— U.S. Citizen Abroad (@USCitizenAbroad) July 27, 2013
This is a must read for anybody considering cleaning up past problems. Anybody who is still thinking of entering OVDP should think long and hard. This thoughtful post ends with:
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.
It also includes a number of considerations of tactical interest to practitioners. For example in counselling clients he notes:
Today, many of the cases do not show the overt criminal conduct of concealed assets and income. Often, the challenge now is to analyze the facts sufficiently to see if there is any way to avoid the onerous, expensive and time consuming OVDI process while at the same time exercise due diligence and follow all the rules under Circular 230 and other standards by which tax practitioners are measured.
The focus on Circular 230 from the perspective of the lawyer remains. But, from the perspective of the client he writes:
The choice to enter the program must be made by the client and we often hear from potential clients that all they want to do is to just start filing prospectively and take their chances simply because they cannot afford the cost and time of the lengthy OVDI process. It is pretty clear that practitioners cannot simply advise a client to just go ahead and do that. That said, those that choose to disclose their off shore shenanigans by simply starting to file are relying on their perceived risk of criminal prosecution. They figure if the IRS had the choice to go criminally on someone who just started filing vs. someone who continues to do nothing, they will probably choose the latter.
The law requires taxpayers to file 1040s, FBARs and possibly other information returns. Seems to me that lawyers should advise, that at a minimum clients should file properly on a going forward basis. The question of what to do with the past is what requires the difficult decision making.
Finally, those with the good fortune to be in OVDP will find other anecdotes of interest. Ultimately Mr. Mopsick gives OVDP a law grade of C-. Mr. Mopsick deserves a considerably higher grade on his analysis.