If you have not seen these two interviews, I encourage you to read them. They provide interesting insight into the “Mind of the IRS” – the institution that “represents the American Taxpayer”.
Who is Bill Yates?
Willard (Bill) Yates, recently retired from the Office of Associate Chief Counsel (International), Internal Revenue Service after 31 years of service. During his tenure as a Chief Counsel Attorney, Bill was the recipient of 10 awards, including the Albert Gallatin Award, Treasury’s highest career service award. The Gallatin is awarded only to select federal employees who served twenty or more years in the Department and whose record reflects fidelity to duty. Bill received the Gallatin award for his work throughout his IRS career, including his work on implementation of some of the compliance requirements of the Foreign Account Tax Compliance Act (FATCA).
Most of Bill’s career at IRS focused on offshore compliance, including his participation in a massive overhaul of outdated foreign trust reporting requirements Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts and Form 3520-A, Annual Information Return of Foreign Trust with a U.S. Owner). Bill was the principal drafter of the regulations under section 679, Foreign trusts having one or more United States beneficiaries, Notice 2003-75, RRSP and RRIF Information Reporting and Notice 2009-85, Guidance for Expatriates Under Section 877A.
Interview 1 – Form 8938 – Boldly Go Where No Form Has Gone Before
#FATCA Form 8938 – ? Interview with Bill Yates – Former Attorney, #IRS International Let's Talk About: US Tax http://t.co/I6m8jdcEwD
— U.S. Citizen Abroad (@USCitizenAbroad) July 22, 2013
Yates: Well, obviously we were going to have to create a new form. What number should we put on the form? We wanted to use number 8938, but we had to get permission from the “owners” of form numbers; in this case, Forms and Publications. Forms and Publications initially said “no,” but later permitted use of this number. Meanwhile, the clock is always ticking. What should the Form 8938 look like? The FBAR was a good starting point, but section 6038D asks for more information than is required to be reported on an FBAR. As attorneys we didn’t have the software needed to create a form. Only the Forms and Pubs people have it. We got Forms and Pubs to assign a project to one of its people. Then, we had someone to give rough sketches and ideas to in order to come up with a rough “draft” of the form. We were starting from scratch; it was tough. The law as drafted by Congress required we avoid requiring reporting of financial assets that “would be duplicative of other disclosures.” So we had to come up with a list of all “international” forms to determine exactly what kind of information was required to be reported on those forms and so on.
Can you believe it? The United States of America has “owners” of form numbers.
Interview 2 – FATCA and Citizenship-based Taxation
Residence Based Taxation? Interview with Bill Yates – Former Attorney, #IRS International Let's Talk About: US Tax http://t.co/7wh82aSQaj
— U.S. Citizen Abroad (@USCitizenAbroad) July 22, 2013
Let’s talk about US tax: In the final analysis, do you think that RBT has a chance?
Yates: Not really. The Treasury and IRS have too much invested in FATCA to turn back now. It’s really too bad, but something had to happen. UBS and LGT broke the dam, resulting in the flood of compliance measures manifested by IRS OVDIs and FATCA. The OVDIs caught up a whole lot of people who were totally unaware of their U.S. filing requirements. How could they have been? And, FATCA is hitting U.S. taxpayers living overseas with unforeseen consequences, such as having their foreign bank account(s) closed.
The interviews are quite interesting. They make it quite clear that the IRS knows perfectly well how much pain it is inflicting on U.S. citizens abroad. Badger, IRSCompliant and Bubblebustin have an interesting discussion about the second interview starting here.
This interview is very depressing.
Someone on the inside understands full well the plight of US persons abroad, sympathizes, and agrees that ideas like changing to residence-based taxation are needed.
And yet, he doesn’t think there is a chance of anything changing for the better.
@Foo, at least this means that the IRS are unlikely to conduct extensive audits on minnows settled abroad with dual nationality, etc. The real issues are the ongoing compliance costs. Personal pension schemes and insurance bonds, local mutual funds, etc. can all be classified as PFICs and foreign grantor trusts! If I had kept my citizenship I would have been looking at annual tax prep bills north of $3000 to even $5000!!!
What can ya do. :/
@monalisa, the annual filing costs are a big consideration. Where I live there’s only one place that can do U.S. returns and they’ve put their price up to 3000 for even the most simple returns and they won’t do FBAR’s or even provide help with them. That’s a lot of money for zero tax owed. Really!
I do think they’ll go to RBT but, not for a long while, probably a decade and when they do some of us will be held up as part of the reason. They’ll even pretend empathy and they’ll sound reasonable. What they won’t mention is how many millions they threw under the bus and those who renounced will still be vilified no matter what.
Nobody can afford to wait to renounce, that’s the situation they’ve created. Certainly it doesn’t make any sense after reading this to keep U.S. citizenship. They know what’s going on, they know it’s damaging and unfair and they have no plan to fix it.
