The 14th amendment of the constitution …
The 14th amendment of the U.S. constitution reads as follows:
All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
Citizenship and equal protection
Does the citizenship penalty paid by powerlessness #americansabroad violate the 14th amendment? Strict scrutiny? http://t.co/IjIhctbx1A
— U.S. Citizen Abroad (@USCitizenAbroad) July 10, 2013
What follows is a quote from Bernard Schneider’s submission to the Ways and Means Committee:
“Generally, U.S. expatriates are treated like U.S. residents and taxed on their worldwide income. However, U.S. expatriates should be compared not to U.S. residents but to nonresident aliens. But for their citizenship or immigration status, U.S. persons abroad would be treated like nonresident aliens, i.e. generally taxed at a flat rate of thirty percent on U.S. source income that is not effectively connected with a U.S. trade or business and at the regular graduated rates on income that is effectively connected with a U.S. trade or business, including on gain from the sale of real property interests in the United States. In addition, net capital gains would not be taxable unless they are fixed or determinable annual periodic income. Needless to say, the foreign source income of nonresident aliens is not taxed by the United States. In most cases expatriates could engage in the same economic activities in the United States as nonresidents without paying the higher taxes for which residents are liable. The difference between the tax imposed on nonresidents and that imposed on expatriates constitutes part of the “citizenship penalty” paid by U.S. persons abroad.”
Note particularly the last sentence that reads:
“The difference between the tax imposed on nonresidents and that imposed on expatriates constitutes part of the “citizenship penalty” paid by U.S. persons abroad.”
I don’t think I have seen this expressed as clearly as in that sentence.
The “Citizenship Penalty”, the 14th Amendment and “Equal Protection”
The “citizenship penalty” deserves consideration. Both US citizens abroad and non-resident aliens are non-residents of the U.S. The fact that the U.S. citizen pays higher taxes, because of U.S. citizenship, is arguably a violation of the “equal protection” clause of the 14th amendment. Furthermore, the U.S. Supreme Court has ruled that “citizenship classifications” are “suspect classifications” and that they can be upheld only if the government can demonstrate a compelling state interest. Why should US citizens abroad pay a penalty because of their citizenship?
You can read the complete posts and argument here.
The implications of the words “Are citizens of the United States …”
#Afroyim, 14th amendment and the forcible destruction of citizenship for #americansabroad http://t.co/Dc3hxqr6mY
— U.S. Citizen Abroad (@USCitizenAbroad) July 10, 2013
Justice Black’s closing directive was:
Citizenship is no light trifle 268*268 to be jeopardized any moment Congress decides to do so under the name of one of its general or implied grants of power. In some instances, loss of citizenship can mean that a man is left without the protection of citizenship in any country in the world—as a man without a country. Citizenship in this Nation is a part of a co-operative affair. Its citizenry is the country and the country is its citizenry. The very nature of our free government makes it completely incongruous to have a rule of law under which a group of citizens temporarily in office can deprive another group of citizens of their citizenship. We hold that the Fourteenth Amendment was designed to, and does, protect every citizen of this Nation against a congressional forcible destruction of his citizenship, whatever his creed, color, or race. Our holding does no more than to give to this citizen that which is his own, a constitutional right to remain a citizen in a free country unless he voluntarily relinquishes that citizenship.
The U.S. Government, U.S. citizens abroad and the forcible destruction of their right to RETAIN U.S. citizenship
U.S. citizens abroad are living under siege. A wonderful express of this comes from Jackie Bugnion in her submission to the House Ways and Means Committee on Tax Reform. She said:
In 1776, the United States declared independence because the mother country on the other side of the ocean was imposing taxes on the colonies for the benefit of England. Resentment started when Britain tried to enforce the Navigation Act after 1763. Resentment increased with the Stamp Act in 1765, a way for Britain to tax the colonies. The British Tea Act of 1773 led to the Tea Party and we all know the outcome – the American Revolution and independence crying out “no taxation without representation”.
