This post is from the RenouceUScitizenship blog.
God, grant me the serenity to accept the things I cannot change,
The courage to change the things I can,
And wisdom to know the difference.
We are now more than two years into the Obama/Geithner/Shulman/IRS assault on U.S. Citizens Abroad. It is commonly accepted that the origin of the assault has been – what can now be understood to be – a clear, deliberate, and conscious decision of the Obama administration. That decision is to equate the day-to-day bank accounts of U.S. citizens abroad with the offshore accounts used by Homelander tax cheats. It’s no longer possible to believe the administration and the IRS are unaware of what they have done. There are signs that the IRS is slowly trying to change the rules, change the policies, and change the enforcement. That said, one gets the feeling that the IRS is motivated by considerations of “processing efficiency” and not by considerations of “fairness and justice”.
Two important aspects of the problem are:
1. All bank accounts outside the United States are considered to be “sacred instruments” of tax evasion. Not even the IRS is stupid enough to believe this. Therefore, it’s clear that the IRS is at least threatening (how do like freedom now?) to use the day-to-day bank accounts of U.S. citizens abroad as an “FBAR Fundraiser“. The IRS is using the retirements plans of U.S. citizens in their country of residence, to levy fines for failure to file Form 3520. The IRS is using the fact that middle class U.S. citizens invest in mutual funds to subject them to impossible compliance costs and more threats of penalties. This has been documented by Taxpayer Advocate and ignored by the IRS. We know this. What is different is that in 2011, there was a sense that this “must be some kind of mistake”. It must be “some kind of misunderstanding”. Only a fool would believe that today. The only sane way to view this today is as follows:
The Obama administration is deliberately using penalties and threats of penalties to confiscate the assets of U.S. citizens abroad. Don’t believe it? What’s Form 8938? This is not about taxation. It is about confiscation. But you know that. But, this is not the purpose of this post.
2. The purpose of this post is to explore an aspect of this that has not been adequately discussed. In the same way that it is a mistake to treat all “non-U.S. banks accounts” the same. It is a mistake to think that the impact of all of this is the same on all. In fact, the people who are the hardest hit are those U.S. citizens abroad who have tried the hardest.
Group 1 – Those Who Have Been In The U.S. Tax System
This group has been filing their U.S. tax returns, to the best of their abilities. They are in the system. They are now “low hanging fruit”. The fact that they have been filing all these years means that they are likely very financially responsible, very aware, very law abiding people. That’s the good news. The bad news is that they are also people who by vritue of having tried to save for retirement have assets that the U.S. wants to confiscate. Obviously this includes the PFIC mutual fund problem.
The problem of owning mutual funds is two-fold:
First, mutual funds are not subject to rules of taxation. They are subject to rules of confiscation.
Second, that in order for the IRS to confiscate them, one must first comply with all kinds of reporting requirements that are impossible to understand and are far too expensive for the average person.
Here is a historical analogy to the IRS treatment of U.S. citizens abroad who have mutual funds:
Jesus was forced to carry his own cross (paying the cross-border professionals to complete the forms) to his crucifixion (the confiscation rules will take it all).
Now, I know that at this moment, at least some readers are howling at the last sentence. Really! What that tells me is that you:
A. Have not tried to be U.S. tax compliant;
B. Have not tried to use mutual funds to invest for retirement;
C. Probably do NOT feel strongly that one should be tax compliant;
D. Probably are far enough enough away from retirement age so that you can make up the losses.
Just try living this reality!
The people most hurt by this are the people who have tried the hardest to comply with the law. I remind you that it was not until OVDP started in 2009 that the IRS enough knew now to deal with mutual funds and not until 2010 that the ruling came from an IRS counsel (that the cross-border professionals are using to deem mutual funds as vehicles of confiscation).
Group 2 – Those Who Tried To Fix Any Past Compliance Problems
It has become increasingly clear that those who entered OVDP or OVDI were simply suckered. After the vicious and frightening propaganda of the summer of 2011, many people were terrorized into entering OVDI. The lawyers were there to usher them in. They are now locked into the program (although there is some indication that some will be moved to “Streamlined Compliance”). Those who waited appear to have better compliance options.
Of course, by December 2011, the IRS had issued the infamous FS which made it clear that, one didn’t need a formal program of voluntary disclosure. Of course, that didn’t stop the IRS, with full knowledge that minnow were being terrorized into the program, from resurrecting (another Biblical analogy) the corrupt OVDP program in 2012.
My point is a simple one: those who tried to be compliant, those who tried to become compliant by entering the OVDP programs have been the hardest hit. The main reason has nothing to do with taxes. It has nothing to do with compliance. It is the fact that many of them have heard nothing from the IRS. Reminds of the Steven Miller (a cousin of his perhaps) song:
Those who entered OVDI have been living in fear and anxiety since entering the program. What have they heard from the IRS? In many cases, nothing.
