A Series of Posts to Explain the Anger and Vehemence Fueling the anti-FATCA, anti-IGA & anti-CBT Movement
Streamlined, as inadequate as it is, would not have come to be were it not for the blood spilled by these in OVDI. https://t.co/lgEJ1RQYnS
— U.S. Citizen Abroad (@USCitizenAbroad) November 23, 2015
Perspective:
This post was written approximately 3 months after the mass hysteria (there simply is no other word for it) of late Fall 2011. Brock was less than a month old. We had only just started to gather information, starting at the ExpatForum. Renunciation was a very scary topic only slightly less than the terror of imagining losing everything due to FBAR penalties. IMHO, FBAR will prove to be the number one issue that fueled the expat movement, hands-down.
An excerpt from January 5, 2012 post from the renounceuscitizenship WordPress Blog
PART I: The Players
UPDATED Thursday November 26
The Taxpayers Part 2 – Those who ventured into OVDP/OVDI
First Part of Post (from yesterday) is HERE
Do the drudgery……do your own research
LCU’s……Life Credit Units
minnows…..little guys
whales…big guys
CCW……… Complain Comply & Warn
OVDP……..Overseas Voluntary Disclosure Program
DATCA… Domestic Account Tax compliance Act
GATCA….Global Account Tax Compliance Act
As usxcanada recently said, anyone who cannot guess right away who the above terms come from, needs to learn some Brock History!
After a much-earned vacation from years of FUBAR expat life, “Just_Me” (Marvin van Horn) may not be posting and tweeting much anymore but those of us who were lucky enough to have “known” him cannot help but smile. He was nothing short of a human dynamo, completely wound up in communicating our plight to everyone and anyone.I remember wondering if he ever slept; he would be online when I first got up in the morning and seemingly still there when I would get to bed in the wee hours of the next morning. He was omnipresent! It didn’t seem to matter whether he was in the U.S., sailing on his boat or at home in New Zealand. Marvin was the reason I learned Twitter. Marvin was the reason I joined LinkedIn groups. He taught me how to make a link. He was the reason many of us knew about the Taxpayer Advocate. He educated us about how horrible it was, to enter OVDP. Above all, he was a true example of what a real person is; he was not bitter in spite of an absolutely miserable experience; “took responsibility” for not being aware of filing; tried to do the “right thing” putting himself at great peril. He devoted himself to the “cause” and refused to let it ruin his life. I cannot recall ever hearing anyone having a bad thing to say about him.
To the best of my recollection, Marvin had been posting on Jack Townsend’s blog and when Peter read his comments, he invited him to become an author at Brock. For Marvin, the 2009 OVDP program was an 851- day process. I have taken excerpts from a couple of his posts to try and capture his story: OVDI drudgery for minnows and Letters to Shulman or a case sudy of OVDP communication attempts with the IRS
Just_Me writes:
Rightfully or wrongly, I came to the conclusion that joining the OVDP was my only option. My logic was probably flawed, but it went like this…
Prior to the moment I heard about the IRS program on NPR during the family visit back to the Seattle area, I didn’t know that a FBAR existed or understand foreign income reporting requirements. Those considerations never enter your mind when you are sailing the Pacific in a small yacht, or gardening in NZ. Maybe that represented some due diligence failure on my part for not staying fully aware of all the complex tax rules and reporting requirements even for my simple existence. I had never visited the IRS.gov web site in my life.
From that moment in late September, 2009, until I submitted my letter in October 12th there was a very stressed and compressed journey. First I had to convince my wife this was something that we could not ignore and had to do. There was the scramble for knowledge. I had to search out attorneys, and CPAs for a cram course of discovery of what my obligations were. There were returns to amend, and the almost unfathomable foreign tax credit form 1116 to complete that the CPA couldn’t even do correctly. There was a long distance bank record compilation effort that was extremely difficult to do in the time frame I had. There was the embarrassment of your predicament which meant you didn’t want family and friends to know. Then came the very hard, emotional and lonely decision which ended with you walking into the Seattle IRS Criminal Investigation (CI) division offices feeling like a criminal. I did all that, because I had reluctantly came to the conclusion, that once I was aware of my failures and aware of the IRS program, I had knowledge and could not escape it.
I KNEW! Therefore, now, I had to do the right thing.