Today, the estimated 7 million Americans resident abroad, of whom the majority are long-term overseas residents in high tax OECD countries, face a comparable situation. Their representation in Congress is non-existent in reality. Americans abroad amount to only 1 to 2% of the votes in any particular state; Congressmen and Senators have ignored their tax issues. The unjustified myth that Americans abroad are wealthy and disloyal restricts a rational approach to the problems because of political image issues.
Citizenship-based taxation (CBT) has existed ever since the federal income tax was adopted. Despite CBT being an anomaly involving double taxation, taxation of phantom gains and explicit tax code discrimination, it was grudgingly tolerated by Americans abroad because it was essentially voluntary, most often involved little tax or no U.S. tax liability and basically was not enforced. In particular, the FBAR filing requirement was so obscure that even the big four accounting firms were not aware of the filing obligation dating from 1970 and failed to inform Americans abroad of the need to file the FBAR.
Since 2001, a series of legislative events have radically changed the situation:
In 2001, the Patriot Act made anything foreign suspect, including Americans residing overseas.
In 2004, Congress, under the Jobs Act, drastically increased the FBAR civil and criminal penalties to confiscatory levels, creating a disguised form of taxation on assets held overseas.
In 2006 administration of the FBAR reports was transferred to the IRS for enforcement.
In 2006 the Tax Increase Prevention and Reconciliation Act (TIPRA) extended the Bush tax cuts and included a compensatory revenue raising provision that reduced the benefit of the foreign earned income exclusion, limited the foreign housing allowance and pushed Americans overseas into higher tax brackets, thereby increasing U.S. tax liabilities for many Americans abroad.
In 2008 the law relating to renunciation of U.S. citizenship was revised under Section 877A and introduced an Exit Tax on wealthy individuals (defined as “covered”). The law also provided that Americans who inherit from estates of former “covered” U.S. citizens are subject to U.S.
inheritance tax with no exclusion. This outrageous discriminatory provision aims to discourage renunciation of citizenship, but in fact penalizes children of former U.S. citizens for an act they did not commit. In practice, it encourages the children to also renounce their U.S. citizenship. In 2009 the IRS launched its initiative against tax evasion linked to foreign assets through the Overseas Voluntary Disclosure Programs and a threatening public relations campaign. While it justifiably targeted U.S. resident tax evaders, it simultaneously trapped Americans abroad who necessarily have foreign assets. The IRS’s one size fits all policy and bait and switch tactics led to abuses of Americans abroad which inspired sharp criticism from the National Taxpayer Advocate.
In 2010 FATCA was slipped into the HIRE bill with no debate in Congress and no cost/benefit
analysis. FATCA aims to provide the door that closes the fiscal trap by requiring foreign financial institutions to report to the IRS on assets held overseas by U.S. persons. It effectively cuts off many Americans from foreign financial institutions which find it too onerous to maintain American clients. FATCA creates a barrier to free movement of capital and people. In 2012 S.3457 proposed to grant the IRS the authority to have a U.S. passport cancelled or not issued if the IRS determined that the individual owed $50,000 or more U.S. tax.
In 2012 the Ex-patriot Act, S.3205, proposed to deny any “covered” expatriate re-entry into the United States, with retroactive effect for ten years prior to enactment of the law. The Reed
Amendment of the 1996 Illegal Immigration Reform and Immigrant Responsibility Act already
allows the United States to deny entry of former citizens into the United States. In 2013, S.268 was introduced; it compounds difficulties created by FATCA.
In 2013 the Senate Finance Committee included in its tax reform recommendations a provision which would grant the IRS authority to cancel a U.S. passport for tax collection purposes.
This stream of legislation and proposals categorizes Americans abroad as suspected criminals seeking to escape U.S. taxes. Congress has outdone George III and has turned the United States into a fiscal prison, including legislation which is deemed anti-constitutional under the Fifth Amendment1 and is contrary to Articles of the Universal Declaration of Human Rights.2
The foundation of the U.S. fiscal prison is citizenship-based taxation. Americans working and living abroad carry a ball and chain of dual taxation throughout their entire lives up to and including death.Americans abroad already pay taxes in the country where they reside and receive governmental services.