IRS Bait and Switch Tactics in OVDP and OVDI
One would think the terms of the OVDP programs were abusive enough. But, the IRS didn’t stop there. In 2009 the IRS changed the terms of the program after people had entered the program. In 2013 the IRS kicked a group of people out of the program after accepting them into the program. It is now certain that:
Any lawyer who advises a client to enter the OVDP program should be disbarred!
The only benefit to the OVDP program was certainty of result and now that certainty has been forever compromised. As a letter from the New York State Bar suggests, who could possibly trust the IRS? The trust issue was recently highlighted by former IRS lawyer Steven Mopsick on this blog. (See also the Mopsick Trilogy – a series of posts about OVDP and its impact on U.S. citizens abroad and Green Card Holders.)
So, what’s a law abiding person who believes he is supposed to be tax compliant supposed to do?
I am writing this post in response to a series of comments at the Isaac Brock Society. The post was about PFICs and it generated a number of comments. The interesting comment stream starts here. We are confronted with a situation of a frightened, confused U.S. citizen abroad, who really wants to be tax compliant, did his best to save for retirement, like the IRS knew nothing about the perils of mutual funds, and must now choose between:
A. Financial ruin – all his money must to to the IRS and compliance costs
B. Non-compliance – but having to live as a “tax cheat”
The problem is that this is exactly the situation of many U.S. citizens abroad who have have lived commendable responsible lives. It is worth noting that neither the IRS nor the U.S. government has ever AND TO THIS DAY DOES NOT make any real effort to educate U.S. citizens about their tax responsibilities! The IRS defines “education” as “threats or penalties”. I feel for the children of Douglass Shulman and Steve Miller (if they have any).
I am going to reproduce this comment stream and invite suggestions on how what people like this should do.
-
@USCitizenAbroad, @Kalc, @Bubblebustin
“What would you expect a U.S. person with many years of fillings in the system to do?”
That is exactly the issue. This whole PFIC thing makes me SO ANGRY and FRUSTRATED!
I don’t see ANY good answer for such persons. No matter what option you look at it spells financial disaster, especially for people who are at or near retirement age. They cannot afford
to lose all of the money they have invested over many years just to now become “compliant” (i.e.pay big bucks to have some accountant fill dozens of 8621s, pay back taxes, interest, and penalties and more taxes and interest after they sell the PFICs) and they do not have any other regular source of revenue to replace such a loss.“If you are a Canadian citizen without US assets, you are protected. Don’t tell your FI if you happen to have been born in the US. Don’t have more than 1 million in one account.”
It’s not so simple. If you’ve had a long term relationship with your financial advisor, he likely may already know that you are a USC. Many mutual fund portfolios contain a mixture of US and non- US assets, so you likely may have some in your portfolio already. What should you do? Sell them and then what?
How do you deal with them on the following year’s tax return? FATCA kicks in way below having 1 million in one account.“I do NOT believe that the Government of Canada understands this problem in its entirety. Would you be willing to collect these comments (including the one about the interaction between PFICs and SubPart F),”
I agree totally. If the government of Canada DID understand all the implications and what a horrendous financial burden this will create for U S persons in Canada, when their financial institutions turn over the data about their TFSAs, RESPs, PFICs, and other investments via FATCA, I think they would not be so ready to sign an IGA. Those persons will be financial bankrupted if the IRS gets their data and goes after them. And when these people are left bankrupted, it will be the Canadian government that will have
to help support them because we all know that the US government won’t do anything for USCs abroad.So, please, please do everything that you can to inform them (Kevin Schoom and others) of what are all the implications if they go down the FATCA compliance path. I think this PFIC problem has certainly not been given enough visibility with our government. It is incredulous to me that the IRS could make a policy change in 2010 about Canadian mutual funds without a formal regulation and then apply it retroactively. This is just WRONG and the Canadian govenment needs to stand up for us and fight this.
Sorry for the rant, but this issue makes me crazy. Reading what USCitizenAbroad suggested as the only solution for the most financially responsible citizens today just makes me feel more depressed about an already depressing situation. Yes, it does help to be able to talk about it here with others but the reality that is looming in the near future if FATCA kicks in as planned is just too awful.
-
@Albatross
Here are the solutions:
Solutions From The Government of Canada
Any IGA would exempt from its application lawful residents of Canada regardless of their citizenship. Put it another way, the U.S. can’t both have FATCA and citizenship-based taxation. Is this possible? Not unless this issue is really understood which is not.
Solutions From U.S. Persons Abroad – Take Charge Yourself
You and I agree that the ones with the biggest problems are the ones who are entrenched in the system. Their options are:
1. Do not sell their PFICs. The problems kick in when they are sold. Continue to treat the distributions the way you have always treated them on your tax return. Repeat: It’s the sale that triggers the very worst of the problems.