So, what was the choice given my knowledge? To me, None! I had to enter the OVDP. My big mistake was assuming that the IRS would realize that I was a Minnow and not subject me to the harsh 20% penalties. I naively thought my appeals to Shulman would result in logic and reason prevailing. They would do the right thing, and not treat me as a Whale. How wrong I was!!
In the end, it was the “discretion” implications of FAQ 35 that finally got me some relief with the much appreciated help of the TAS. It took 26 months from entry in the OVDP to 906 closing agreement signatures. Without the TAS, I was fish fertilizer!
Current Situation: After a long distance drawn out process, via mail and phone calls to and from New Zealand (no email allowed), I am now in the 20 day countdown (12 days left) to decide to “Opt Out”, or be thrown out of the OVDP into an “irrevocable” program of great uncertainty.My current 906 settlement statement calls for an OVDP penalty of ~$172,000 (plus interest and 20% accuracy penalties on our amended returns) for a tax failure of <$21,000 over a 6 year period. The taxes have been paid in full with interest and penalty.We were not the target client of the OVDP program, as we have repeatedly pointed out. We were not deliberately moving ill-gotten gains or unreported income to foreign accounts for the purpose of hiding funds in secret Swiss UBS like accounts out of reach of the IRS.
Instead we were just simple expats and immigrants who are not financially sophisticated and weren’t aware of the rules. I understand the IRS position, that arguably, we should have been. That is your world. You are the technocrats that live your lives immersed in rules and regs at IRS.gov. We do not. We were living plain vanilla non extravagant lives in semi-retirement in New Zealand, which is not exactly a banking haven for tax cheats as there are no bank secrecy laws. We were negligent, maybe, but not criminal and never heard of a FBAR prior to September 2009.
Now setting aside any technical or legalese considerations of willful vs non willful, or reasonable cause vs just plain negligence, does the amount of $172,000 seem like a reasonable penalty for a tax failure less than $21,000 that was voluntarily disclosed and paid? Really?
The reason my OVDP penalty seems extreme as compared to the tax errors is technical. The rules of the program allowed (actually required) the “Technical Adviser”, who has no discretion, to include my retirement home, where I am living, in the highest gross aggregate calculation! Why? Because it generated some non substantive holiday rental income in 2003, 2004, 2005, so it is included. If there had been no income, it was not included. There are no de minimis rules, or intent of ownership. If there is $1 of income, it is included. End of Story! Black and white! No Discretion!!
In the current 2009 OVDP program, the IRS created penalties totally divorced from the tax or compliance failure. It is just a uniform 20% of the high aggregate account balances and some assets. That is why we now find ourselves subject to a non discretionary penalty for a tax failure of < $21K over 6 years as compared to, say, Tim Geithner’s tax failure of >$42K. His penalty – nothing. Ours – $172K. I hate to bring in this example, but what is wrong with this picture?
To their credit, my examiner and her manager spent a lot of time trying to determine if they could remove my house value from the penalty structure because they wanted to be reasonable on penalty application. But they were over ruled by the “Technical Adviser.” No discretion allowed!
later……
Also, she advised that I should calculate FBAR penalties outside the OVDP as per the IRM based upon each account having a FBAR penalty. Would they double count? First she says, of course not, and then after a conversation with her “Technical Adviser”, she calls back to say, yes they will double count accounts. What?!So, if the same money is in two different accounts in the same year, I am to calculate two FBAR penalties. Example. If my $10,000 CD rolled over to a new CD during a year, it would have to be counted twice as $20,000 in the high aggregate because technically two accounts apply when the new CD with new suffix is issued. Go figure.
After I mailed my letter to Shulman, and with 11 days left to “Opt Out” or be “kicked out” decision , on June 30th, I emailed the TAS offices of Nina Olson. 24 hours later I received a call back setting up a conference call. Also on the 30th, I finally got a hold of Victoria Gally and she arranged for a conference call on July 5th. The TAS joined in, and that was the beginning of the end of my ordeal. Below is the correspondence that followed.
August 5th, 2011 Below is a copy of the TAS FAQ35 appeal made by the TAS on my behalf to the IRS Examiner. After the TAS issued a Tax Advocacy Order (TAO) shortly after July 11th, my examiner suddenly found some discretion, and offered to lower my penalty from $172K to $115K . The Advocate Case Officer did not think that was good enough, and it was their opinion that the maximum penalty should be $25K as probably the best deal they could get out of the IRS examination department. It was their decision to counter the $115K with a $25K offer.