The additional U.S. tax obligation creates inevitable incompatibilities and discrimination and even requires Americans abroad to break foreign exchange control laws to pay U.S. taxes.
A revolution among long-term overseas residents is now underway. Five years ago, Americans abroad never talked about renunciation of citizenship. Today, it is a common topic in the press and among the community abroad. For more and more individuals, renunciation is the only solution to an intolerable situation created by the U.S. imposing its laws beyond its borders. The United States is literally destroying the community of Americans abroad, which plays an essential role in representing U.S. interests and goodwill overseas. The United States is shooting itself in the foot.
While the absolute number of renunciations, currently around 2,000 a year, is insignificant compared to the average annual U.S. citizenship naturalizations of 680,000, renunciations have multiplied seven times over the last four years. So far we have seen only the tip of the iceberg if CBT remains in force.
Today’s situation leads to serious hidden prejudice for the United States. U.S. exports are far below where they should to be because citizenship-based discourages U.S. companies from deploying U.S. citizens overseas to sell U.S. products; the law makes them too expensive. U.S. tax law and FATCA create insurmountable barriers for small and medium-sized companies to establish beachheads abroad to develop exports. The loss represents millions of U.S. jobs, hundreds of billions of dollars of exports, billions of dollars of U.S. tax revenue, and an unsustainable trade and budget deficit. Americans married to a foreign spouse, who represent about a third of the Americans resident abroad, now hesitate to register their children born abroad with the U.S. Embassy. The hot thing among young adults in their twenties is to renounce U.S. citizenship; they are aware of the impossible web of U.S. regulations that restrict job opportunities and personal freedom. Pushing away the young generation of Americans abroad is an immense loss to the United States. In prior generations, many highly educated multi-lingual American children returned to the United States, founded companies and created jobs in the U.S.
Adopting RBT will stop this revolution immediately. RBT law needs to be drafted in the spirit to allow free movement of individuals to leave and return to the United States, to reinforce the competitiveness of Americans and the United States overseas, to provide a simple, non-penalizing transition to RBT for the community of Americans already overseas, to ensure that Americans abroad are not subject to FATCA and FBAR, to adapt existing bilateral tax treaties and enter into new tax treaties so that withholding tax rates on U.S. source income are reasonable and to ensure that Americans abroad who have the majority of their assets in the United States (retirement funds, pension funds, real estate) are not disadvantaged under RBT with regard to either income or estate taxes.
I thank you for the opportunity to comment and hold high hopes that your bi-partisan efforts will lead to the constructive tax reform so necessary for Americans residing abroad.
Sincerely yours,
Jacqueline BugnionTo quote again:
The United States is literally destroying the community of Americans abroad, which plays an essential role in representing U.S. interests and goodwill overseas. The United States is shooting itself in the foot.
While the absolute number of renunciations, currently around 2,000 a year, is insignificant compared to the average annual U.S. citizenship naturalizations of 680,000, renunciations have multiplied seven times over the last four years. So far we have seen only the tip of the iceberg if CBT remains in force.
The forcible destruction of U.S. citizenship
The decision of Justice Black in Afroyim v. Rusk states that the forcible destruction of U.S. citizenship is unconstitutional. Jackie Bugnion’s “plea” to the Ways and Means Committee is as clear a statement of the destruction of U.S. citizenship that there could be.
You can read the complete post and argument here.
An added reason to switch to RBT
It would take years to get this issue before the Supreme Court. That said, I believe that certain aspects of “so called” citizenship-based taxation may be in violation of the 14th amendment. It is possible that this could, influence the consideration of whether to switch to RBT.
@Chris, Neill – Yup. The lawyer who pushed me in the direction of OVDI scared me more than I already was scared by not doing a proper analysis when I first found out about the FBAR. When I asked the lawyer what kind of penalties I was looking at, he told me, “$10,000 per account. Do the math.” So much for getting good advice from a lawyer who knows the field. My lawyer knew OVDI. He knew how to push people into OVDI and run the process of filing their documents. He had such a good business that he had six associates filing OVDI cases. No one ever took the time to explain the penalty structure outside of OVDI to me. My Revenue Agent was the first one who did this. It is sad to hear that others who hire lawyers are also not getting proper advice and analysis.