2. The time has come to recognize that you will never be able to be U.S. tax compliant. Just not possible unless you pay the staggering costs of compliance and all the fines associated with trying to plan for retirement. I would stay away from the lawyers who will scare you to death. Just keep living your life. Don’t do anything that will trigger taxable events. The advice that most accountants and lawyers give is: sell your PFICs. For those who have had them for the long term, that is the worst possible advice. You do NOT sell them. You hold them and simply pay tax on the distributions the way you always have. That’s the best case scenario. Include the income on your taxes.
3. RRSPs – This may be the exception to my suggestion for holding the PFICs. Assuming that because they are in an RRSP that the sale inside the RRSP is NOT a taxable event, then perhaps you get rid of those (but get competent advice for taking that step).
4. Don’t listen to the F_____ cross border professionals. Most of them have really not thought this through plus they have trouble separating their interest from your interest.
5. If all else fails, hide behind the treaty.
6. Become a Canadian citizen if you are not already. Then start lobbying the Cdn government to pass law saying that all naturalized Canadian citizens were Canadian citizens from birth. This will protect their own tax base and their citizens from the U.S. exit tax.
7. Just accept that the US considers you to be a criminal. Hell, people live like that all the time. Of course, you should stay out of the U.S. You might even learn to like it. Dress the part. Pick up the language. Learn to talk that way. It might be fun for you. You might get the respect that you think you are lacking. Pick a criminal to model yourself on – say Barack Obama.
8. If none of these work, and you have Supart F income, then, well you know my suggestion.
Curious what you think of those suggestions?
-
@USCitizenAbroad
For those entrenched in the system, surely renouncing is still a better option than continuing to have to deal with this BS year after year. At least that frees you from the ongoing obligation. Yes, I accept that it may leave issues from the past and may not be a great idea for those that have a need or desire to set foot in the US in the future.
Yes, there is still an issue with the 8854 compliance, but there is still a choice on how to play that game, depending on the circumstances and risk tolerance.
-
@USCitizenAbroad,
Thanks for your comments on my posting. Here are my thoughts on your suggestions. I’ve included a
few questions I have on some points you raised.Solutions from the Government of Canada
Yes, I agree that this would be a great solution, but I don’t believe they do understand it.Solutions From U.S. Persons Abroad – Take Charge Yourself
1. Yes, I agree that it makes no sense to sell the PFICs as that will trigger a nightmare.2. Yes, the lawyers and accountants that I’ve talked to have all said to sell ALL the PFICs, but of course they don’t have to worry about paying the costs associated with doing so. I concur that there is thus NO
way to ever be tax compliant in this scenario, unless of course the tax code changes.“You hold them and simply pay tax on the distributions the way you always have. That’s the best case scenario. Include the income on your taxes.”
QUESTION: So I infer from your suggestion that one should not bother with now filing 8621′s and the
complicated calculation of “income” derived from them, but just continue to include the actual interest or
dividends or capital gains distributions you receive from the mutual funds on your tax return. Is that what you are suggesting? As soon as you look at filing 8621s for each mutual fund you are talking BIG bucks
to have an accountant prepare it and these forms are way too complex for the average taxpayer to attempt.
QUESTION: What happens when FATCA kicks in and the FFI or CRA turns over the details of these funds to the IRS? Won’t they then identify them as PFICs and come screaming for all they back taxes, 8621 forms, etc? Is that where your suggestion 5 comes in?3. Don’t know about the RRSPs. This would require more research. For now these are not as
important since the tax is deferred by 8891.4. Agreed.
5. “If all else fails, hide behind the treaty” Not sure just how one can hide behind the treaty. Can you
clarify what you mean here?6. Definitely a Canadian citizen. Ideas how we can get the Canadian government to pass such a law?
7. Yes, definitely safer to stay out of the US. Not really a big hardship on that point for many of us.
8. I didn’t really understand the Subpart F business completely but sure hope it doesn’t apply. I’d hate to think that that would be the only solution.
I’d be interested in your further comments and answers to my questions above. Your comments are always very informative. I appreciate having the means to exchange thoughts with people like you who do understand this complex and horrendous issue.
It is clear that this person is in a situation where he completely compromises his financial security by allowing the cross-border professionals and the IRS to confiscate his assets or he must live with the knowledge that the U.S. considers him to be a “tax cheat”, somebody who is worthy of a “FATCA Hunt” or possibly a Whistle Blower’s Retirement Plan.
It is impossible to live with either scenario.
The first scenario subjects one to a total rape and having to live with the consequences the rest of your life.
