This post is based on a more detailed post on the RenounceUSCitizenship blog. As noted by numerous bloggers, on June 3, 2014 the IRS Commissioner announced there would be modifications to the rules for allowing Americans abroad to come into tax compliance. Isaac Brock Society commentary began here. This announcement was part of a general discussion of international tax enforcement/evasion FATCA and the like. Although, I may be mistaken, I read the Commissioner’s prepared remarks to include (for the first time) a suggestion that there will be attention paid to the plight of Green Card holders with undisclosed foreign accounts. If I am correct, this is very welcome news for a group of people who have been persecuted by the U.S. Government (why would anybody want a Green Card?).
For Green Card Holders with #Offshore accounts relief may be on the way http://t.co/Gde57eQBVx
— U.S. Citizen Abroad (@USCitizenAbroad) June 4, 2014
The Commissioner’s remarks included:
Now, while the 2012 OVDP and its predecessors have operated successfully, we are currently considering making further program modifications to accomplish even more. We are considering whether our voluntary programs have been too focused on those willfully evading their tax obligations and are not accommodating enough to others who don’t necessarily need protection from criminal prosecution because their compliance failures have been of the non-willful variety. For example, we are well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives. We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas. We are also aware that there may be U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties.
We are close to completing our deliberations on these respects and expect that we will soon put forward modifications to the programs currently in place. Our goal is to ensure we have struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most U.S. citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes. We believe that re-striking this balance between enforcement and voluntary compliance is particularly important at this point in time, given that we are nearing July 1, the effective date of FATCA. We expect we will have much more to say on these program enhancements in the very near future. So stay tuned.
The longer post from which this is excerpted is here.
Even if I get a complete free pass, without penalties, to come into “compliance” I wouldn’t do it. Compliance itself is a problem. Their laws are just WRONG! So what, I get a break now and they get to hose my future retirement with their worldwide income tax. I still can’t properly invest, I still have problems with TFSAs and RESPs. No thanks. Let me renounce for free, and now you’re talking. You’ve got to do better than this, America.
What makes this even more frustrating is that it would be so easy to just go to a system in which “you get what you pay for.” Why trash your expats. Nobody wins. If they want to move back later, fine. They just don’t qualify for the social programs they didn’t pay into. Who would disagree with this?
The IRS has to get out of the tax jurisdictions of other countries. Sometimes I’ve hoped for the complete financial ruin of the USA to come faster, just to get these a-holes out of our countries.
“….. right balance between emphasis on aggressive enforcement”….. says it all. EMPHASIS.
The nightmare continues. They already introduced Streamlined a while back and that didn’t really help anybody either.
The United States is the land of importunity. They are so poor they need to tax the citizen of other nations all around the world. Might makes right. Power corrupts. Pride comes before the fall.
I’m with you Pierre. As a Canadian living in Canada, I will happily pay taxes here. I don’t live in the US. I don’t use or benefit from US services. I won’t file or pay taxes there. If the US changed to residence based taxation, I would be “compliant.”
The lesson from people who did OVDP is that the IRS can not be trusted. They denied me the tax loss in 2008 generated by their artificial M2M regime. They sure didn’t deny the taxes generated by that same regime in 2003-2007 and 2009-2010. This was a surprise to us. Take too long in OVDP then they keep the money paid even if you want to do your taxes in a different way.
Got a penny in unreported income but no tax? Well then the balance penalty of 27.5% please. No exceptions.
Got PFIC? Well just take a deal because you can’t comply with the tax laws.
Yes the IRS wants you to produce the 400 odd 8621 forms so they can check them.
They will check if your pensions are work related looking for gaps to pull more accounts (pensions) into the balance penalty. Sure it’s not just a grab for money.
Try to get an answer from the IRS on if a UK ISA is protected by the tax treaty. No way you will find anyone who knows. They sure know what their opinion is in OVDP and it isn’t good for you.
One good thing is they will likely allow people already screwed to enter the new program if it applies like they did previously.
From a report in USA Today on Obama’s recent speech in Poland:
We at IBS say: “bigger nations must not be allowed to bully the small, or impose their will by economic blackmail. And the stroke of a pen can never legitimize the theft of a neighbor’s wealth.”
It’s hard not to sigh when you see words like “re-striking the balance”. For those of us who have been around more than a little while, there’s little optimisim.