@Chris
Agreed. The lawyers have been and continue to be a big part of the problem.
@Neill
It is absolutely essential that you run the numbers under all scenarios. If you feel your lawyer is not running the numbers correctly – then get the numbers run somewhere else. In fact, you might want to consider an independent verification of the numbers regardless. Most of the lawyers don’t know how to run the numbers anyway. They just pay accountants to do that. Therefore, you can and should run the numbers yourself.
Question: Why did you enter OVDI in the first place? Were no other options explained to you?
@All
As @NotthatLisa points out the biggest problem on the PFICs is when they are sold. The complete gain is treated as an excess distribution (with all the horror that this entails).
So, if you are considering renouncing and are below the two million mark, do NOT sell the PFICs until you are no longer in the U.S. tax system. As one tax lawyer commented:
AT the point that you sell the PFIC, it’s bye bye investment.
The fact that so many people have investments in foreign mutual funds is in and of itself a good reason to renounce. As a U.S. citizen it will very hard to sell them without doing yourself very substantial financial damage.
Put it another way:
Renounce – Get the f*** out while you can.
@Chris, Not That Lisa,
I really didn’t understand how much money it would cost and how much effort it would be. I was so low at times as I struggled to get all the data together. Each time I thought it could not get any worse I learned about new stuff that was worse. When the lawyer calculated the $36k tax + penalties I was floored. Then came the $75k penalty as well. My CPA was floored by the numbers as well.
I don’t think I would have entered OVDI knowing what I know now. It’s just too much to take. Any chance of it not happening was probably worth taking.
I started to realize it is a money spinner for them when I spotted the PFIC error.
@Neill – So there you go. Maybe your worst penalty outside of the program could be, with good argumentation, only $5000 per year. Maybe 2003-2009 are closed years – no extra taxes. Maybe you have reasonable cause – no penalties.
Lots of maybes. You will have to put a lot of time and thought into developing your reasonable cause arguments. You will then have to get advice if your facts are favorable (more lawyer’s costs), or maybe just try asking your agent. Don’t be surprised if the agent does not give you a response. They do not have much room for discretion. However, don’t be afraid to ask the Revenue Agent about Opt Out. What is it? When should somebody do it? What makes someone non-willful? What kinds of penalties would one face? What does the math look like in your case? More than likely you will be threatened with the maximum penalties. The agents have to do that. But maybe, just maybe, they will give you a sign of the way things could go in an opt out, but maybe not. At the very least, I think they should be able to tell you the facts about closed years outside of OVDI. Its a ridiculous way of dealing with those who have no criminal risk. Just another one of the many problems in this ill conceived program.
@USCitizenAbroad,
Other options to OVDI were presented like quiet disclosure but it was put to us as the only mechanism to come clean and not have problems going forward. I don’t think the lawyer ever asked enough questions to understand our situation. It was only in response to the fines that I mail him with our story that he switched to saying he would fight if they asked for the $75k.
If you have contacts who can do PFIC calcs at a reasonable rate then let me know. It would be good to know what the default calc is going to cost me. My lawyer has ruled that out unless you have several million at stake.
@Neill, you said “It was only in response to the fines that I mail him with our story that he switched to saying he would fight if they asked for the $75k.”
That proves your lawyer does not know much about OVDI. If I understood well, the 75K is the in-lieu of penalty, right? the 27.5% of your max balance. That’s basically the deal in OVDI, they charge you that to waive criminal prosecution. So much if you don’t have criminal risks in the first place.
But the 906 will include the 27.5% in lieu of penalty. The only way to avoid it is to opt out of the program and argue for reasonable cause.
From Taxpayers Advocate Service, includes a table showing total opt-outs and closed after opt-out cases from 2009, 2011, and current 2012 OVD programs and a scathing review of the IRS from the NTA. Made my day.
http://www.taxpayeradvocate.irs.gov/userfiles/file/FullReport/IRS-Offshore-Voluntary-Disclosure-Programs-Continue-to-Burden-Benign-Actors-and-Damage-IRS-Credibility.pdf
@Chris,
Yes $75k is the 27.5% balance penalty on aggregate balances of accounts that owe any kind of tax. Of course it’s inflated balances by a good market and currency fluctuations just before the big drop.