The second scenario, if not dealt with properly, has the potential to change your own “self image”. On this point though I would say:
To be considered a criminal by the U.S. government is like being called ugly by a frog. To be a criminal is to have a certain moral stature. In the U.S. there is no correlation between law and morality – in fact, law has become a substitute for morality.
At a minimum, leaving aside the financial issues, the emotional stress and damage is more than a person who was financially responsible can bear. So, those U.S. citizens abroad who are nearing their retirement years and have most of their wealth in mutual funds must choose one of two options. Tax compliance is possible only in a logical sense. In a practical sense, for many U.S. citizens abroad, tax compliance is not possible. This is perfectly understandable when issues of “taxation” are confused with “confiscation”.
The current U.S. Canada Tax Treaty, as I understand it, does NOT require Canada to assist the U.S. in the collection of taxes on Canadian residents, if the person was a Canadian citizen at the time the “debt” arose. This is information of possible relevance. It doesn’t mean you don’t owe the money. It just means Canada won’t help the U.S. collect it. I presume that that those renouncing U.S. citizenship would be able to use the treaty to shield them from possible Exit Tax Enforcement. But, to use the treaty is to live with another layer of worry!
The best solution is always to renounce. At this point the only reason to NOT renounce is because you think the U.S. will move to Residence Based Taxation. Who knows? Tax reform is on the agenda. U.S. citizens abroad made a number of excellent submissions to the Ways and Means Committee. I don’t know about you. But, there are NO circumstances under which I would want to be a U.S. citizen.
I am writing this post at time when:
1. Canada is considering a FATCA IGA with the U.S. I hope Canada understands what it will do to one million Canadians by turning them over to the IRS.
2. Generalized IRS abuse of taxpayers is under way in Washington. It is possible that this post has relevance to that issue.
3. Congress is considering moving to Residence Based Taxation. That would solve ALL of these problems.
In closing, to all U.S. citizens abroad who worked so hard to save for your retirement …
God, grant me the serenity to accept the things I cannot change,
The courage to change the things I can,
And wisdom to know the difference.This is for real. You must accept that the U.S. government is not what you thought it was. It has made a conscious decision to attack you, your families and your assets.
Courage is the willingness to proceed in the face of fear. In this case it requires you to face up to a decision with no good outcome. You must choose between being destitute or being tax compliant. “American exeptionalism” means you cannot have both.
Wisdom means finding a way to move beyond this frightening chapter in your life. Look at it this way: there are parts of the world where people have never experienced life without U.S. tyranny. The good news is that you do NOT live in the United States.
On that note, I will conclude with a thought from Winston Churchill. His wife did not approve of his drinking. One night he came home and she said:
Winston, you are drunk.
Winston thought about it a minute and said:
Yes, I am drunk. But you are ugly and tomorrow I will be sober.
Put it this way, you can renounce your U.S. citizenship. Every day, for the rest of their lives, Homelanders will wake up in the Homeland!
@badger
Do two wrongs make a right in this case, i.e. knowingly making a false statement in order to exit the US tax system unscathed?
One surely has other options.
@WhiteKat
I have complete empathy with everything you’re saying. If we hadn’t thought it would jeopardize our way of earning a living, we would have never entered OVDI and would have likely chosen to never enter the US again. I’d like to think that if we hadn’t, I’d be writing letters of protest right now to the IRS Commissioner, telling him where he should put his FBAR’s and quoting at length from the NTA’s Reports to Congress and Bernard Schneider’s tax reform submission (both being upstanding Americans) but I more likely be would find myself hoping for a miracle instead. As horrible it is to go though this, I hope at least I’ll come out of this with a lasting solution to the problem, and feel terrible for those who, as you say, feel as though they have no control over their situations. Much of our distress comes from being abandoned by no less than both countries that consider us their citizens, and if the Canadian government was to at least show stronger signs of pushing back it would go a long way in helping our psyches.
@bubblebustin, those abroad, who did the ‘right thing’ as advised by tax-cheat-Geithner and ‘I’m-not-responsible’-Shulman and ‘In-2008-it-was-expedient-to-pretend-I-cared-about-those-abroad’-Obama, have paid an incredible and unjustified price. Further casualties and sacrifices cannot correct that, unfair as it is.
I don’t think that this situation lends itself to a clear case of two wrongs not making a right. It is more that two wrongs will never make things right. Confiscating our legal assets, and threatening people into nervous breakdowns and suicidal depressions will not make anything right. Turning over our family savings will not make things right. Putting ourselves in useless peril will not make anything ‘right’. Unless the US can rationalize that obtaining as much revenue as possible, by any means ‘necessary’ is right. And unless the US subscribes to the belief that ‘might makes right’. Which is what I think the US clearly believes.