We watched the expatriation provisions turn into a taxable deemed sale of unrealized gains and a deemed inclusion of as yet unpaid pensions in income. We watched as they foisted tax punishment on the children because of the expatriations of their parents. We’ve seen the incomprehensibility, mission creep and devastating penalties of an FBAR regime which now seems to hold people hostage to whatever penalty the IRS wishes to impose for not reporting whatever the IRS now decides you should have reported on your FBAR. We’ve watched the OVDP turn into a penalty revenue generating machine wholly disproportionate to the tax peccadillos of most of the “voluntary” participants. We’ve seen the introduction of asset reporting affecting mostly those abroad in the form of 8938 and the (deliberately?) tricky and confusing differences in the reporting requirements there that should have been harmonized with the FBAR. We’ve seen legislation by way of Notices and guidance and revised notices and amended guidance and technical corrections and Q&As until no one can possibly know what the rules are at any given time. We were not in the least bit surprised when the Medicare tax applied to non-residents even though they can’t use Medicare. We’ve seen the US pass up many opportunities to at least exclude financial accounts in the jurisdictions where US persons are long-term residents from FATCA reporting. And the 77,000 GIIN-registered institutions already represent one forcibly co-opted IRS bounty hunter for every 100 Americans abroad.
Unfortunately, what I think we will never see is residence-based taxation, unless some other countries adopt it, too, and then everybody has to sort out the resulting controversies about who gets to tax whom. Residence basis taxation is the only workable solution to the conflicts that would arise if more countries than just the United States decided they, too, are exceptional and should tax their citizens wherever they live.
Simple Answer. NO
They are incapable of doing the right thing…
@qm. Well said. I think that just about covers it. Do you suppose they will now offer to reinstate US citizenship for all those who have renounced in the wake of their tax regime? Not reimbursing the $450, it goes without saying. Or remove the threat of refusing entry to former citizens who want to visit family?
BTW, there are some good comments at
Townsend’s blog.
Also additional comments
starting here at IBS
You’ve boiled it all down to what it is, qm.
The USA is just too damn exceptional from the rest of the world — and they’ll continue to let all other countries know they are and to bow down to their power in fear of whatever sanction. Such exceptional PRIDE is not a healthy commodity for the world to live in peace and respect for one another, but it has worked for the USA so far through their might is right.
Fits right in with AnonAnon’s report of Obama’s speech in Poland, where he says that
…or their countries’ treasuries.
Remember we do have a get out of jail free card for FATCA as long as you do not cross border
” I hold a U.S. green card. How does this affect my tax residency?
If you are a green card holder (that is, a lawful permanent resident of the U.S.), the U.S. considers you to be a U.S. resident.
However, if you are a resident of Canada for tax purposes and do not hold U.S. citizenship, you should not identify yourself as a U.S. person to your Canadian financial institution.”
http://www.cra-arc.gc.ca/tx/nnrsdnts/nhncdrprtng/ndvdls-eng.html
Let alone people who threw them out a long time ago may have an I-407 misplaced and have travlled to state on Canadian Passport with a tourist visa stamp.
The problem is, the only “right thing” here is the abolition of CBT, but that is not within the IRS’ remit. Furthermore, on other issues, such as PFICs, phantom income, tax traps, etc, I always wonder how much discretion the IRS has. Cleary, they can waive penalties, but whether they can waive the obligation to pay the underlying tax is very questionable (although @ Neill, waiving the production of useless Form 8621s is something they clearly could have done). Best anyone can hope for is that the IRS a break from the more overly burdensome parts of the OVDP and then a Service that is more expansive in its interpretation of reasonable cause (essentially, a streamlined program that actually works).
I’d be happy if USA kept its CBT, but let me go, without having any compliance obligations hanging over my head on the way out the door. What would be so hard about that?
In other words, give ‘US persons’ living outside the USA a choice: Do you want to be a US citizen and subject to CBT or not? If not, then all ties are cut, now, without any of this getting into compliance BS. USA could keep its beloved, unique, special, CBT, and only those who truly are willing to put up with it as a cost of US citizenship would be ‘US persons’.
Being forced to be something you don’t want to be, and being forced to pay through the nose for it in LCU’s, compliance costs, taxes, and penalties is ridiculous.
I’m left trying to wrap my head around the concept of the head bureaucrat of a monster bureaucracy talking about trying to “fix” problems they themselves have created. It would be laughable if it weren’t so pathetic. Everyone knows CBT is at the root of this mess and nobody is talking about fixing that. Why would anyone ever trust the IRS after all that has happened these last few years?
The only fix for long-time expats is relinquishment or renunciation, period. Screw their CLNs, Form 8854, Streamlined program, OVDI, 8938, FBAR, or trying to “comply” with this insane system. After living this nightmare I hope the US government winds up on the scrap heap of history. But I am done with trying to deal with any aspect of the US government.