$36k was my tax + penalties + interest etc.
By fight I assume he means to opt out though I brought that up first as were I thought I was going.
Never did he suggest there was a different FBAR penalty available below $10k that I remember. So my view was that when all was said and done opting out might not work financially. Obviously I need to sit down with that doc and study it carefully. Each time I see something that makes me feel better I later find something I don’t match.
To be fair I need to let the guy give me his plan once we get the results back.
@Neill – You have to be found Non-Willful to get the NW Penalty. Don’t just assume you will be categorized as non-willful You need to get your reasonable cause arguments in order that show you were non-willful. To get an idea of what constitutes reasonable cause in one situation, take a look at the reasonable cause document at the link I sent you earlier. It does not sound like you were willful, but in OVDI you are guilty until proven innocent so you must be prepared to show you were non-willful and deserve partial or even full relief from FBAR penalties.
@Not that Lisa.
Well as usual everything is confusing. In some places the level II talks about account balances being less than 250k. In another place it talks about aggregate balances being above $250k. I am sure this is all going to be a waste of time for me and I will be back to $10k / account / year. As always, any glimmer of hope soon falls away.
Only hid 50k from the taxman on money earned in the US then you get a lower penalty. Had more than 50k in money that was never earned in the US and hence not hidden and you get the 27.5% penalty.
@Neill – It does not seem that you have looked at the document of how potential Non-Willful penalties are calculated. http://isaacbrocksociety.ca/wp-content/uploads/2013/06/Not-that-Lisa-FINAL-Mitigated-FBAR-Level-II-Non-Willful-Penalties.pdf
I think that docujment will make it clear to you. Just plug in your numbers according to the formula. And yes, you may have two accounts that make the total over 250k. In the example, one account of $140k is shown. If you had another account with $230k in it, the maximum penalty for each account would still be $5k per account if you are found to be non-willful. If you have an account over $250k, then you go into Level III.
Again, I strongly encourage you to read the all documents on the following link. You will learn a lot about opt out.
http://isaacbrocksociety.ca/2013/06/16/an-irs-ovdi-ordeal-with-a-happy-ending-an-opt-out-success-story-as-told-by-not-that-lisa/
@Neill
Although I am sure you aware of this, if you are able to demonstrate “reasonable cause” (and that the accounts have been reported) there should be NO FBAR penalty at all. I.e. you are trying to get them (based on your reasonable cause arguments) to just give you a “warning letter”.
It’s only if you cannot demonstrate “reasonable cause” that this discussion about the amount of an FBAR penalty kicks in.
@Bubblebustin
This is a great find and should be read by all. Taxpayer Advocate minimizes the true damage that the Shulman Voluntary Disclosure programs have done to the IRS and therefore to America, it’s citizens and it’s other residents.
Here is a partial list:
1. Through its unreasonable and immoral behavior, the IRS has reduced ALL incentives to come into compliance. For the average middle class “jay walker”, it’s hard to imagine receiving worse treatment than in OVDP. Why? Assuming minimally competent legal counsel, the IRS has little chance of successfully asserting willful penalties. The unreasonable behavior of the IRS has done nothing except generate contempt for the IRS. Furthermore, by reducing all incentives to come into compliance many rationally believe they are better off staying out of compliance.
2. Through its inconsistency in application (nobody really knows how they will be treated) the IRS has ensured a total lack of trust in the IRS.
3. It’s recent abuse of authority (quite possibly under the direction of the Obama administration) has further eroded confidence in the organization.
4. For many, the IRS has become the face of the U.S. government. This is bad for immigration. It is bad for responsible citizenship. It has resulted in a world where people want to renounce their citizenship. It is simply bad for America and its stakeholders.
