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.
If Bopp wins, the US will simply print more money to pay back the fines. The best way to neutralise FATCA is for the US to lose sole reserve currency status. That way you can start to stockpiling in other currencies and avoid the USD all together. I hope the Russians, the EU, or the Chinese aren’t stupid enough to implement their own version of FATCA. However I think this wouldn’t be the case in the short term because FATCA will actually help them de-throne the USD.
@Don
Couldn’t they all dethrone the dollar already if they wanted to? I don’t think they want to- for various reasons. If anything – they will do it slowly.
Since the US has already stopped pretending that FATCA is only about catching tax evaders expect the world to start moving away very quickly from the US dollar.
The US announced recently that they intend to use FATCA as a weapon of war. If they would easily threaten crippling economic sanctions against their close ally Canada, you can bet their enemies are very afraid of what’s coming at them. They would be fools not to run away from the US dollar as fast as they can.
Remember when the Russian empire fell? What a surprise that was. Here we were lead to believe they were all powerful and we needed to be so afraid of them. All of a sudden their population was standing in bread lines. I really hate to say this but my gut tells me the US is not far off from that day of reckoning. They already have record numbers of people on food stamps. That’s kind of like a very long bread line. There are people living in tent cities in the US. That’s nothing to be proud of.
My husband’s business caters to mostly Canadian companies and although business is slow it’s still pretty good. My business caters to mostly US companies and it’s been on life support for the last 5 years. I sometimes consider just shutting it down even though in the past my business has seen great success. I just don’t know how much more the US population can take of what’s happening down there.
The US will have to engage in some type of war to distract homelanders from their misery. Since they can’t afford conventional warfare anymore it’s going to be all about FATCA.
I have to say the only growth industry the US seems to have spurred lately is lawsuits against their own and now the Canadian government. I’m in awe of some of the donations that are being made to our Charter Challenge. This is happening during a time when people are cutting back on all other expenses. In our hearts we know we are at war with the United States and that’s why people are willing to dig deep and contribute to the legal fund.
Biggest Russian bank says no more US persons.
http://www.nasdaq.com/article/russia-vtb-to-phase-out-us-customers-in-russia-20140605-00874
A few weeks ago I mentioned I got big demand letters from the IRS wanting loads of money for the OVDP despite us settling the whole thing. They sent us maybe 10 letters to demand this money. The resolution was that they hadn’t processed all the returns yet and these demands would melt away.
Well today the jokers sent us 24 separate letters and two checks totaling close to $4k. Now we shouldn’t be owed anything. I have to pour over this crap trying to work out what’s happing and if they will claw back the money later. If I ask my lawyer I could cost myself money. Cashing the checks if in error would be signing myself up to additional penalties. The basis rule is that if you make a mistake the money flows from you to them. If they make a mistake the money flows from you to them.
Even when you just give up and pay them the money so they get lost your still having to deal with their rubbish.
So if your planning on entering OVDP remember you can’t even pay them to get lost. People should be lining up round the block to get this great OVDP deal.
I believe FATCA will incentivize FFIs to reduce their US investments. Holding the threat of a 30% sanction for non-compliance or making errors in compliance over an FFI’s head will inevitably induce FFIs into gravitating away from US investments and dollar transactions.
It won’t happen over night but in the long run FATCA will certainly eat away at foreign investment in the US. Carl Levin and company are either just plain too arrogant to consider such consequences or they are so short-sighted that their attitude is that “in the long run, we’re all dead anyway.” Perhaps a combination of both.
Carl Levin take note — FATCA is your baby. It will define your legacy along with the unprecedented number of US citizenship renunciations.
We’re all looking forward to your retirement, perhaps even more than you are.
I imagine if somebody died and went to hell it would look alot like OVDP. And they wonder why 1 million Canadians are not eager to start filing tax returns with the IRS. I’d rather have all my teeth extracted without pain killers.
Too little too late B$$tches… I am utterly insulted at the idea of being property of the USA and their “gracious” offer to come into compliance…
Interesting quote from Larry Lipsher, a U.S. accountant in Guangzhou, who seems to have just helped a client do a “quiet disclosure”:
http://www.taxindiainternational.com/columnDesc.php?qwer43fcxzt=MTg0
More past comments from Mr. Lipsher.
http://www.taxanalysts.com/www/40thpub.nsf/Web/5FA49751539BEE29852577FC00714148
http://hongkong.asiaxpat.com/profiles/larry-lipsher.html
All very interesting comments and I am enjoying reading them. Just a perspective – I am currently in a large US city and a world away from FATCA FBAR and CBT – or so it feels- no one cares and the fact that all if the total US citizens abroad (including me) would populate only a portion of this US city and about 1/6 of the state gives one a perspective on this issue. Moreover once you re enter the Borg and are re assimilated as another one of 350,000,000 it all feels normal.