August 23rd, 2011. I wrote a letter to my examiner and sent a check for $25K, which was the negotiated settlement between the TAS and her office on August 18th. Given the stress and the high level of penalties that I was staring at, $172, I was so relieved that I felt that this was the best deal I was going to get, thus it was probably reasonable and fair, given the IRS FBAR environment and mindset. As time as passed, I now think I left too much money on the table. It wasn’t fair, but in the end, mine was a business decision to bring the nightmare to an end.
….There is something intimidating about the whole process that makes you feel guilty, even when you know you are not. My approach through out the process was to keep it from becoming personal and stay away from acrimony that might add to my problems.After 851 days, from entering the OVDP in 2009, I was informed by the TAS officer today, that the IRS has issued a refund check to clear all reconciliation items from the OVDP examination. Tomorrow they are mailing me a check for ~$3000 dollars which includes roughly $250 of interest for overpaid taxes. (actually received two treasury checks yesterday for $3925.01 which was more than I expected.
The mass hysteria, as Tricia calls it, was created by articles in the Globe & Mail (Barrie McKenna) and the National Post (Jamie Golembek)–and likely others who followed suit. Their sole experts were members of the compliance industry who stood to gain thousands from sheep being led to the slaughter. It was bad journalism at its finest. Only Isaac Brock Society had taken the stance that these laws were evil and deserved to be resisted and opposed as immoral and a violation of the sovereignty of Canada.
I participated in the comment stream, at the original blog post cited in this post, sparring with a notorious compliance condor. I see already my bold admission that I would never file an FBAR.
Actually- point one and two go together. Human rights issues do harm people.
This poll isn’t thought out clearly when 2 answers apply to the same group.
Meanwhile we see a few expats admitting that they voted for BHO both times: https://www.facebook.com/groups/citizenshiptaxation/permalink/941819109241171/
@Polly
The 2 questions are designed to ferret out whether one views the overall harm as more important or the personal harm as more important
@Peter
there are so many links I am not sure which one you are referrig to. Can you post it pls?
https://renounceuscitizenship.wordpress.com/2012/01/05/the-taxpayer-the-irs-and-the-professionals-where-to-go-from-here/
Options, what options? None according to then IRS Commissioner Shulman in 2011:
“As I’ve said all along, the goal is to get people back into the U.S. tax system,” Shulman said. “Combating international tax evasion is a top priority for the IRS. We have additional cases and banks under review. The situation will just get worse in the months ahead for those hiding assets and income offshore. This new disclosure initiative is the last, best chance for people to get back into the system.”
I was scared and angry those days. Now I just seethe with anger over the injustice. I’m afraid I won’t rest until the US government sees the error of its ways. Just this morning I was thinking about both the Ways and Means Committee and the more recent Senate Committee both acknowledging to a degree that the situation non-residents face needs to be at least reviewed. The former suggested the US look at going to RBT, the latter merely suggested someone address our issues in the future. Neither suggested things remain the same, yet no one has followed through with either recommendation in spite of knowing full well what’s going on.
Justice delayed is justice denied.
@Bubbles,
yup, going the “traditional” route, produces nada. I can understand trying it. But after years and many scarred peopple, other means become necessary. It is the lack of years that makes other expats less angry than we are.
@Petros
because we are rolling this out in smaller chunks, I had not yet scrolled all the way down. I remember that “conversation.” Wonder what Mr. Berg meant about being affected by it personally….I find the “insurance” reference to use OVDI even if the FS applies not only impossible to believe but repugnant. That’s the same as suggesting one who relinquished without a CLN could only acheive total piece by becoming 5 years compliant and renouncing (esp if in Exit Tax Territory). I didn’t have thousands to pay and even if I did, I would refuse to do so.
They know what’s wrong yet they do nothing. Each renunciation is like blood on their hands. Trying to stem the flow of it by increasing the renunciation fee only puts more blood on their hands. As Allison said, instead of making it harder to leave, they should be making it easier to stay.
Everyone’s favorite compliance condor probably meant that he had to pay himself to do his US taxes.
