Shadow Raider says
YES! YES! IT WORKED!!! The Senate Finance Committee had its meeting on international competitiveness today (instead of May 23 as scheduled), and it included notes about individuals! It’s considering the proposal in Bernard Schneider’s paper!
Excerpts from the meeting notes (my comments in bold):
“The United States income tax rules applying to cross-border income are based on two core concepts: the residence of the taxpayer and the source of the taxpayer’s income.” (Are they abandoning the concept of citizenship now?)
“Nonresident citizens: U.S. citizens living abroad are generally taxable as residents of the foreign country where they live. They are also required to file U.S. federal income tax returns annually and pay tax to the U.S. on their worldwide income, subject to the foreign tax credit and an exclusion for a limited amount of foreign-earned income. Other countries generally tax their nonresident citizens only on income their citizens earn in their country of citizenship. Some believe certain employers overseas are reluctant to hire U.S. citizens because of the associated tax burden and compliance costs.”
“NON-RESIDENT U.S. CITIZENS
1. Provide an election to citizens who are long-term nonresident citizens to be taxed as nonresident aliens if they meet certain conditions (Schneider, “The End of Taxation Without End: A New Tax Regime for U.S. Expatriates,” 2013; similar to the law in Canada) (You read it right, they mentioned Canada!)
a. Require a minimum period of residence abroad
b. Impose an exit tax on electing taxpayers where deemed to sell all assets at the time of election
2. Repeal the foreign-earned income exclusion (H.R.2 (108th Congress), Jobs and Growth Tax Relief and Reconciliation Act of 2003, sponsored by Rep. Thomas)”
I can’t believe it! feel like jumping around right now!
Has anyone out there, in Canada, complied and been fined the FBAR penalities?
Paying any taxes owed is one thing but I just cannot wrap my head around the threats of those FBAR penalities.
The little advice I have sought from two sources tells me to comply comply but I feel great fear in doing this and first of all I would have to get a SSN.
I am very new here and not sure if I am in the correct “blog” or not.
I have so many questions but not sure where to ask them.
I am very happy to have found the Isaac Brock Society and to be a part of it.
I am in OVDI, and the latest word from my lawyer is that I’ll likely be moved to Streamlined where there are no FBAR penalties.
It is important that you proceed very carefully, very thoughtfully, and very objectively. Do NOT do anything until you have met all three of the “very” requirements and you are in a calm state of mind. Remember that the professionals are there to get you into compliance on their terms. Do NOT enter OVDP without explaining your reason for doing so. Find out how much you may in taxes. Too many people are over concerned about penalties and under concerned with taxes.
Totally fantastic news! What did your lawyer say about how he knew this?
@bubblebustin, that’s great! What a relief. Maybe there is some justice still left in this world. Hopefully when it is all over, you’ll get a refund too, covering all of the expenses paid. 🙂
@Tortured, I haven’t heard of anyone who didn’t join OVDI who got fined those penalties, as of yet. But, that could change, I suppose. OVDI is designed for people who intentionally cheated on their taxes.
@USCitizenAbroad and Swisspinoy
Thank you both for your well wishes. Keeping our fingers crossed! Still very angry about how we would have gotten a better deal if we had become wilful tax evaders and waited! Should have known better than to believe Shulman when he said OVDI was “the last, best chance for people to get back into compliance”. Had a proposal to return to a residency based taxation system been in the air, I wouldn’t be here talking about this with all of you.
Tortured If you don’t even have a SSN then they don’t know you exist. Think long and hard about this. Don’t even think about OVDI- it is meant for criminals. Be cautious with advice that involves spending a lot on lawyers and accountants. They don’t all have your interests foremost.You, perhaps, will be best off if you do absolutely bugger all. Go to Youtube and search Monty Python’s ‘How not to be seen”
@bubblebustin, this is the problem with my understanding of the US. It seems to often focus on punishing people or scaring them into compliance, instead of helping and assisting them to be good citizens. If RBT is to come at all, it should have come before FATCA and OVDI. First give the carrot and then wave the stick!
@KalC, absolutely. I’m currently having a discussion in a forum with one who claims to be a tax “expert”, who has been showering me with false claims and personal attacks. At this point, I’d have a very hard time trusting any US tax expert. In my view, the IRS is a far more trustworthy and reliable outside of OVDI,especially now that it is under pressure due to the scandal.
What forums do you post on in CH
I replied to you on the “Traumatised by the IRS” thread, but now, reading this thread, I see in your comment here that you don’t have an SSN. That made me think — were you born in the US and naturalised as Canadian citizen, or born in the US as dual Cdn/US, or born in Canada to US parent/s? How you got US citizenship status is important in where you go from here. Whichever category you’re in, you’re not alone, and, although we all have a lot in common, people in the same situation may have useful information particular to your situation.
