There is a good article on The Hill about the complaints that are being directed to Republican Lawmakers about IRS abuse. Apparently, or so it says, Democrat’s are not getting the same feed back.
While both parties have criticized the IRS’s actions, it has mostly been Republicans reporting possible wider abuses.
Asked whether her office had received a wave of allegations of greater IRS abuse, Hannah Kim, communications director for Rep. Charles Rangel (D-N.Y.) said: “Not that I know of,” in an email to The Hill.
Maybe we should help change that!
There is the link to the article, and you will note some comments by Roger that drew my attention to the story. It was originally posted here, and I am pulling out for higher level visibility. A few comments below:
Roger wrote:
So far there has not been one word about what is probably the most abused by the IRS group in the world: US citizens who live and work abroad.
Under Schulman’s leadership the IRS has gone out of its way to financially destroy US citizens who live abroad – many of which are dual citizens of the countries where they live, and in fact where many were born and lived all their lives.
Schulman resurrected the 1970 FBAR law which requires U.S. citizens to file annual reports if they have bank “foreign” accounts abroad, including in the countries and cities where they live and receive their paychecks and buy groceries, or have signature authority over accounts they don’t own, such as issuing checks to pay their employer’s bills or if they work for a charitable organization such as their church or the Girl Scouts.
Failure to file such letter-perfect reports, even though they have fully paid US taxes on earnings of their own accounts,subjects them to an unforgivable minimum penalty of $10,000 per year, up to 50% of the total maximum value of their own and non-owned accounts.
The existence of this old law designed to catch money laundering drug lords was only recently revealed in IRS tax instructions for overseas filers and has been applied without mercy to confiscate their savings for retirement.
These abuses were highlighted in the National Tax Advocate’s 2011 report to Congress, as well as the IRS’s bait and switch schemes to confiscate these funds, but neither Schulman nor Congress has batted an eyelash over this outright abuse. As highlighted in that report there are 16 IRS publications, 667 pages of tax forms and 7,332 pages of instructions strictly for overseas tax filers. This includes the recently-enacted FATCA legislation which is an absolute nightmare for the US citizen abroad.
The instructions and forms are so complex that, according to the Tax Advocate, even after spending thousands of dollars for the best available professional tax assistance, the US citizen living abroad can never be sure their US tax returns are correct.
That’s why renunciations of US citizenship by long-term US citizen resident abroad is up 6-fold in just the last few years just to be able to survive. Once renounced you can never regain US citizenship, and if renunciation is “deemed” for tax reasons you can be blacklisted and be barred from ever visiting the US for the rest of your life for any purpose; not even to visit a dying relative in a nursing home. That’s the law.
No other civilized country double taxes its citizens when they live and work in a country other then their own where they have already been taxed once by that country on their worldwide income. Yet nobody in Washington can figure out why, or seems to really care, with very few American feet on the ground in foreign markets, that the US has a job-destroying trade deficit of $740 billion which last year was 60% of the total trade deficits in the entire world.
Jackie wrote:
I strongly support Roger Conklin’s statement. Over the last five years, the IRS has manipulated the law through its OVDP program which was strongly criticized by the National Tax Advocate.
After 30 years of ignoring and never enforcing the FBAR reporting rules, the IRS applied them in a rigid, confiscatory way, particularly for Americans residing abroad who have most of their assets overseas.
There was zero outreach to the overseas community and the only indication that FBAR filing might be required was a footnote on Schedule B.
The IRS has put some Americans abroad in an impasse. The whole practice of applying penalties for non-filing of a form unrelated to the 1040 should be put into question.
The IRS policy is all the more questionable as citizenship-based taxation on which this international reach is based rests on thin ice, morally and practically. It is time for the United States to adopt residence-based taxation, like the rest of the world.
Calgary411 wrote:
Thanks for your thoughtful comment, RogelioC. Why is this issue not in the media?
Why did Commissioner Shulman repeatedly ignore the Taxpayer Advocate Service, Nina Olson’s TADs, both for US and international taxpayers?
Will the new Acting Commissioner pay attention and communicate with Nina Olson on the issues she has identified as one of his first responsibilities?
There is serious collateral damage done by the US’s citizenship-based taxation laws — and the IRS is taking advantage of decades of turning a blind eye for now outrageous penalties for $0.00 or very little actual tax owed to the US.
And now we have FATCA. Shameful tactics of the IRS and the US Congress that has built the monstrosity of Tax Code. Faux reciprocity — will the US Congress allow full reciprocity for FATCA to every country of the world?
