This post was prompted by an article written by a Los Angeles tax law firm.
The background is that there are about nine million or so people living outside the United States who are deemed by the United States to be U.S persons. Most of these persons are IRS non-compliant. Some of these persons believe that it is illogical for them to comply with the IRS.
The article points out (correctly) that many of these IRS non-compliant persons, as they age, will develop in old age some disabling cognitive impairment, and therefore will need another person (e.g., conservator, tax attorney) to handle their financial affairs.
The individual having enduring/continuing power of attorney over the person’s finances could be a spouse, relative, close friend, attorney, or professional company. It is likely that this person will instruct a tax lawyer or accountant to handle the tax filings.
What happens when the tax attorney/Conservator in Canada, UK, Australia, whatever, discovers that their cognitively impaired client has a U.S. taint but is IRS non-compliant?
What is the obligation of the tax attorney to the client — or to the U.S. IRS? Will the attorney be guided primarily by fear of personal liability? What is your guess? Will the attorney pursue a Streamlined or perhaps an OVDP “defence” on your behalf? How will the assessment of your state of mind prior to cognitive impairment re: “willfulness” be conducted? What happens if no evidence can be found “proving” non-willfulness? How much cost will all this entail to the cognitively impaired who must live off their retirement savings in an assisted living or nursing home? Can the tax attorney ethically justify bankrupting the savings of a cognitively impaired client to satisfy a tax law imposed by a foreign country?
Given that there is potential liability (in the eyes of the United States) for BOTH the person having power of attorney over the cognitively impaired person’s finances AND the person doing the tax filings, what is the “REALISTIC” solution to get out of this mess? Readers have suggested:
— Renounce while cognitively intact if you can somehow afford the cost “and just be done with the problem” [USCitizenAbroad]? Free yourself now.
— Instruct the person having enduring power of attorney NOT to pay taxes to a foreign government? [This may be problematic. The Conservator may in future worry about personal liability re: U.S. and it is likely that some (many? most?) tax attorneys/accountants will refuse to participate in the tax filings if they have knowledge that the individual is an IRS non-compliant US person].
— Attach a self-generated CLN to the POA instructions (Rebecca’s interesting suggestion)?
— Every individual in the world takes out an insurance policy modeled on Obamacare which would insure them and their estate against the possibility of their being deemed to be a U.S. citizen [USCitizenAbroad]; and/or
— No person who is suspected of possible “USness” will be entitled to have an executor [or Conservator][USCitizenAbroad].