@bubblebustin – no worries. I had to laugh when you said I would have found a way to avoid certain taxes. I was a self filer and had tried my best to fill out the forms. When my accountant was amending them, I showed him the documents I had worked with, showed him how I used the instructions and his comment was “Well, you can calculate well.” The first thing my agent said to me was, “There is no way anyone would consider you willful.” I guess I must have really looked like a stupid idiot. I honestly thought the U.S. tax code was not complex.
I understand your frustration. I strongly doubt that the IRS will not require you to pay tax for 2008 if it is an open year. I feel that kind of anger about the amount of money I paid to the attorney I worked with initially. My way of dealing with it is to accept it as sunk cost and move on. I realized that I could not do anything about it. Perhaps you can still do something about your situation. In my case, it is easier to let go because it is over. The years of not being able to conclude and not knowing how I was going to be seen was really hard. That is why the TAO the TAS issued on my behalf changed my life for the better. If you do have a case number, do start up the contact with them ASAP.
@Chris – Thanks. I have been following your nervousness. I especially appreciated your opinion when you said that you thought I had done the right thing by applying to both Streamlined and the regular Opt Out at the same time. It did work to my advantage.
I understand your nervousness, but I had had contacts with the IRS before OVDI and I always found them helpful (line item audits by correspondence). Being a minnow, I believe that if you get audited and just tell the IRS the truth about how you tried to correct the problem once you found out about it, they will listen. I do not mean to be an IRS apologist, but it does depend on the agent and my experience has been mostly positive. The IRM gives you a lot of protection and if you are audited, read the IRM carefully and show how it applies to your situation.
I should also be clearer about one thing. The first time I talked to my examiner, it was clear that I should opt out. The examiner never recommended anything, but did point out certain calculations that were to my disadvantage if I stayed in the program. As I had intended to opt out no matter what, I gave immediate notice.
So I never waited for the 906 or the calculations within OVDI. I stated on the phone that I wanted to opt out and followed it up immediately with written correspondence. As soon as I stated I was going to opt out, my examiner went beyond what was is covered in the OVDI “certification” and started a bigger scope audit. Part of the reason for that was that I had PFICs and you cannot use the 1296 Mark to Mark method for calculating them if you opt out the program. They all had to be recalculated using the 1291 method. While doing this, the examiner took a look at most other items. There was going to be a review again once the official notice came back from the Opt Out Committee, but I felt that after the detailed IDRs (Information Document Requests) that I had already answered, this was just going to be a doublecheck.
It seems acceptance in the Streamlined Program avoids this audit after Opt Out. The letter says they have already reviewed the returns and my agent had certainly done that so no more checking was needed. So that is why it is a good thing to opt out into the Streamlined Program.
Congratulations. Fantastic to come out of it. Terrible to have been subjected to the nightmare. Encouraging to others with small complications.
For everyone but especially for Bubblebustin today and also to celebrate the recent release from IRS bondage of Not That Lisa! …
Bubble, bubble, toil and trouble
Life is joyless, all a muddle
The cause of this lies o’er the border
In an office, dark as Mordor
The IRS with true insanity
Seeks control of all humanity
Piles and piles of senseless forms
Fines exceeding all the norms
Reams and reams of regs and rules
Call the hotline, talk with fools
Your questions are beyond their ken
Your only recourse, seek a friend
All’s not lost, there is a rock
A site named for a man called Brock
There you find some others who
Have these problems, same as you
Some can merely empathize
Wise ones can and will advise
The goal’s to help all Brocker’s find
That wondrous thing called peace of mind
With loads of tips and information
You now can face that damn form nation
Complain, comply or be defiant
There’s no wrong way to treat the tyrant
@Em – Well done!
Dear Isaac Brock Society Poet Laureate,
Thanks — that was great. Once again, a winner in rhymes of comfort to us.
As usual, Em, you bring a smile and pack a punch!
Congrats to Lisa. And best wishes to BubbleBustin, I hope TAS will make reason and fairness prevail in your case.
@ calgary411
That’s very kind but laureate? No, no, not the least bit. Truthfully I never read much poetry until the past few years so I have very little knowledge of how it’s supposed to be done. I don’t have the talent for research like you and so many others here display so I pop off whatever comes into my mind sometimes. I just hope people can tolerate it. Heck it’s hard enough for me to merely keep up with the reading here on a day to day basis. I know I would worry myself to death if I didn’t have this place to reassure me that others do get it and are working hard to get it fixed. It was good to read Elizabeth May’s latest letter today.
Yes, Em. Even Calgary has one (http://www.cbc.ca/news/canada/calgary/story/2012/03/19/calgary-poet-laureate-demeanor.html). Wish I could provide you the honorarium but alas I have lawyer and accounting bills to pay.
interesting reading – here’s a question from me at the start of the compliance journey:
Now that I have all 6 back years of irs and fbar forms filled out plus the 2012 ones – what to do? I apparently owe no tax and don”t have complicated investments. But through sheer ignorance of the filing requirements I have not filed since moving from the US decades ago. I thought the streamlined program was appropriate but is it, or should I do the backfiling of the 6 previous years instead?
@Em
That’s wonderful and even better because it is so relevant to so many of us here. I’m going to print that off, can you give it a name? Today’s been a roller coaster ride, a busy day at Brock. Here’s one also tailored made for IBS:
Hope springs eternal in the human breast;
Man never Is, but always To be blest:
The soul, uneasy and confin’d from home,
Rests and expatiates in a life to come.
@ bubblebustin
I really can’t think of a name. You are welcome to call it whatever you like. I never heard the rest of “Hope springs eternal …”. Thanks for finding that. I see so many people getting absolution and resolution and wish so much the same for you.
@Em
My anger flares, but is slowly giving way to sadness. Although significant, it’s not really the money. I don’t expect the IRS will see justice in giving me a refund on the taxes. I said when we entered OVDI that it would give me a voice that I intended to use to its full extent in trying to correct this injustice. Now I just feel sucker punched.
For you and everyone else who’s given me their well wishes, thank you.
@Not that Lisa! When I wrote that you had the means by which to avoid ‘discrepancies’ in tax filing years, I didn’t mean that you would have found a way to avoid certain taxes. Obviously the IRS has found that your problems were not avoidable and I am happy for you that things turned out better than you thought they might. It’s unfortunate that the IRS won’t publicly admit that the wringer they sent many people through was avoidable.