5. The design of the OVDP program demonstrates beyond a shadow of a doubt that it is about “confiscating assets”. It’s not about taxation. It’s about confiscation. Just look at what the penalties have been relative to the tax owed. When much of this is related to Americans abroad buying mutual finds in their country of residence it becomes even more sickening and sickening it is.
6. By the fall of 2011the IRS clearly knew that many Amerians abroad and green card holders had entered the OVDI program. They knew this was inappropriate. What did the Shulman IRS do? They came out with OVDP 2012 without any change in the rules/qualifications. Absolutely contemptible behavior.
7. They changed the rules in OVDP 2009 – remember the “bait and switch”. They failed to respond to the Order of Taxpayer Advocate to remedy the situation. They set themselves up as judge, jury and executioner to destroy the lives of a lot of good people who believed this was their only way of coming into compliance.
8. They failed to respond to the concerns of the New York State Bar Association concerning the administration of OVDI 2011.
9. In the December 2011 Fact Sheet, they promised further guidance for how Americans Abroad could come into compliance. One would thought this guidance would have appeared prior to the June 15, 2012 tax filing deadline. The guidance did NOT come prior to the deadline. Rather an announcement was made at the end of June 2012 with a promise of further instructions to come. This did not come until August 31, 2012 (making it difficult for people to deal with their 2011 taxes).
10. What about Green Card Holders residing in the U.S. who want to be in compliance? Right, what about them?
The effects of the Shulman IRS on America have only begun to be felt. This is a sick, sick organization.
@USCitizenAbroad
Please post this as a new thread with your comments where it can get the airing it deserves. I’m going to get a scoop of ice cream with my grandson 🙂
Thank you for your always superb assessment!
@Not that Lisa,
Based on my reading of your links would I be right in thinking that I could be looking at penalties of only $5k / year * 6 years for a total of $30k?
This would be non-willful level II with only one penalty per year even though there were a lot of accounts. Not sure if my wife’s FBAR and mine count as two FBARs and hence a possibility of 10k / year.
My lawyer understands the lesser penalties but believes you get the aggregate penalty / year. So say 10 accounts at $5k / account would give $50k just for one year. Obviously many of my accounts wouldn’t reach the 5k limit but plenty would each year.
Thanks this has at least been very informative.
@Neill – As I have already stated, your lawyer needs to be aware of IRM 4.26.16.4.7 (4). If you would read the first document I suggested you read, it is in there. Search for that in the narrative document. That IRM regulation is very clear that if you are non-willful and not egregious, you can argue for one penalty a year. As it is all explained in the documents I referred you to, I am not going to explain it again here. I think the explanation in the narrative is best. Please read the documents. They were written to help people like you.
@Neill – I also suggest you heed the words of what USCitizenAbroad wrote at 9.32pm on 10 July. I do not understand why you are so focused on paying non-willful penalties. Yes, you want to understand the worst case and what can penalty mitigation can be argued for. Fair enough. The next step I recommend is putting focus on your reasonable cause arguments for avoiding all FBAR penalties. As USCitizenAbroad says, even if you cannot receive complete relief, your reasonable cause arguments can help you to get a lesser penalty. Now figure out what reasonable cause you have and how to clearly communicate it to your Revenue Agent. Again, you cannot argue for anything without opting out.
Ah yes, the set-up on inheritance taxes encourages US children of covered expatriates to renounce their citizenship too. Only the US makes it extremely difficult for minor-aged children to renounce.
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@IRSCompliantforever
Thanks for sending this to the ACLU.
Another thought – would you be interested in approaching the Carter Center for Human Rights.
http://www.cartercenter.org/peace/human_rights/index.html
As you know President Carter has been very critical of the US Gov on the human rights issue.
http://isaacbrocksociety.ca/2013/07/05/president-carter-writes-on-us-indifference-to-human-rights/
I think that this might be worth a try.
Your thoughts?
@Chris, Not That Lisa,
Like all hopes they get dashed. I consulted with my lawyer. He informs me that the IRM for agents to apply penalties to one account only is at their discretion. They can apply penalties for multiple accounts if they want and do even in non-willful. He confirms I would be non-willful. He believes there is a positive chance of them accepting our lower penalty in OVDI despite assertions here that the probability is zero.