ACA keeps the pressure on Residency-based taxation (RBT) and re-submits comments to the Ways & Means/Senate Finance COmmittee’s website (https://taxreform.gov/). ACA’s proposal sites our recommendation for RBT and also ACA’s proposal for a Comprehensive Compliance Program (CCP) that allows Americans overseas to become tax compliant without being hit by onerous penalties and criminal prosecution for oversight in filing errors.” Read the submission here
Well, I sent off a quick email to Mr Yates, asking him a few questions and he was kind enough to respond, although he didn’t answer one of my questions, which was:
“When you were asked “In the final analysis, do you think that RBT has a chance?” you answered “Not really. The Treasury and IRS have too much invested in FATCA to turn back now.” It would appear that you were answering whether you thought FATCA would be repealed, not CBT…Is it that you believe that RBT as prescribed by ACA has no chance, or no chance in any form whatsoever? If either, can you explain why?”
Or, maybe to him it’s neither!
To be fair, Mr Yates did state in the interview, “To me, it’s really a question of whether FATCA will go if CBT remains.”
To my concerns about his statement from the interview when he said, “I thought it was bad policy. We shouldn’t be pushing U.S. citizens towards expatriation. But, having said that, I was less sympathetic towards foreign banks” he wrote to me:
“No, I don’t think forcing U.S. citizens to expatriate in furtherance of getting tax cheats is good. I made that clear in the interview.”
Really? that’s not what his comment says to me, when he says that he’s “less sympathetic towards foreign banks”.
This last answer is the most revealing about the current state of the IRS:
Yes, I think that the IRS is way underfunded and, in addition, has many other problems that I will not put in print. (You didn’t ask about IRS funding, but your email gave me an opportunity to tell the truth about IRS funding.) Why do you think it is taking IRS so long to get back to you?”
I have learned so much from this site, but I have a hard time figuring out what this current blog is about. It seems like 12 angry men (actually 6 men and six woman). http://en.wikipedia.org/wiki/Twelve_Angry_Men
In my own experience with filing US back taxes, it takes maybe an hour for one year (but my case is simple). I just use the previous tax form (1040 plus foreign tax deduction), and do it myself and send it someplace in USA. They never send anything back probably because USA cannot afford postage stamps because of foreign wars. I actually called them up last year I think it was in Philly and they said they got the returns. In my case, the US taxes are 4K less than Canadian so I always take the foreign tax deduction (actually this is because state taxes are not included in USA taxes, but this is another complication of double taxation). My renounce date is Sept 5 and I am totally prepared.
For those of you who know Victoria, she is now my facebook friend. We have much in common. We both are from Seattle.
The play 12 Angry Men is about a jury were 11 of the 12 are predisposed to convict without any consideration of the evidence and no experience with or of the defendant.
Many of the people blogging and commenting at the Isaac Brock Society have experienced very significant damage because of unjust US taxation, information returns, threats, penalties and abuse from the IRS and the compliance industry.
Please explain how this is similar to the jury in 12 Angry Men.
I wonder what Mr. Mopsick would say about Yates’ comments in these interviews.
Here is his latest prognostication:
“…While FATCA creeps toward the starting gate, there appears to be scant progress on two fronts sorely in need of attention: (1) the plight of Americans abroad whose local bank is no more a “foreign financial institution” to them than the corner McDonalds is an English fish and chips joint to us, and (2) the hapless recent immigrant who was never told in citizenship class that as American taxpayers, they now had to register their worldwide assets with Uncle Sam in addition to report the income. The collateral damage of these two unintended FATCA consequences, particularly the former, account for the bulk of the internet chatter on this example of the gross tax injustice FATCA on Americans abroad.
The problem seems to be that of the five to seven million estimated Americans living abroad, few seem to vote. Add that to a Congress which for all practical purposes is frozen in place with no effective direction and leadership and the result is a broad based sense of frustration and disdain. Unfortunately there appears to be little hope any time soon of any attention to this problem.
Next blog: FATCA Reform or Repeal: Wishful Thinking or a Likely Prospect.
Interesting ACA Professional tax advisory list.
Too bad none of them is in / from Canada.
@Arrived,that’s terrible about their huge charges just to prepare a simple tax return,especially when they won’t even offer you any help with the fbar. It seems the compliance industry is almost self-catering….as others have said, Congress has essentially become a private club looking after special (usually big moneyed) interests tthough lobbying. The tax compliance complex is inevitably part of this though they are a necessary evil now that taxes have become ridiculouslu complicated!
I have concluded that only the poor and rich will be able to easily would have the grace to offer citizenship back to those of us who renounced just to be able to survive if they move to a RBT; however, I feel very bitter so doubt I’d bother, plus agree that we will continue to be vilified in spite of all the collateral damage caused. maintain U.S. citizenship unless major reform takes place.
I would like to think though that the U.S.
Sorry, all there but got jumbled due to cursor jumping…; U.S. Expats will be screwed into having to cough up huge annual accounting fees.
Website manager – can you please correct the spellling of my name? It is Virginia La Torre Jeker (not Jecker). Thank you.
@Virginia La Torre Jeker, J.D. says
I was just looking, and I see it was done! Thanks so much for your BIG contribution to the understand and thinking of the FATCA insiders. It gives us a much better insight as to how they think!