It is apparent that US Persons who left the US to live in other countries have had and continue to have punitive action from IRS and Congress as they are stated and perceived “traitors”. The real tax evaders, for the most part, reside within the shores of the US, not offshore..
Distressman wrote:
As a dual citizen living in my country of origin after living and working 30 years in the USA I am a casualty of this persecution initiated by Mr.Shulman. I learned about FBARS in 2010 by chance when visiting my son and daughters in the USA. Since then my life has become a nightmare. I live in fear and being 80 years old my health is being affected. I have spend a lot of money and time trying to do the right thing. Since my country of origin has no tax treaties with the USA, I am being double taxed and I pay taxes that Americans in other countries don’t. My choices: return to the USA, renounce my US citizenship, or stop working.
and Finally I wrote:
FBAR! (IRS form TD F 90-22.1)
One of the greatest abuses of all time, and totally ignored by Congress and the press.
The IRS has conducted an offshore Jihad against what was ‘supposed’ to be Homeland tax evaders, (cheats the press says) but extended it in very aggressive and egregious manner.
They used a Draconian penalty structure based upon the failure to file one 1970 form the FBAR. They applied to Homelanders and Americans living around the world alike without regards to culpability. Even new immigrants to America who had no idea of this responsibility got hammered.
For 40 years, the FBAR had not been widely used or reported even by the professional tax practitioner community, until the authority to enforce was delegated to the IRS and they suddenly unleashed its penalty provisions in 2009.
After the new administration, and under the leadership of Shulman and Miller, they pulled it off the shelf and without any warning, education or outreach went after ANYONE, ANYWHERE in the world and applied it without regard to willful or NON willful behavior!
The did NOT get around to mentioning the requirement in their publication 54 Tax Guide for U.S. Citizens and Resident Aliens Abroad until 2011, and even now you would have to read the publication to find it, as it is NOT listed on the table of Contents.
http://www.irs.gov/pub/irs-pdf…
It is listed under other forms you may have to file on page 8
That seems strange, for a Penalty structure that is so Draconian and the lynch pin of all their offshore crackdown efforts. Why does it still remain hidden for you to search out, find or stumble upon?
In 2009 they created a Voluntary disclosure program, (OVDP) and immediately did a BAIT and SWITCH to hammer everyone in a ‘One Size fits all Penalty Structure’ that especially hurt Americans living abroad who were benignly non compliant.
All faced the firing squad. Benign J Walker and Child murder all received the same sentence.
The National Tax Advocate issued a Directive to Commissioner Shulman to reverse and STOP his non discriminatory penalty practice, but like with IRS testimony in Congress, he STONEWALLED her, and failed to respond as required by law.
She reported on this in her 2011 Report to Congress and Republican and Democrat Politicians alike DID NOTHING.
Read it yourself. It is not long, but it is telling of the abuse and attitude inside the IRS.
Title: The IRS’s Offshore Voluntary Disclosure Program “Bait and Switch” May Undermine Trust for the IRS and Future Compliance Programs
She continues to report about inflexibility IRS administration of their misguided Voluntary Disclosure programs and more generally on the U.S. Citizenship taxation rules and impacts on Americans abroad. Due to complexity and the unique nature of US Tax Practices, it is virtually impossible (and very expensive) to be compliant while living and working abroad.
Where are the Republicans and Democrats that are reading that? Where is the outrage and hearings about this?
Title: The IRS’s Offshore Voluntary Disclosure Programs Discourage Voluntary Compliance by Those Who Inadvertently Failed to Report Foreign Accounts
Title: Challenges Persist for International Taxpayers as the IRS Moves Slowly to Address Their Needs
The GAO recently did a report on the OVDP, and drew some wrong conclusions and recommendations that will actually decrease compliance, but if you look at the numbers, of all the revenue ($5.7 billion) that Shulman trumpets as success and the press just repeats without question, ONLY 33.9% was tax revenue collection.
66.1% was Penalties, and will not reoccur as a future tax revenue stream.
THIS IS IMPORTANT.
…The IRS has been using disproportionate FBAR penalty application as a revenue enhancing tool, rather than really employing policies to improve compliance.
If you look at the lowest percentile, it is more shocking what they have done…
For the 10th percentile group, with median account size of $78,315 the total unpaid taxes over the six-year 2003-2008 lookback period were $103 (or $17 per year.)
It would be hard to imagine anyone willfully setting up and maintaining a foreign account to cheat for such an insignificant amount of money, yet the average (in lieu of) FBAR penalty for this group was $13,320 or 129 times the amount of unpaid tax!!!!!!.