What Koskinen has in mind is purely speculative but if I have to guess I’d say whatever he comes up with will be underwhelming in the relief department and overwhelming in the regulation department (call that more formication). QM pretty much sums it up. The only thing I’m certain of is I don’t trust ’em, never will.
@maz57,
So far, I have not made any moves regarding my status, but in future, I may do just as you suggested – officially renounce, but not do any of the compliance BS. At least at that point, although USA will consider me a bad slave for not complying, I will no longer be a slave.
@Maz57, Of course with my luck, the rules will change and slaves will no longer be able to remove the chains (i.e. get a CLN) without proving tax compliance.
They let 5 terrorists go in exchange for 1 soldier who actually went AWOL. Nice deal for somebody who betrayed his country. Also a real sweetheart deal for the 5 terrorists who will likely go back to killing innocents again.
Strange that they choose to keep as financial prisoners millions of so called US persons who haven’t lived in the United States for decades. Where’s our get out of jail free card President Obama?
@Petros re: “The IRS has to get out of the tax jurisdictions of other countries. Sometimes I’ve hoped for the complete financial ruin of the USA to come faster, just to get these a-holes out of our countries. ”
I think the same, yet financial ruin there, does not bode well for Canada. Something is wrong when reasonably intelligent, sane, middle-class, average, law-abiding Canadians who have lived entire lives in Canada, and never had any animosity towards USA, get to a point where they don’t even want to buy single thing ‘made in USA’, and plan never to step foot on US soil. This is a sign that something is seriously wrong with that country. Why is no one paying attention?
Judging by some of the jargon used, it sounds to me that that new commissioner has been listening to the National Tax Advocate. She’s been dedicated trying to find a way for CBT to work for Americans living abroad, and perhaps he is too – which we know never ever will.
You’re on to something here, uscitizenshipnightmare. The IRS has the discretion to waive the penalties, but not having the ability to waive the tax will make any gesture from the IRS still all stick and no carrot. Unless the commissioner comes up with some brilliant plan for these people, their problems will only become worse as it will become more difficult over time to prove non-wilfulness. I’m afraid it’s a lose-lose more situation for a lot of people to come forward now, or any time.
Now speaking from my own personal and in-flux situation, I can say that it looks as though the US is going to create a Streamlined specifically for non-residents where the determining factor for penalty abatement would be reasonable cause, not annual tax levels and evidence of sophisticated tax planning. Not a Streamlined that works entirely for everyone, but maybe one that works a little better for a few more people.
@omghesstillanamerican
And did you see the report of the other American couple with child who are still being held hostage in Afghanistan? I wonder WHO is brokering these deals?! They exchange 1 little soldier for 5 top level terrorists – when the Taliban is still holding other american citizens? Why not in the very least get them out too and make it 4 for 5?
Sometimes I want to cry for what has become of my former country. But I too would be happy if they just let me go…. free of charge. I haven’t lived there in over 50 years.
@qm, well said and good reminder of their past conduct. Does a leopard change it’s spots? Is the IRS willing to change their conduct towards those living abroad, (or those who immigrated to the US with pre-existing accounts)?
Just a reminder that those in OVDI who entered before Streamlined existed, and those who either were selected by the IRS (a more recent phenomena) to be opted out into Streamlined, or who opted themselves out to apply to it are still being held in limbo that exceeds a year, 2 years, even 3.
If the IRS is and has been; “….. well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives. We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas. We are also aware that there may be U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties…..”,
Then why are those who would have fit Streamlined IF IT had existed sooner, or was less ridiculously narrow being penalized? Why hasn’t the IRS been demonstrating good faith by showing it to those ALREADY in the system?
I refer to this:
FIGURE II.4, OVD PROGRAM APPLICATIONS, DISPOSITIONS, AND PROCESSING TIMES (AS OF JUNE 7, 2013).
http://www.taxpayeradvocate.irs.gov/userfiles/file/FullReport/IRS-Offshore-Voluntary-Disclosure-Programs-Continue-to-Burden-Benign-Actors-and-Damage-IRS-Credibility.pdf.
See also;
http://www.taxpayeradvocate.irs.gov/userfiles/file/Full-Report/Most-Serious-Problems-IRS-Offshore-Voluntary-Disclosure-Programs.pdf.
and,
http://the-tax-wars.net/2014/02/24/taxpayer-advocate-criticises-offshore-voluntary-disclosure-program-ovdp/
@bubblebustin
When will the threat of litigation make them stop and think? I`m still thinking that if Bopp wins, then they will have to return the steep penalties they have collected. I think all those involved will sue for it. Then what?