I was told by my tax advisor in the UK (a mid-sized local firm in London) in July 2011 and again in October 2012 that they had never seen an FBAR penalty asserted against one of their clients. They said they had handled thousands of coming back into compliance cases and their standard procedure was 6 years 1040, 6 years FBAR and a reasonable cause letter (I think it’s referred to as a “loud” quiet disclosure). They further said that no one in their circle of contacts at law firms and other tax firms had ever seen an FBAR penalty being assessed for someone resident outside the US.
There was also a post by a person from Australia with the user name McKeegans in the Expat Forum that said “I work for a tax firm which specializes in Expatriates, we have filed thousands of returns, and have been established since 2009…We have yet to see any of our clients receive penalties.” (http://www.expatforum.com/expats/expat-tax/128012-fbar-compliance.html#post929521). The “penalties” McKeegans was referring to were FBAR penalties.
The obvious caveat here is that the statute of limitations in most of these cases will not have expired, particularly for McKeegans which was only established in 2009.
@bubblebustin – The other positive aspect about getting moved to the Streamlined Program is that there are no tax penalties either. So you will have any FTF (Failure to File) and FTP (Failure to Pay) penalties you paid returned to you. Those are the Section 6662 and Section 6651 penalties you had to pay because you did not file and pay when the return was originally due. Unfortunately, interest that was paid on any taxes due after the original filing due date is never returned.
I think my experience shows that the IRS is being more flexible with at least two eligibility criteria for the Streamlined Program: 1) Amounts of tax owed and, 2) For those in OVDI, whether amended returns were submitted or not. From what you have said about your case, it appears you would be a good candidate for the Streamlined Program. If the IRS does not move you to the Streamlined Program by the time they get to your case, then it would be good if your lawyer is proactive and requests an opt out into the Streamlined Program as soon as there is a contact with the agent. The worst that will happen is that you will be rejected from the Streamlined Program and then you will be outside of OVDI and can argue reasonable cause. You would have had to opt out anyway to avoid the unreasonable OVDI penalties and to argue reasonable cause.
Opting out was such a relief for me. I was not afraid. Conquering one’s fear is most of the battle. I had good awareness of what my penalties would be – and no – they are not automatically $10,000 per account. If one reads the IRM, they will see that there are different levels of non-wilfullness. My agent was candid with me about the fact that I was considered non-wilfull so that made it easier for me to opt out. However, even before the agent told me that, I was determined to opt out. For me it was clear that a better deal was to be had outside of OVDI. Most important was that I could argue reasonable cause outside of OVDI.
My accountant could not believe that I was going to face the wrath of the IRS by myself, but I knew my circumstances, and like yours, they were innocent and I figured I would fight to the end. Honestly, there was no battle. Experienced agents can judge these things from the first time they see your file.
Another thing, you might want to reconsider your decision not to renounce now. In my country, I know a set of siblings who are in OVDP2. They are Accidental Americans from birth. They have not used their US passports in about 50 years, but to make a long story short, they inherited their parents business, which had accounts in Switzerland because the business of their parents has an operation there. Their bank saw their birthplace and closed their accounts and advised them to seek legal counsel and file with the IRS. Their lawyer has seen no issues with their renouncing so they have already booked renunciation appointments.
I also do not believe renouncing sets up any red flags. I was never asked questions about my citizenship by my agent. The focus is on the amount that was owed during the period under examination, not what one’s citizenship currently is and not what one’s intentions with respect to future citizenship and taxes are. You have certainly already established ongoing compliance, which will be viewed favorably.
@Tim, englishforum.ch. To my knowledge, there is at least one instance where my posts here were used to attack me there. That alone should be enough to explain the situation.
Long story short, there are two phases: pre-banking discrimination and post-banking discrimination. In both phases, my main opponent claimed to be a tax expert. The character is appears to be highly respected among the American posters and threatens to not give “free tax advice” to independent critics like me.
In the pre-bank discrimination phase, I was posting what I was learning about banking discrimination and was met with strong opposition. I blamed FATCA, they blamed Swiss banks and accused me of exaggerating the situation, among other things.
In the post-bank phase, months later, some had renounced, others are considering to do so and one stated that he will renounce if there is no switch to RBT. The main disagreement concerns double-taxation. I criticized it while they opposed me for doing so while claiming that they opposed double-taxation too.
Anyways, here is the latest professional contribution from one of the self-declared US “tax experts”:
That’s quite ‘professional’ for American tax standards, I suppose. In any case, I’ve decided to see how the mods feel that this remark fits in with their forum rules. 🙂
Here are two examples:
Pre-banking discrimination phase:
@swisspinoy, re; “….There is no evidence in the GAO report that is referenced by the blog you cited that any of the OVDP participants, let alone the 10th percentile group, was living outside of the United States….”