@Bubblebustin:
“I was scared and angry those days. Now I just seethe with anger over the injustice. I’m afraid I won’t rest until the US government sees the error of its ways.”
Good luck with that. The US will never admit the error of its ways. That would require rational thought, something that is apparently nonexistent down there. The Vietnam war was an obvious mistake that cost a vast amount of money and tragic loss of human life and they still haven’t admitted they did anything wrong. I think being an American Homelander is a form of mass insanity.
They will continue with their war on everything until the country breaks down into a seething mass of political bickering, backstabbing, racial unrest and insolvency. They are talking about rounding up Syrian refugees and Muslims just like they did with the Japanese-Americans during WW2, for God’s sake. They haven’t learned a damn thing. We can consider ourselves lucky to have escaped from that cesspool. For the sake of our own mental health we must learn to just let it go.
Far better for us to concentrate on the ADCS lawsuit. At least that is something constructive because there is hope of forcing our own government to treat all Canadians equally.
@maz
I am afraid most of what you write on any thread I agree with….
@Tricia
But the harm IS financial. It is both and it will always be both. I dont see any real division of the topic there. I voted for the human rights issue- but that is because I am being harmed. WE are being harmed individually- and I dont think you can divide the we from the I.
@Bubblebustin says:
“As Allison said, instead of making it harder to leave, they should be making it easier to stay.”
I came to Canada a broke student. After 22+ years in Canada, my financial situation has “improved.” Thanks to CBT and FATCA, I have divested myself from the US and relinquished my USC. This is in my opinion, a rational choice.
@Polly
Yes you can divide. One is not really about financial. That is the “we.” That is a broader issue. Some people will choose that.
Others will feel it more personally. It may/may not be financial.
I am sorry you feel it doesn’t work. Doing my best to explain it. I know what I was after and I did it on purpose. I don’t feel it is “not thought out clearly….”
From day 1 it’s always been about equal citizenship rights and discrimination, the taxes and penalties were a separate issue all together.
Yes awareness has increased, but there’s still lots of work to be done.
It’s a little early, but 2016 I believe will be more renunciations, the Charter challenge, and hopefully legal action commencing in the EU. For all we know that could already be happening.
Re: poll
Ex-pats can either file and face financial harm year after year– unnecessary cross-border accounting fees, an extra layer of taxation without benefit, lockout from local banks, severe limitation in retirement investment options– or they can “choose” the nuclear option that Professor Christian alludes to in her video interview, “voluntary” renunciation or relinquishment of one’s birthright, USC. I view this as a terrible human rights abuse by the US government and a clear violation of Article 13 of the UN Declaration of Universal Human Rights.
Pay taxes to a country where you no longer live under threat of jail time or penalties or turn in your citizenship. What was it the Godfather said? “I’m gonna make him an offer he can’t refuse.”
“Now I just seethe with anger over the injustice. I’m afraid I won’t rest until the US government sees the error of its ways.”
The US government sees the intentional malice of its ways, and it doesn’t care. It knows what it’s doing.
“Each renunciation is like blood on their hands.”
Each renunciation is like blood flowing past their Teflon coated armour. They might see it but they don’t have to care. If they care they can just blame the renouncers.
OMG, I have been here forEVER. No wonder I get tired of this subject.
CBT, FATCA, FBAR are like a festering thorn that can only begin to heal when they are finally removed.
@Tricia
“I find the ‘insurance’ reference to use OVDI even if the FS applies not only impossible but repugnant. That’s the same as suggesting one who relinquished without a CLN could only achieve total peace by becoming 5 years compliant and renouncing…”
A few years ago (early on my learning curve) I sat in a Moodys promo event and witnessed Kim Moody, Roy Berg and their associates tell people who insisted they had relinquished decades ago but had no CLN that the only way for them to achieve total peace of mind was by becoming 5 years compliant and renouncing (with the generous help of Moodys, of course).
@ Petros
I’m more of the opinion Berg meant he had to pay Moodys for tax help, who then did it wrong.
@Shovel
I have also heard this directly at a seminar this past summer………
No matter who helps whom, they’re going to do it wrong. The rules contradict each other.
Re: Doing US tax returns wrong. It doesn’t matter, nobody at the IRS understands their tax code, either. Norman, weren’t you the one who said that it was far more important for US returns to be “processable” rather than be correct?