@Neill
Ignore this if you plan to reside in the US permanently. Also, I have no idea whether this option would still be available to you if you have already filed returns using the MTM method for PFICs.
Have you examined reporting your PFICs under the excess distribution method? Under this method, you pay tax only on the dividends distributed by the underlying PFICs. Most of the dividends will be treated as ordinary dividends in the year the dividend was received. Dividend distributions in excess of 125% of the three year average are deemed excess distributions and the excess portion as apportioned over the holding period and taxed at the highest marginal rate in the period plus interest. However, it avoids having to pay “capital gains” tax on a MTM basis which is where you can get whacked by dollar depreciation or underlying fund appreciation or both. If the underlying funds you held paid a fairly stable rate of dividends from year to year then most of the dividends will be treated as ordinary dividends.
Additionally, I’ve had two different sets of tax preparers tell me that only dividends from Income class shares need to be reported as dividends since Accumulation class shares don’t distribute dividends.
If you bought and held your PFICs, if you have PFICs that are Accumulation class shares, and if you don’t plan to permanently reside in the US, and if it is possible to amend the returns submitted, it may be worth investigating. This method, however, produces absolutely brutal consequences if you sell the holding while you are US tax resident.
@Neill – You have to do what you feel comfortable with and it is good you checked with your lawyer instead of just believing something you read on a website. If your lawyer should not be able to do anything for you inside OVDI, then there is always opt out. You seem very risk averse so perhaps paying $4000, if that is your best case, will give you the certainty you need. Yóu should be aware that my lawyer also told me to stay within OVDI. The best decision I made in OVDI was to fire him after educating myself about what is actually in the IRM and what the experiences of others were. I knew my facts better than he ever could and I was also not afraid to defend myself. For me, it was the only course of action. My best case penalty was a lot higher than yours and I also objected strongly to the shakedown that the OVDI has become for Americans abroad and immigrants to the USA.
Just threw up this comment on a French blog which had an article in FATCA that was picked up by Mediapart. Here’s the blog: http://ndonne.blogspot.fr/2013/07/fatca-bombe-atomique-americaine-et.html.
And here is what I said:
“Merci pour ce billet sur un sujet peu connu en France.
Les conséquences de cette loi impactent les Européens (et les Francais) aussi.
1. FATCA a un coût énorme parce que les banques doivent refaire leurs systemes d’information et changer leurs procédures. Ce coût sera payé (pas par le gouvernement Américain ou ses citoyens) mais par les banques locales et leurs clients.
2. Les Etat-Unis ont une definition assez large de “contribuable américain.” En effet il ne s’agit pas simplement d’un citoyen Américan avec son passport bleu mais de toute personne couverte sous le terme “U.S. Person.”
Un “U.S. Person” peut être:
Un Français né aux Etats-Unis pendant un sejour de ses parents qui ont quitté le territoire American 6 mois apres la naissance.
Un Français né en France avec un père (ou mère) Américain.
Ou simplement un Français qui a eu la mal chance de passer un peu trop de temps aux Etat-Unis avec ou sans une “Green Card.”
Selon la loi Américaine ces personnes sont des “U.S. Persons” et doivent declarer leur revenu mondial (et, dans certain cas, payer les impots) aux Etats-Unis. Peu importe que ce revenu n’a rien à voir avec les Etats-Unis. S’ils refusent ou ne savent pas qu’ils doivent s’occuper de toute cette paperasse vis à vis des Etats-Unis, ils sont quand meme des “évadés fiscaux Américains.”
Sous FATCA toutes ces personnes risquent de voir leurs informations financières envoyées au fisc Américain ainsi que celles de leurs époux et leurs enfants francais.
Nous ne savons pas encore comment l’EU (et la France) vont réagir – pour ou contre la protection de ses propres citoyens face à une nation prédatrice?”
@Edelweiss
I believe Neill said earlier that he (and his wife) already sold the funds, in 2010 and 2011. In which case he may be well and truly stuffed by taking what appeared at the time to be entirely reasonable attempts to limit damage.