Had this been unreported domestic income from Americans living in the homeland, and the highest fraud penalty applied of 75% to the $103 failure, the penalty would have been $77 NOT $13,320.
Now, that is scandalous! What is the moral justification for that level of penalties that is totally divorced from the amount of tax reporting failure?
Compare those real Penalties to some T-party 501(c)(4) groups who were delayed in exemption application, but were NOT legally required to file for the exemption in the first place! This was just IRS regulatory overreach!
If there is any non scribe journalist around, read a full GAO analysis here.
So, you don’t need a special prosecutor or more Congressional testimony to understand IRS abuse of penalty practices, you only have to read their own National Tax Advocate or read the GAO reports.
In my opinion, what the IRS has been doing to average Americans of modest means around the world with administration of FBAR and OVDP…and now FATCA is by far a BIGGER scandal than the T-Party Targeting.
This scandal has had some positive effects, in that it sheds a bright light on the fact that the IRS is capable of doing GREAT harm.
It misuses its regulatory power and discretion. It is bureaucratically muscle bound when it comes correcting policy errors. The leadership is incapable of accepting any responsibility by admitting mistakes, changing practices and doing the right thing to restore trust.
Rep Duckworth said it powerfully. “Shulman, you can delegate authority, but NEVER delegate responsibility.”
Finally, it also turns the mirror onto Congress that creates the Tax code complexity with 4680 tax changes since 2001 and totally fails in its oversight responsibility.
From the Economist: Who will tame the Taxman?
http://econ.st/ZjQtXk
Wake up America, and you Dems with your head in the sand, the T-Party is not the only victims. Even your Progressive publications are beginning to get it.
Examiner: ““we’ve been told to raise more revenue.”
When that becomes the attitude inside the IRS, abuse naturally follows!
Good move putting this into its own post, Just Me — and, as usual, your full 101 course for the uneducated. You say it all so well. Thanks.
That is a reason why the founding father emphases on “no taxation without representation” why would congress cares about oversea American as they have no vote
Pingback: More on #IRS abuse of #americansabroad | U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club
From Roger….
http://thehill.com/blogs/on-the-money/domestic-taxes/302033-lawmakers-press-on-with-irs-targeting-investigation-over-recess.
I have posted my response to this article. Here’s where we all really need to pitch in and hold the Congressmen’s feet to the fire to question both Schulman and Miller on their malfeasance in failing to respond to the National Tax Advocate’s 2011 and 2012 Reports to Congress as mandated by law. So far they have both completely ignored their obligations to respond.
So far there are only 3 posted comments, including mine. So whatever you post is much more likely to be read than when there are a thousand or more posted comments. There is much more to be highlighted, such as Citizenship based taxation, FATCA, the skyrocketing renunciations of US citizenship by long-time American residents abroad who cannot survive the Gestapo tactics of the IRS, and the gross negligence, be it inadvertent or deliberate, of the Commissioners in responding to these reports. I am reasonably sure in my own mind that this is deliberate and Congress cannot allow them to get away with this.
Roger Conklin
(My posted response)
Internal Revenue Code Sec, 7803 requires that the National Tax Advocate submit an annual report to Congress, and Section 7803(c)(3) mandates that the Commissioner respond to this report within 3 months.
National Taxpayer Advocate Nina Olsen’s 2011 report was issued on December 31, 2011. It highlighted the “bait and switch” Offshore Volunteer Disclosure Program which punishes inadvertent non-compliance with the same draconian penalties applicable to criminal tax evaders even though it most cases those penalized owed either no or very little additional US taxes.. Commissioner Schulman never responded to this report as he is required to do so by law.
Ms.. Olsen’s 2012 Report to Congress for 2012 was issued on January 9, 2013, highlighting this same identical issue. Over 4 months have passed since this report was submitted to Congress, which identifies this same “bait and switch” program for overseas tax filers. Over 4 months have elapsed and Acting Commissioner Miller sill has not responded as required by law.
Both ex-commissioner Schulman and soon to be ex-acting commissioner Miller need to be questioned by this Congressional Commission on their failure to submit responses to these reports.
Well, comments have swollen to over 137 now, and I did my duty and put up one as a follow on to the theme Roger posted…
@ Just Me
“But never mind, lets continue to have partisan fights over the current scandal and ignore an even more abusive one. Congress can’t even be bothered to read their own National Tax Advocates reports on the issue and respond.”