I blame the IRS the GAO and Treasury for not stepping up to the plate and telling POTUS and Congress that CBT does not work and the law should be changed. Instead these brainless and spineless agencies keep trying to push a square peg into a round hole. While sitting on the inside you can’t see the problem well – these agencies know the issue all too well and refuse to do what’s right.
My two cents as I see it from the inside – until I leave again for my real home abroad in a few weeks.
@Neill,
Sounds Like you are describing the screwed up post OVDP rconalliation process. It is impossible to figure out! I had a similar experience, although not quite as many Letters. I could not make sense out of their final cheques to me, but after one last chat with an agent, convinced me that they could not either, so cashed them and called it done!
@Just Me @Neill – I got 8 letters, the first time around. Due to my extremely ( and from what I am reading unusually) successful opt out I was supposed to get more money than I paid in back – basically what I paid in, plus interest. My agent said it had been arranged that I would get it in one check. I got it in 2 checks and it was $2000 short. When the agent was contacted, I was told to wait for the rest, there was nothing the agent could do, although the agent did file some report. I waited 8 weeks and after that, as the TAS was involved, I got them to help me out. They could not explain what the problem was, but they fixed it. When I finally got the money it came in one check with 3 letters. Good luck. OVDP tortures you to the bitter end and then some more.
@Eric
I don’t believe people with quiet disclosures are going to fare well in the long run. I think they will be found out some day and then have the book thrown at them. And I also don’t believe in giving them the chance to find some way to throw the book at you. Some poor guy in Florida who wanted to come forward back in 2009, but did not join an OVDP program because he didn’t know or it wasn’t offered yet, had to pay 150% of the account he had hidden. I just cannot believe that laws such as this even exist!
… I think some Quiet Disclosures will be found out but the vast majority will make it and bring the taxpayer back into compliance – Stay away from OVDP !
@Laughing, as times passes, I tend to agree. My accountant told me that the IRS would inevitably be aware of my quiet disclosure due to the anomalous nature of it, but that I wasn’t the sort they would aggressively pursue.
My situation was messy because I’d accumulated a huge number of PFICs but with very small holdings in them, averaging less than $3000 each. My disclosure going back three years plus the then current year came to around 600 pages!!! Technically, My amended returns would have a six vs three year statute of limitation due to the previously unreported income but she explained that if I hadn’t been audited within three years, I could assume my QD was successful.
Well, it’s now been three years; apart from some small adjustments, I haven’t heard anything nasty back from the IRS. It would have been different had I gone into OVDI, of course. At the time, I was scared sh*tless because I felt so vulnerable. I had misunderstood the tax treaty and had assumed that because I didn’t need to declare my ISA income on my UK tax return that I didn’t need to on the US one either, etc., plus had never heard of the punative PFIC taxation of what were locally owned mutual funds.
I was even scared to talk about it on here for fear of whistleblowers because, before Brock, had really feared that I might have been viewed as a tax evader. I agree now with Larry Lipsher that I wasn’t worth enough for them to pursue, though my accountant was bound by law to pedantically compute all the 8621 PFIC forms.
Another attorney subsequently explained to me that had I gone through a good tax lawyer who’d given my case to an accountant via a kovel agreement, that they would have probably felt confident enough to have just declared my passive income as ordinary dividends and capital gains/losses which would have saved me money both in taxes and fees.
The problem here though was what a lottery it would have been in terms of whether I’d have found someone genuine like him or an a predatory attorney who’d have railroaded me into the OVDI which would have bankrupted me. I feel, in retrospect, that I actually came through this relatively well, though the past three years of uncertainty have been wearing.
I don’t know though if quiet disclosures will become a lot more risky if FATCA is fully implemented. We probably won’t know for at least another three years for thing to trickle through.
monalisa1776–Your story illustrates exactly what is wrong with the system and a new type of voluntary disclosure won’t solve it. No one knows what to do, tax attorneys don’t know whether they can even recommend quiet disclosures, people who went along with the system and entered a program find they have been disadvantaged not just in the results but in the amount of expense they have incurred, opting out leads to OTT audits, mostly there is total silence from the IRS in response–whether you have filed Streamlined or done a quiet disclosure…What an awful mess! Ignorance, in this case, is maybe bliss, because those who know they have a problem and try to fix it have to be prepared to suffer years of uncertainty about their and their family’s futures. Even those who can expatriate must wonder whether the IRS will come along within three years or maybe even six years and challenge their 8854s.