Amazing that they don’t get the confiscatory and unconstitutional disproportion between any potential US tax owing (ex. under 200.), as compared to the OVD penalties levied.
They are obviously apologists in a state of complete denial – because they don’t want to believe that the US has behaved so unjustly and arrogantly. They go on to say that there are ways of dealing with and living with US double taxation abroad, but I suspect that means that they either just don’t truly what they’re up against, or that they do well compensated work for a US corporation or US government abroad, who handles their US taxes for them, and perhaps compensates them for any losses. I’m sure that Ambassador to Canada Jacobson would say the same, and his family as well. Or anyone sent here by the US government, or a large US corporation – because they never have to deal with the complexities or the punitive and draconian results.
Do you remember the article in the Globe that was discussing how difficult it was for some Canadian resident to get a US SIN number – all the hoops he jumped through? I think it was posted. Perhaps somebody could find it. The SIN number is the identifier for filing taxes.
Also, @Tortured really needs to consider whether at any point in his life (he is an adult) he ever committed an expatriating act. Given that he has lived his whole life in Canada, this is very much worth considering!
@US Citizen Abroad, was it this story about the SSN?
Great comment – with regard to the second part about renouncing:
I recognize this is just my opinion, but I urge every person (unless you have an objective reason for wanting to remain a US citizen) to cease being a U.S. at the earliest possible moment. For some this means renouncing. For some it means a different form of relinquishment. For some it means recognizing that in the past you have committed an expatriating act that means you need only to get a CLN. For some it means simply recognizing that you have committed a relinquishing act, and making that your position.
U.S. citizenship is more than a cancerous tumor. Cancerous tumors are not cantagious. It is like a lethal virus that will spread into every aspect of your life.
Get out at the earliest moment that your personal circumstances allow! You escape first and worry about any “fallout” later. You do NOT have to have 5 years of tax compliance (although in some circumstances it may be to your advantage to have this).
Questions for all: Since you realized the problems of U.S. citizenship abroad, have you had even one day of happiness? Have you had even one day free of worry? Have you experienced even one day of financial security? Is your level of achievement and personal effectiveness what it was before? Are your relationships with the people in your life the same as they were before? Phil Hodgen says:
“U.S. citizenship is a problem to be solved”.
I would say:
“U.S. citizenship is a status that must be eradicated!”
I remember that amazing story.
Here is what the US Consulate in Toronto says:
Here is what the Social Security Administration website says:
Thanks – right on!
I remember feeling very sorry for this guy. I wasn’t sure whether I felt more sorry for him because of his stupidity or because of what was in store for him.
@badger, I could’t agree more. There’s an article in SwissInfo yesterday which might help to explain the situation:
Brian* and Diane*, who have lived for many years in Switzerland, gave up their US citizenship 3 years ago… “Honestly, I’ve felt more relaxed since. There is so much panic-manufacturing and greedy tax lawyers who are trying to earn easy money. Many of our friends are in a similar situation. They are angry or feel hurt”, said Diane.
I am interested in what happened to Mike Kaiser, and am hoping that perhaps he has benefited by coming along later in the US tax jihad against us. He could have been any one of a million trying to solve the same problem, and blissfully unaware of the trap and nightmare he was about to enter. I hope that perhaps he stumbles upon IBS and finds some help here. As you pointed out earlier, the ones who are suffering the most are the ones who tried to do what the IRS and US government advised and threatened them into doing. And that is so ironic – that those who demonstrated the type of ‘compliance’ the US demanded, are the ones that the US is squeezing the life out of – even if just by making them wait for > 500 days for a resolution.
@Not that Lisa!
I can’t thank you enough for sharing your experience with me, and of course everyone here at Brock.
Our lawyer’s office concurs with you about taking our own initiative and moving from OVDI to Streamlined if the IRS doesn’t do it themselves. I also agree with you that experienced agents have a nose for BS, so we should fare pretty well. I’m not afraid because the thought of remaining in OVDI makes no sense whatsoever.
Clearly, the IRS misled us into OVDI. There was no misinterpretation of their threats on our part. However, it was clear to both my husband and me after reading the NTA’s 2011 report to Congress that we would likely be able to recover the penalties associated with the capital gain tax on our home and FBAR, due to reasonable cause, which was subsequently confirmed by a TAS agent.
Regarding renouncing US citizenship. My husband and I have a plan, which doesn’t involve immediate action as it currently stands.
Getting down to the nuts and bolts of tax reform will be an arduous task.
“Vague talk about broadening the tax base and lowering statutory tax rates is insufficient to guide legislation. And it takes more time than most people imagine to work through all the effects of various tax reforms, especially when many provisions of the tax code are being changed simultaneously that may move in opposite directions, economically.”