Spot on! It seems “The Hill” is another one of those battlefields for the Hatfields and McCoys. It’s the left this, the right that, and they don’t want to look beyond the boundaries of the homeland. However, that was a good attempt, along with Roger, to try to get them to appreciate the truly scandalous treatment of Americans overseas and American immigrants who are being FearBARed to a pulp by the insanity of the dys-system passing itself off as US tax code. The comments are getting buried in the rep-dem dialogue but if Brockers get their “up arrows” out maybe we can get yours and Rogers to the top of the “Best”. Location, location, location.
@Em…
It definitely is the “Hatfields and McCoys”, and hard to even bother reading with all the name calling. It would be nice to get a lot of thumbs up to move our comments to the top of the rubbish heap!
The IRS caused a huge damage to the US economy by treating innocent dual citizens no differently than criminal tax evaders or money launders, even though about 90% of them owe no taxes (and in fact 30% may get tax refunds for dependent children) and law abiding citizens. Even more hurtful is, the support of fellow US citizens to such IRS abuses, which destroyed my trust and belief in their fairness. I refuse to believe about the human rights abuses in Iraq, until we are victims of such abuse (with tacit support of press and US citizens).
Over 90% of the people don’t mind paying back taxes, interest and penalties. We are resentful of using FBAR (giving same punishment to J-walker and child murder). It is intentional and deliberate by demonizing dual-citizens as traitors.
I ask the US citizens living in the USA, how you would feel, if you are a dual-citizen living abroad large part of your life in that country where all your family levied for many generations and have no plans to live in the USA. There are 6 million people like that, once proud citizens of the USA and who have been batting for the USA.
The IRS silenced their voices and driven them underground. Under 600,000 FBARs are filed each year. I am sure large portion of this is from residents in the USA and 30 million strong immigrants or Green card holders. If the goal is increasing compliance, the approach is a miserable failure. Many dual-citizens becoming compliance only to relinquish US citizenship.
From Accounting Today: http://www.accountingtoday.com/news/Attacking-IRS-Ignorance-Stupidity-66866-1.html?ET=webcpa:e7151:241779a:&st=email
and COMMENTS!!!
A comment by Jackie Bugnion ACA Executive Director I want to point your attention to.. A few thumbs up please.
House lawmakers press on with IRS investigation over recess
I would like to expand on the comment of Roger Conklin. The IRS should be questioned not only for not responding to the National Taxpayer Advocate, Nina Olson, but should also be questioned on the handling of the Overseas Voluntary Disclosure Program, which was so bad that it was publicly criticized by not only Nina Olson, but also by the New York Bar Association and in articles written by partners in Caplin and Drysdale as well as in blogs of Jack Townsend and Phil Hodgen, both tax lawyers, and probably many others.
American Citizens Abroad (ACA) has received several testimonies about totally disproportionate penalties under the OVDP which are based on the maximum value in foreign accounts over the 6 to 8 years preceding entry into the OVDP.
The GAO study (Ref GAO-13-318) of March 2013 entitled “Offshore Tax Evasion” provides on page 13 a table of penalties and additional tax owed for 2003-2008 under the 2009 OVDP. For the 10th percentile with estimated accounts of $78,000, the penalty based on asset balance represented $13,320, which was 129 times the taxes due of $103.
This drops to 21 times for 25th percentile ($35,670 in penalties vs $1,661 in taxes due), to 8 times for the Median ($107,949 in penalties vs $12,748 in taxes due, to 5 times for the 75th percentile and to 4 times for the 90th percentile ($793,116 in penalties vs $190,399 of taxes due).
ACA strongly suspects that most Americans residing abroad who entered the program fall into the lower percentiles with lower levels of assets. ACA members have written several times to the IRS under the Freedom of Information Act to receive a breakdown of the participants of the OVDP between U.S. residents and American residents, but the requests have systematically been refused.
The IRS program unduly punished Americans resident abroad who must have foreign bank accounts because they correspond to local bank accounts for their daily living, not to accounts deliberately set up to avoid taxes as Americans abroad pay taxes where they reside; Americans abroad have a far higher proportion of their total assets in overseas accounts than the wealthy US resident hiding a portion of their wealth overseas. The IRS is using the FBAR penalties to confiscate assets from Americans abroad, many of whom are individuals who have lived most of their lives overseas, have earned their money overseas, have saved overseas and who were simply unaware of the filing requirement due to citizenship-based taxation.
The IRS implicitly recognized their error in September 2012 when it created the “Streamlined program for Americans resident abroad”, but the threat of penalties on assets and criminal prosecution remain. The GAO report points out that the IRS has deliberately publicized its threats and prosecutions to scare individuals and attract individuals to the OVDP program, but has made no significant outreach to the community overseas. The Taxpayer Advocate annual report signals that the IRS has spent hundreds of millions of dollars on international tax criminal investigation while cutting back on the minimal amount of outreach to taxpayers.
