reposted from MapleSandbox
by Lynne Swanson
#FATCA Americans overseas: Do NOT allow US tax pros scare u into entering US tax system. Many have no business entering!
— Keith REDMOND (@kredmond_global) January 19, 2017
Backing up the above tweet, Keith Redmond posted the following on Facebook:
Dear Members: I just had a lengthy, robust call with an individual who spent 25 years in upper management with the Department of Treasury IRS Criminal Investigation. He confirmed what I thought about the IRS. There is more bark than bite. He stated that there are many, many Americans overseas ho have no business in entering the US tax system and that Accidental Americans UNDER NO CIRCUMSTANCES should enter the US tax system. He confirmed that there are MANY US tax pros who prey on Americans overseas and Accidental Americans through fear and falsehoods. (e.g. you will get arrested, etc.). Any US tax professional who pushes and scaremongers these individuals to comply are not professionals and should not be used! He confirmed that the IRS is NOT going to go after you in your country of residence (most especially if you are a citizen of that country) and the IRS is NOT going to arrest you at the US border. The IRS does not have the resources to do this plus they go after those who have committed a crime not the average American overseas. He stated that Americans overseas need to not succumb to the fear. Excellent conversation and I am glad my views have been validated.
This reflects what I have long believed. Unfortunately, there is still the nightmare of FATCA to deal with. In some countries, anyone born in the US cannot even get bank accounts. We are treated as criminals just for banking where we live.
I asked Keith how his contact explains and justifies this.
Keith replied:
He can’t. He finds the whole situation abhorent…
@Polly – “…if they WANT to, if you are caught somehow, the IRS can still throw the book at you. Because it is the law. ”
Exactly. If they have evidence of actual tax evasion, AND the sums involved make it worthwhile, AND the person has signed one of those penalty of perjury jurats, THEN they can ask the residence country to extradite the person to stand trial in America.
If the sums involved are paltry, or the person has never filed, or the IRS has no proof of tax owed/evaded, there’s very little they can do beyond writing a letter.
This fascinating post has prompted me to re-examine my past choices. I have greatly benefitted from reading this website with its rich trove of varied opinion, advice, and personal experiences so here’s my situation.
I started filing age 29 when I moved back to the US for 1 year in 1996-1997. I stopped about 4 years after returning to Europe because my income moved above the FEIE and I didn’t get the local tax data in time for IRS deadlines (even extended) so I had to work in estimations and it just seemed pointless since I would not owe tax nor should I pay tax to the USA…
Maz57: even after FATCA I would have no qualms telling my bank I’m just an ordinary EU Citizen living and paying taxes here and not mentioning the US. The problem is that in Belgium you do everything with a chip ID card that has your birthplace on it. You cannot open a bank account (or do much of anything) without that card.
So when in 2014 a bank threw me out on basis of my birthplace, and I knew the other banks would figure me out some time in the future I decided to start filing again. I filed 3 years of FBARs (I’m a low net worth individual but sometimes the total on one account did exceed 10000 USD, even if for a day and even if the others were underwater) and 3 years of returns. Quietly. No letter, no explanation, nothing. And I’ve filed 2015 and will soon do 2016. I guess this is the ultimate in quiet disclosure, and would recommend this approach. I feed numbers to a tax preparer, and I don’t go into details. I assume retirement accounts are non reportable and I assume that my savings plans which are a kind of mutual funds are savings accounts for FBAR purposes. Keep it simple.
The “risk” is having my current banks figure me out. One has sent me a single letter saying if I don’t respond within 30 days (I haven’t) they will forbid me from opening any new account AND send my bank data to the Belgian Government (something they cannot do to ordinary people, because there is bank privacy for non-US persons) in view of it being forwarded to the IRS. Right now I am not afraid of this, since the IRS has received my returns.
Now one could tell the bank yes, I’m a US Person and here’s my tax number for the US. And do nothing more. The bank is happy, it gives the info to whom it wants, and the info is passed along,or not, to the local govt or not an then to the IRS. Assuming the banks sends the info, and assuming the Belgian govt does too, the IRS gets the info. What do they do with it? Probably nothing. But will they do nothing? One assumes that if the info is that you once had a 10000 balance will they check the FBARs, will they audit? What if they do? Who knows.
I guess in the end even if the bank knows you are a US person and even if you have a 100000 USD on your accounts and even if you are non compliant with FBARs and returns there is little chance of anything happening. Again who knows?
@Calgary411
You did in fact lose your U.S. citizenship by becoming a Canadian citizen in 1975. Your son’s status as a U.S. decision is doubtful. You had a high price for a combination of unhelpful professional advice and a desire to be in compliance with the laws that you were told applied to you. Clearly you would have been much further ahead if you ad simply taken the (defensible) position that you were NOT a U.S. citizen.
@Fred(B) – “The “risk” is having my current banks figure me out. One has sent me a single letter saying if I don’t respond within 30 days (I haven’t) they will forbid me from opening any new account AND send my bank data to the Belgian Government (something they cannot do to ordinary people, because there is bank privacy for non-US persons) in view of it being forwarded to the IRS. Right now I am not afraid of this, since the IRS has received my returns.”