I’m not advising anyone to make a false statement. But I’m not advising others on what to do period, or to imperil themselves just because the US says so. We see that in some cases there is no good solution. Not even a sort of solution. The situation is still full of pitfalls, and I don’t think that the perils and jeopardy are just or ethical or contribute to any societal good. There is no greater good’ achieved here. The forced sacrifice of our health, legal and already-taxed-once assets and the security of ourselves and our families is just plain wrong. I think that this situation is unjust and unethical. It is extortionate, which is a perception that the Taxpayer Advocate chose to highlight in an official report – so I am not alone in that perception. Extortion is a crime. We know from the behaviour of the IRS and the little that has leaked out despite their refusal to cooperate with multiple FOI requests, that in the OVDs they have imposed greatly disproportionate penalties far and away in excess of any actual US tax owed. The ‘in lieu of’ penalties – are entirely independent of the zero or minimal tax owed. Stacking of penalties is entirely possible. We know from the Taxpayer Advocate’s reports that some US tax professionals have said – with very good reason, that the willful FBAR penalties – are so disproportionate that they could be considered confiscatory and unconstitutional and successfully challenged in court. And, they have no relationship to any US tax assessed or owed. The accounts in question are not unlawful or necessarily filled with criminal proceeds. Toscher and Lubin say that; “……..the Excessive Fines Clause of the Eighth Amendment to the Constitution
require that any fine—including the FBAR penalty—
be “proportionate” to the conduct it seeks to punish,
provides real limitations on the government’s ability
to impose an excessive FBAR penalty. The case law
developed under the Excessive Fines Clause also
provides a meaningful structure—through a propor-
tionality analysis—of how the IRS must exercise its
discretion in imposing the FBAR penalty, in order to
avoid running afoul of the Constitution by imposing
the type of excessive penalties that the Eighth Amend-
ment sought to banish to medieval English history” from: http://www.taxlitigator.com/main/images/stories/Articles/FBAR_Penalty.pdf “JOURNAL OF TAX PRACTICE & PROCEDURE
69, December 2009–January 2010 by S.Toscher and B. Lubin
‘When Penalties Are Excessive—
The Excessive Fines Clause as a
Limitation on the Imposition of the
Willful FBAR Penalty’
All of this is so wrong that I cannot with good conscience tell people otherwise. I am not advocating perjury because it may have unforeseen consequences worse than the alternatives. I don’t know enough about this to say. But I think we have to acknowledge that doing the ‘right thing’ hasn’t resulted in any greater good either – for us or the US. This is a situation that is immoral and is imposed by the US by force and by manipulating people through threats of confiscation and financial ruin. I don’t think that acting ‘morally’ or ‘ethically’ by putting oneself and one’s family in harm’s way will result in any ‘good’ and I am sure that there are many who came forward via OVD who are heartily sorry that they did. No good came out of it – other than perhaps eventually buying out our freedom at a great price. In some cases, it may be immoral or unethical to free ourselves as individuals at ANY price if it sacrifices the savings and assets that the rest of our family depend on to live.
I am not going to condemn the choices of those who find themselves in the midst of this nest of vipers. Especially as the filing forward and quiet backfiling options seem to be less and less of a possibility – given the recent report urging the IRS to work on capturing and penalizing those who do so. The report did not focus only on capturing tax and ‘getting people back in the system’ and compliant – but in capturing penalties. We know the cost of OVD. We know that Streamlined is very narrow and I would bet that we won’t see any more useful information about it as we approach the one year since it was officially announced (June 2012). In fact, I think we can be certain that we won’t hear anything useful about the Streamlined process, or any other useful clarifications of the ongoing fog around it by the one year implementation anniversary (Sept 2013).
Not everyone can even muster the funds to get professional advice in order to figure out their options. And the costs aren’t fixed ones. The estimates offered up to clients in those ‘terms of engagement’ aren’t worth the paper they’re printed on. The professional fees could and can be vastly more than the eventual penalties, but because the IRS refuses to be transparent – even where zero tax is owed, no-one can make any informed decisions or know that in order to proceed and come forward. The Taxpayer Advocate has chastised the IRS, and it is uncontested that their delays and caprices are harming people, but they refuse to change. The delays and foot-dragging add exponentially to the professional fees. Perhaps I could pro-actively agree with you if we could expect justice, obtain it and afford it. Instead, it’s an adversarial pitting of mere individuals against a behemoth.
Some sacrifices are too great and unreasonable to bear. And many people have to get the agreement of their non-US spouse or others who might be jeopardized in order to come forward, or even to access the jointly held funds to pay for help, or to disclose, or to enter into a debt for legal and tax advice or for any penalties that might result. I read here of someone (born dual) who took out a loan on their house in order to pay for professional fees and pay the 5% penalty under OVD – just to get out and renounce. The US is punishing entire families, not just individuals. And these families are not US persons and none of those involved are ‘willful’ US resident with family trusts hidden offshore to avoid US taxes. The IRS can determine that with far less torment than it is imposing. But it refuses.