The attitude of the IRS’s aggressive foreign account tax compliance program is to use a one-size-fits-all steamroller with no consideration or concern for the destruction brought on Americans resident abroad. What is worse is that this policy of imposing penalties on assets corresponds to basically taxing individuals on their assets, which is not part of the US tax code that taxes only on income. This policy is all the more unjust as it represents a 180 degree change in policy. The 2003 Offshore Voluntary Compliance program had no offshore penalty. In fact, prior to 2008 nearly no one was aware of the FBAR filing requirement as it was never enforced; it was only mentioned in a footnote on Schedule B. It was not mentioned in the general instructions for international tax filers. If one filed the report, one had the impression that it was just a useless paper that would disappear into some forgotten file in the DC bureaucracy.
The FBAR penalties touch nearly all Americans abroad since the threshold for the reporting requirement is still only $10,000 which was established in 1970. That the IRS can impose such drastic penalties specifically related to foreign bank accounts creates a clear discrimination against Americans resident abroad.
This IRS prejudicial policy is all the more incoherent since Congress is now seriously starting to think of initiating residence-based taxation, recognizing the multiple defaults of the current citizenship-based taxation, including the handicap on U.S. competitiveness. The Senate Finance Staff has issued a statement supporting residence-based taxation and the House Ways and Means Committee is looking at it as well. It is time for the United States to recognize the asset value of Americans abroad instead of maintaining policies which are literally destroying the community overseas. The IRS OVDP should be investigated by Congress.
I am one of the Directors of American Citizens Abroad.
Wow, thanks for posting that from Jackie Buignon of ACA, Just Me. Powerful.
And that is the first time I think I’ve seen the confirmation that multiple FOIA requests for the penalty breakdowns, submitted by ACA members, were denied entirely. I just assumed that they were being stonewalled. I’d like to see copies of those denial letters posted on the website (applicant names could be redacted). Wondering whether the Taxpayer Advocate Nina Olson asked the same thing – and what the answers she received (or not?) from the IRS and Treasury?
And as to this “The IRS implicitly recognized their error in September 2012 when it created the “Streamlined program for Americans resident abroad”, but the threat of penalties on assets and criminal prosecution remain.” Bravo!!!
I’d add that by forcing those still currently in the OVD programs who do qualify for Streamlined to be judged on 8 years of submissions only because they obeyed the IRS instructions not to do quiet disclosures in 2011, when they would have been able to come compliant with far less pain, professional fees and years subject to jeopardy, egregiously extends the injustice that the IRS is tacitly acknowledging. If it was wrong then, and inappropriate for the IRS to treat all non-filers ‘abroad’ as deliberate homeland tax evaders, then it is still wrong – to penalize those ‘abroad’ that the IRS deliberately manipulated with threats – knowing that they could have at minimum used the advice belatedly described in the December 2011 factsheet – or just filed forward or quietly backfile any number of years – as thousands did successfully. There are lots of forums where tax professionals repeatedly state that quiet backfiling or filing forward was a perfectly acceptable practice for decades until now. And reports of IRS helpline staff advising the same.
@Badger…
If you don’t mind, I am pasting your reply in the Hill comment response to Jackie so she receives it. 🙂
@Calgary411. Great comments on that Accounting Today story. I bet he is sorry he wrote it… I added one too, just to pile on.
Thanks Just Me.
And @all,
You can comment on the Hill article as a ‘guest’ – easy peasy – doesn’t require Facebook, login, etc.
IRS Appoints Executive to Restore Integrity after Controversy
http://www.accountingtoday.com/news/IRS-Appoints-Executive-Restore-Integrity-Controversy-66877-1.html#read
Was a opportunity again for Roger to comment, and I added one too…
@Badger
Of all the homelanders who believe that USP’s abroad should be paying US taxes, NONE have outwardly supported the US taxation on a non-resident’s sale of a home in Canada, although one person said that if they were lucky enough to have netted the kind of profit required to owe tax they would gladly pay it. It’s easy to say that when the situation in purely hypothetical, isn’t it?
@JustMe: IRS Appoints Executive to Restore Integrity after Controversy
Restore?
@Watcher…
They live in a bizarro upside down world with their views of a false reality. There has been none to restore, but they need to maintain the myth as if adding an executive will make one whit of difference to the mindless blob of processors