AIUI, the risk is loss or restriction of banking services. It doesn’t matter that you’ve filed your returns. The bank has to get your certification as a US citizen or non-US-citizen, or report your account as “recalcitrant” or risk US withholding.
If you’re reported as recalcitrant, and you’ve filed returns which don’t mention the account (Schedule B), then in theory the IRS could pursue you because they’ve got that penalty of perjury jurat. But is it likely? I would guess that it’s not, unless there’s a lot of money at the end of the rainbow for the IRS.
It”s the banking services that are the problem, or that’s how I would see it, were I in your shoes.
I think it’s important to separate the issues discussed in this post.
1. Mr. Redmond’s discussion with the Treasury agent is interesting, helpful and (to some reassuring). Beyond that, it is not an “Official Statement of Policy” from the IRS. But, the IRS cannot change the law. Therefore, the IRS will NEVER state an “Official Policy” of NOT going after Americans abroad. That said, there is NO evidence that the IRS has attacked Americans abroad. Why would they? They can rely on the “tax professionals” and banks to do it for them. In other words, no matter what the IRS does, many people will still be attacked by the banks, etc. The IRS is NOT your main problem. Your problem is with the banks (who lead you to the tax professionals by sending the FATCA letter)) and the tax professionals (who lead you into U.S. tax compliance).
2. With or without this discussion, “accidental Americans”, “possible Americans” born outside the United States and long term “technical Americans” abroad must decide how to deal with their situations. Whether they deal with their tax situations or not, this is not a “one size fits all” issue. Some will comply. Some will not comply. Some will think they are in compliance and will not be. Full compliance with the IRS rules for Americans abroad is not possible. The best you can hope for is “best efforts”.
3. With or without Mr. Redmond’s discussions, the experiences of @Bubblebustin, @Calgary411 and others reveal the dangers of entering the U.S. tax system. Therefore, the decision to enter the U.S. tax system must be made with full knowledge of the consequences TO YOU. I am not suggesting that people should enter the system. I am not saying they should not enter the system. I am saying that the decision should be made with full knowledge of the consequences TO YOU. The decision must be an “educated decision”.
4. Entering the U.S. tax system is a permanent decision. The reality is that entering the U.S. tax system is “in effect” the first step toward renunciation. It is difficult to survive as a “Tax Compliant American Abroad”. Rational retirement and financial planning is simply not possible. Those who value U.S. citizenship will find it easier to remain a U.S. citizen by living outside the U.S. tax system and outside the U.S. tax grid. The irony is that retention of U.S. citizenship is easiest by NOT entering the U.S. tax system. It’s no longer possible to both live outside the United States and be U.S. tax compliant. But again, this is a situation that you must make for yourselves with education.
5. I note some unhappiness with @Bubblebustin’s letter. It’s worth remembering that the clarity and support that is available to those “having their OMG moment today”, is because of the lessons learned from @Bubblebustin, @Calgary411 and others yesterday. Those coming of age today have (and continue to benefit) benefited enormously from your “OMG Moment Ancestors”. For example, when @Bubblebustin dealt with this situation there was no streamlined. there was no December 2011 Fact Sheet, etc. It was a very different world then!
6. Those who do NOT have a U.S. place of birth have a completely different category of issues and anxiety. FATCA attacks ONLY those who either have a U.S. place of birth or announce to the world that they believe they are U.S. citizens.
In summary (for what it’s worth), your decisions be based primarily on an evaluation of your personal situations.
Just my two cents.
I said: “If you’re reported as recalcitrant, and you’ve filed returns which don’t mention the account (Schedule B), then in theory the IRS could pursue you because they’ve got that penalty of perjury jurat. ”
If you decide to certify as US and want to be on the safe side, you could file amendments to the returns to tick “yes” to the “any foreign accounts”, plus Schedule B to report the interest, plus of course FBARs.
I think another aspect to be looked at in this discussion is those who would at some stage be expecting a US inheritance. Many Americans that live abroad, even long term expats may have parents that are based in the USA that will some day leave an inheritance.
I had some correspondence with such an expat that I was given as a contact when I was looking for a tax accountant referral. She was someone that inherited off her US mother after many years abroad and non compliant and it caused her a real mess. She didn’t go into details because I did not know her personally, just seeking an accountant referral but she told me it was a mess and she did have to renounce in the end. So it’s something to consider and get informed about if one falls in this category.
And it is true to say that there is no one size fits all. The only thing that fits all is that the laws are unjust, unfair and barbaric.
very interesting comments all around……
I have lied to my bank and financial advisor…..I will continue to do so with no qualms about it……
I will never cross into that country to south of my country of residence
were I to get a letter from that fabled 3 letter agency it would be added to the bottom of my bird’s cage along with the rest of the junk mail from the post office.
I lost my American citizenship in 1980 when I obtained CANADIAN citizenship as there was the threat of renewing the military draft because of the iran hostage crisis.
I AM A RESIDENT CANADIAN CITIZEN first and foremost.
and Justin said “a Canadian is a Canadian is a Canadian” 🙂
Regarding point 5, above.