Until the US behaves with honour, I’m not condemning anyone else who has been caught up in this who isn’t a US resident actively hiding their assets and cheating on their US taxes. We’ve already paid one government in full. We should not have to appease another.
@Badger
Incredible comment ending with:
“Until the US behaves with honour, I’m not condemning anyone else who has been caught up in this who isn’t a US resident actively hiding their assets and cheating on their US taxes. We’ve already paid one government in full. We should not have to appease another.”
@Bubblebustin
Form @Badger’s perspective this is not a situation of “two wrongs” – it’s a question of one horrible wrong. That one horrible wrong is the wrong inflicted by the Government of Barack Obama. U.S. citizens abroad are now in a situation where they feel (whether true or not) that they are under attack. It is natural when one is “under attack” to defend oneself. That’s part of being human.
You have raised a difficult and interesting question. I don’t claim to know the answer. Or as Barack Obama would say: “That’s above my pay grade” (first debate with John McCain on the question of “when life begins”).
Do you feel that there there are “some means” of defense that are wrong? One of the books written about the Obama administration is called “Gangster Government” – Obama Thugocracy.
http://www.amazon.com/Gangster-Government-Barack-Washington-Thugocracy/dp/B005DI69SQ/ref=sr_1_1?ie=UTF8&qid=1369946434&sr=8-1&keywords=Gangster+Government
Working with the theme of the “Thug”. Imagine the following situation. You are sound asleep in the sanctity of your home. You are resting after a day of taking care of your family and contributing to your community. All of a sudden there is a “midnight knock on the door”. In a sleepy state you begin to open your door at the same moment that is being kicked in by someone wearing “Jack Boots”.
There are 4 people standing there. The first introduces himself as Barack. He then introduces the others as Mr. FBAR, Mr. FATCA (looking very thugish, muscular and menacing) and a hot looking babe, in clearly fine “form”, who goes by the name of “3520”. Now they explain to you that they are here to take your money. They are not sure how much they want, because they don’t know how much you have. But they explain that they really want it all. Now to make it easy, quick and painless, for you they explain your options very simply:
Today’s your lucky day, because you get to pick which of options (A) or (B) you wish to keep. You can’t have both.
Option A – We want your money, all of it
Option B – We want your life (that is if you think it’s worth anything after meeting them).
But, they are reasonable people. They reason with you. They explain that it’s okay if you can’t decide. If you don’t decide today, they will come back tomorrow. It’s just that if you decide to pay tomorrow you will have to pay more. Therefore, there is no better time to pay them than now! Therefore, this really is your best (and possibly) last chance to pay.
It occurs to you that this is a situation where you really need to protect yourself. It’s just you. Can’t call the police. They are of no use.
Then all of a sudden your neighbor appears. He introduces himself as a “thug consultant”. He knows how to deal with “thugs”. He is especially experienced with those in the Obama Thugocracy. You are relieved. You think, thank God for this neighbor. But then the neighbor says: but I will charge you for this service. I don’t know how much it will cost, but would you rather pay me or pay Mr. FBAR? Look I know, its a bummer, but you simply have to pay. No, I can’t tell you what it will cost. Look these are difficult, unpredictable and irrational thugs. Just let me take care of it. But as I retainer I would like, say 10% of your net worth. And make no mistake, I will be asking for more. At this point “Thug Obama” interjects and says:
“To be perfectly clear, if you pay us 27.5% of your net worth tonight we will never be back.We will be out of your life. Do you really think that this slimy, self-proclaimed “thug consultant” will give you a better deal? Remember, today is your best chance (and if you piss me off – last chance) to pay me.”
Once again, it occurs to you that you really do have a problem. You also have the presence of mind to realize that you can escape through the back door quickly. Of course that requires you to keep running and never look back. You don’t know how long they might follow you and how much they want if they catch you. What should you do?
I don’t know if there is a “right response to this”. But, is there a truly “wrong” response? Responses that might be wrong in some circumstances are justifiable in others.
Thats why, for example, in certain circumstances, “self defense” is a defense to a charge of murder.
What do you think? One wrong, two wrongs and can do wrongs make a right?
Is there really a wrong response? A response that would truly constitute a “wrong”?
@KallC
Re your last comment: Would you really advise somebody who is already in the system to do nothing and hide?
The way I see it, is that the United States has a gun pointed to our collective foreheads saying “Pay us or else we’ll destroy your life.” In normal society, that’s known as extortion with threat of violence. And in this we have the legal right to take any measures that will protect us, up to and including lethal force. Unfortunately, we don’t have the firepower that would repel a thuggish country that is armed to the teeth with everything all the way up to nuclear weapons.