@QM, exactly! I fear that they could come back and challenge my 8854. As they never acknowledge receipt of it, I don’t even know if they have it on record that it was even filed. I understand that failing to file it would mark me as a covered expat even though I’m a minnow; and though my QD appears to have gone smoothly, you’re correct that I will still face uncertainty until my statutes of limitation close in 2017 at the earliest.
I actually believe that I will not be completely out-of-the-woods till July 2020, when my FBAR for 2013 will finally close. If they rejected my 8854 and thought it had been completed incorrectly, I am of the understanding that I would be deemed ‘covered’ and thus taxed on the full value of my pension fund, landing me with a huge tax bill of close to $20,000!!!
So even minnow could effectively be hit with a de facto exit tax of sorts. The accountant signed my dual-status 1040 but never signed off the 8854, nor have they charged me for these final filings. I believe they have quietly decided to do my final filings pro bono, which is very kind; however, it also means that if my return and 8854 are ever questioned that I would legally be on my own with it.
I am optimistic that everything will turn out alright in the end, but six years is a LONG time to still have to wait. It will thus mean that my whole case will have lasted from Spring 2011 when I had my OMG moment to mid 2020. NINE years.
I feel saddened when I look at all the D-Day anniversary stuff and to think how close allies the UK and US were back then, and to think of where we are now….it breaks my heart.
I believe that the uncertainty is deliberate on their part to help put people off.
@QM, another thing that strikes me is that if they claim they’ve never received 8854, they would argue that while I may no longer be a US-citizen, I would still be a US person for tax purposes and would be expected to still be filing and fbarring.
It thus gives them a power over us. There could harass anyone they particularly had in in for, such as an outspoken critic of the IRS, especially with all the NSA surveillance. They will feel that we’re essentially apostates; I thus don’t even know if we’d still have the same constitutional protections if pursued as a form of retaliation.
I also have to keep emphasising that who could blame a bank for not being satisfied with a CLN and demanding not only copies of filed FBARs, tax returns, 8854, etc, but also proof of RECEIPT and ideally acknowledgement from FINCEN and the IRS that these documents have been received. After all, the IRS could always feign that we were still under their jurisdiction.
@Not That Lisa!, @Just Me
Thanks for your input. I laid the letters out last night in year order. It looks like they processed some later years first (like 2010). This generated the first large set of demand letters. Then they processed the earlier years. This causes the refunds to be distributed to what looks like a random set of years they have outstanding balances from (the first years they processed). In the earlier years the numbers they produced just differed slightly from our numbers. You get credit for money they have of yours over the time they have it. So the small amounts make sense. It’s them computing interest minus the times you had a balance. As I go through the years though the deviation gets bigger.
So after looking at them in detail I have no idea what’s going on.
@ Neill
re: “So after looking at them in detail I have no idea what’s going on”
and neither do they! Cash the cheques and assume their computers know know best! 🙂
It will be interesting to see how many years of FBARs this new streamlined for nonresidents will entail. More than the current year will be proof that they may be willing to forgive you the penalties for not knowing about your tax filing obligations, but not the tax you might owe. Welcome to my parlour, said the spider to the fly…
@Bubblebustin, I always remember how you said that had you been able to do Streamlined, rather than the eight years required in OVDI that you wouldn’t have been hit with such a huge capital gains tax on the earlier sale of your Home.
Yes, Monalisa1776, under Streamlined, 3 years of tax returns filed in 2012 would not have included the year we sold our home, which was in 2008. Six years of FBAR’s however, would have revealed an event in 2008 that may have piqued the IRS’s curiosity.
When the IRS keeps moving the goal posts closer each year, who’s going to jump in unless they absolutely have to?
@bubblebustin , @ Monalisa1776 ….. you two worry far too much !
I won’t be happy until they:
1. Apologize for trying to fleece and extort from those of us with no real connection to the US.
2. Cease and desist from requiring those with no real connection to the US to be “compliant” for tax purposes.
3. Apologize for imposing phoney citizenship on same, when the benefits of citizenship were previously denied.
Until then (hell freezing over), they can kiss my 100% Canadian butt. Their new and improved programs to “come into compliance” are still meaningless. There’s no reason to comply with the schoolyard bully trying to steal your lunch money.