“Two wrongs don’t make a right”? Well, the way I see it, they have no legal grounds to touch my family’s finances. So my protecting myself isn’t WRONG. I have the right to, under Canadian law. The only country that has that right is Canada. So what I consider as FATCA as an American legislation which has no judicial rights to cross the border and it is an act of extortion against my wife and my kids. And I’ll be damned if I don’t do every damned thing in my power to protect them as a fully Canadian citizen, including invoking Canadian laws because that is where I and my wife and kids are resident in.
The United States and the IRS can kiss my ass.
I often regret having ‘fed the monster’, which in my gut tells me I’m wrong for having given in to the extortionist. The dismay I feel in having done so is worsened when I hear people like Shulman gloat over the haul that he says the IRS has made in OVDI, when I know damn well those numbers will eventually be effected by those being moved to Streamlined.
Badger writes ” I am not advocating perjury because it may have unforeseen consequences worse than the alternatives”. I agree, and slipping though the system in this way has at least one very direct negative consequence: there is one less voice to express the atrocities against us. It may be sauve que peut, but we then become complicit in allowing the crime to perpetuate itself through our own self-interest and preservation, to silence ourselves when we instead should be publicly speaking out against it regardless of the consequences of doing so. In my mind, that is the nature of true activism.
USCAbroad. I once had a brief conversation with former deputy commissioner Mark Matthews. He said that he could not advise anyone to break the law. He then went on to say that the decision whether or not to enter OVDI was not a legal decision, not a moral decision, but a business decision. This conversation tok place a few yrs. ago just as the deadline for OVDI approached.
Each person has to weigh for themself the cost of compliance against the cost (risk) of non compliance.
In most cases, the costs are moderately high in terms of money, time, stress and so on. The risk of non compliance is of course different for each of us but I submit that for most of us it is very very small.
I agree on all counts, bubblebustin!
Well, unfortunately my family can’t afford to “feed the monster”. If we stick our heads up we get it lopped off. We don’t have any fall-back. So it’s all fine and dandy to say “We’re all in this together.” But frankly. All of us may have the same problems, but each of us has their own financial threshold and mine happens to be a lot less than other people’s.
@bubblebustin, I didn’t intend to give the impression that I was critical of your or anyone else’s decision or judgement about what path to take. That was not my intent. In calling the tactics used by the US extortion, I was not implying that you or anyone else ‘gave in’. I would not characterize it that way. The US deliberately threatened, fostered fear, and preyed upon those abroad, herding them into the pit of OVD. I think that was unethical. There was and is no single uniform best path. We all are doing what we think best out of the very limited number of options. I don’t know what is or was ‘best’ for anyone else. You have helped many people by your participation and advocacy, and by sharing what you could of your experiences. That has been invaluable to many I’m certain, and I personally thank you for it.
The words of the US ambassador to Norway–“you better pay up now or we are going to get you later”. Listen only to the attitude, not to the content of what he said.
@Mark Twain
Where and when were these words said?
@KalC
The question of whether to enter OVDI is a completely different question. At best, the OVDI issue is one of whether you use a specific means to clean up past problems. It has nothing to do with compliance in a general sense.
I certainly agree with you that peoples situations are different and that the risk for those who never been in compliance is probably low. But, to get back to the topic of the thread, what about those who are, and have been in the system for a many years? Do they just stop filing? This is a very very difficult question for them.
For American expats, renouncing US citizenship is like removing cancer. The sooner it gets cut out, the better.
@The Animal,
… and it is so wrong. How are so many families to afford all that is “needed” for this, financially and emotionally? What a complete waste of time! I know what this has cost me and my family; I know that, by US law, my son is “entrapped” into US citizenship; I know that I will practice “Don’t Ask / Don’t Tell” and hope the US will not be so stupid to target me and my son (or your family and your son) — but Why, Why, Why?
What your family and others like yours face with this is completely immoral. It is such a powerless feeling when people try to do the right thing, the lawful thing — it doesn’t make sense and it is destroying or crippling the lives of many families of US Persons Abroad.
Damn the US uncarng immorality and hypocrisy!
@TheAnimal, @Calgary411
Yup, its wrong, immoral, etc, and we are powerless or do we think. Sometimes ‘doing the right thing’ (jumping through hoops to comply with immorality disguised as law ) is exactly the wrong thing to do. How will change ever happen if we ‘do the right thing’ and then go away whining about how unfair it is?
If one million ‘US person’ Canadians(and their families) stood up to the banks and the Canadian government, and the IRS, and refused to divulge our ‘US connection’, reused to file US tax returns and FBARs – think of all the collective power we would have. Actually we DO have it, we just haven’t figured out how to harness it yet.
ooops, I meant ‘so’ we think.
@USCitizenAbroad, and @Mark Twain,
re the comment earlier about the US Ambassador to Norway; I did see this on the earlier IBS thread http://isaacbrocksociety.ca/2013/02/09/what-are-you-hiding-just-file-it-a-personal-account-of-a-norwegian-tax-seminar-hosted-by-the-u-s-embassy/
“…During the ensuing conversation, the Ambassador stated a number of times to “Just file it, what are you hiding?” And, final warning, “You better file them now or the penalties are gonna be a lot worse later!”…”
@badger
Thank you for your very kind words, but really it was me vocalizing the wrestling of my inner thoughts more than any perception that you may have been criticizing me 🙂 My directness doesn’t always serve me well, and I apologize if I led you to believe I felt you were being critical of me. I don’t know what to say about being of help to others, other than to say that if I am able to help others through the process of helping myself here, it is truly a blessing to me. You’re welcome, and I feel confident in telling you that many of us here feel that Brock would not be what it is without your incredible insights and a deep admiration for your ability to express them.
@Calgary411, thanks for the support, lol! @the Animal, your support for your family is outstanding. No need to feed the beast when you’re doing a fine job of fighting it off on your own.
@USCitizenAbroad
You ask “what about those who are, and have been in the system for a many years? Do they just stop filing? This is a very very difficult question for them.” By coincidence, just yesterday I was able to ask someone in the financial services industry those very questions. I can tell you that according to him, they are continuing to purchase and not declare their PFIC’s (pronounced peeficks). Some are US’s persons who’ve never filed before while others are already in the system, and depending on which they are, are either “playing with matches or fire”.
I wonder how he’d feel about the IRS viewing him as aiding and abetting their tax evasive measures in tax haven Canada? What an absurd situation!
@whitekat
The problem here is that you can’t avoid taking significant action and protest at the same time. I’m afraid nothing will happen until we’re “smoked out”.
USC abroad I was using the OVDI program as an example of the principle that whether or not to take a certain action is a business decision (in the words of Mr. Matthews): not a legal decision; not a moral decision but a business decision. People and companies do this all the time.
I agree that it could be a very difficult decision. You are asking about someone who has been in the system. Many people here are not but are wondering about getting in. I suggest for them that it might be better not to.
For those already in, it clearly depends. If they have no US assets and don’t live there there is precious little the US can do to them.
Too bad there there is no edit function.
@bubblebustin,
There are times when I get so angry I want to smoke myself out just to get it over with!
I imagine writing a nasty letter to the IRS and another to my bank, telling them what my situation is, where I live and daring them to f*&k with me. Usually when I think that way it is after indulging in a few glasses of wine – something which has become a more frequent event recently.
@whitekat
I’ve often used wine to channel the inner activist in me too, lol. Then there’s that little voice that says ‘don’t do something you’ll regret later’. For a while there my blood pressure was getting pretty high so I had to cool it a bit, but it’s seem to have subsided for now. Be careful, stress and anger can be very damaging. Wine’s ok though, 🙂
I’m beginning to believe more and more that the right time will come and it will be the result of something that makes it unbearable to stand idle.
@ Everyone. Great discussion. The fact that some of you question whether filing falsely, incompletely or not at all would be ethical just demonstrates the inherent moral sense that you all have. I’ve come to believe that, for me at least, the only way forward is total resistance.
I believe that this is a chance to oppose the horrible mess the US has become since they became a rogue government sometime back in the fifties. They were wrong when they went to war with Vietnam and I opposed them back then. Now I and the many others who came to Canada in that era have the satisfaction that time has shown that we were on the right side of history. All reasonable people agree that Vietnam was a tragic mistake: only the US government refuses to admit that. I don’t need to go into all the more recent examples of wrong-headed US policy; we’ve all lived through them.
How ironic that in my retirement years all of that youthful idealism is coming back into focus. Right thinking people everywhere need to take a stand, oppose and expose this monster for what it is. Compliance and appeasement will never work. Compliance is somewhere between very difficult and impossible. Appeasement is silent endorsement of this gross violation of human rights. I don’t have “foreign accounts”. I have accounts in the town, province and country where I live and they are all properly declared and taxed in Canada. I feel no obligation whatsoever to report anything to a rogue foreign government. There’s strength in numbers, folks. Just say no! Besides, I believe in the end non-disclosure is our best protection against this onslaught. They simply don’t have the resources to track us down. Threat and intimidation is their only weapon.
There’s no justification for requiring us to lay out the minute details of our financial lives year after year. Homelanders don’t have to put up with this; why should we? The IRS has had many years to figure out how to make compliance relatively painless; instead they have only come up with ever more complicated and intrusive rules. It’s never going to get better.
As for feeling uncomfortable breaking impossible IRS rules, I believe it’s our moral duty to resist in any way we are able. It’s the US government that is corrupt, illegitimate, morally bankrupt and without a shred of integrity. Any peaceful resistance is a fair strategy when dealing with such a monster.