Perhaps it’s just my criminal nature, but when I had my OMG moment back in 2011 my first reaction was “this is BS, they’ll never find me” and my second reaction was “there’s probably close to a million duals in Canada, it would be a shitstorm of the highest order if the US actually tried to gouge money out of us”. In other words, my first instinct was NOT to attempt compliance. It’s a decision I have never regretted.
I did briefly flirt with renouncing, but decided that five years’ tax paperwork was too much hassle; only later did learn that you could buy a CLN and ignore the tax side of things, but by that point they’d raised the price and to me it doesn’t seem like a great value anymore, particularly when Canadian banks are not demanding to see proof of non-citizenship.
The IRS will never enforce the taxation of Americans abroad to the extent it should, probably in part because it would need to expend too much in the way of taxpayer support services for little in return. Instead, they cut back services at the same time FATCA is rolled out.
My point is – if you are going to have a law, be prepared to do everything it takes to enforce it or lose it.
I also strongly believe that if the IRS were to enforce CBT fully, it would soon be gone.
Instead they act with uncertainty, seemingly content with any falling fruit that comes their way with no clear policy on what they’re doing while keeping US citizens abroad in a constant state of terror. I want accountability and to be treated fairly for my tax dollars – or don’t tax me. Don’t leave me blowing in the wind while you keep an unenforceable, immoral and totally obsolete law on the books.
Deal with it.
@Bubbles…”My point is – if you are going to have a law, be prepared to do everything it takes to enforce it or lose it.
I also strongly believe that if the IRS were to enforce CBT fully, it would soon be gone. ”
You are spot on AS ALWAYS. 😉
@Brockers, in most of the West…expats….deemed pats…..are not likely to owe any tax to the USA and that is not considering the FEIE.
The penalty for failure to file is based on tax owed. So if you owe no tax there is no penalty.
I believe the IRS knows this and that would be why at the agent level no one is going to get hot and bothered to go after middle aged and retired folks who are simply managing.
Besides there is very little they can do to collect even if someone owed a little bit.
THE problem was that expats signed up to OVDI when they should have simply taken a vacation.
Bubblebustin,
Who knows what will happen to the effectiveness of the IRS under the new administration? As referred to yesterday in the media thread — Bloomberg, January 19, 2017: Mnuchin calls for boosting IRS despite House plan to streamline
More likely, it will continue to be wink and nod, disregarding some as government agencies, here the IRS for US-deemed *US Citizens / Persons Abroad*, pick and choose who shall be affected by US sham exceptional CBT law instead of the common sense change to the law of other countries, which is RBT, residence-based taxation. Fear and awe (similar to the military shock and awe) as the naive, such as me, tried / try to obey unjust US law and redeem the fact that my Canadian-born children were deemed-US citizens because of me, supposedly automatic — not choice to *claim* that citizenship (according to the law that was explained to me by US lawyers). So different than my choice to become a Canadian citizen. Thus, the Department of State is the same — their law on the books, but presumably if those are ignored, no problem.
USCA, a decade ago when this started for me, there was no Isaac Brock Society and other information to access on the internet. I was so naive, never imagining that my Canadian-born children could automatically be considered US citizens, reacting in fear to change my family’s facts and free all of us from US-deemed US citizenship. I made so many naive decisions on my road to renunciation, but indeed they were my free-will decisions. The $$$ I spent from my retirement savings went mainly to the US tax compliance industry and a Washington, DC immigration / nationality lawyer. The only $$$ that actually went to the IRS (my family’s fair share?) was for the Canadian Registered Disability Savings Plan account that I hold for my son, the bonds and grants contributed to that RDSP US taxable and subject to IRS Forms IRS 3520 and 3520A. Canada agreed with an IGA to protect the financial institutions, making *US-deemed US citizens who happen to abide in Canada* second-class to any other Canadian citizen, no matter their national origin, unless one is brave enough to follow the more common-sense actions and the promise that Canada will not collect for the US for either FBAR penalties or US tax and penalties from the time a person a person is a Canadian citizen. The waters are muddy here and there.
It’s all in hindsight, for me, could of / would of — what would I do now? My mistakes are made but I can be an example to others of perhaps what not so hastily do. Emotionally, I said early on that all this took the joy out of my life. That is the unseen consequence for many, no matter wanting to never claim a US citizenship and its discriminatory consequences or wanting to keep the US citizenship which is their birthright though living abroad, but not subject to the discriminatory consequences, both under exceptional US CBT, which as I see in this discussion is indeed a sham.
Yes, I, though no longer naive, do have *CHUMP* across my forehead (and *Made in the USA* tattooed on my backside). I remain here, a prime example for others who continue the discussion at Isaac Brock Society. One US tax lawyer here told us *the law is the law* (like a US citizen must only cross the US border, either in or out, with a US passport). Apparently not in so many examples. Read and research well what has been built here before making your decisions on how to deal with US CBT consequences for yourselves and your families, sham or not.
@Bubblebustin – the IRS doesn’t enforce extraterritorial collection because it doesn’t have the power to do so. Within the US, there are powers of compulsory payer reporting, compulsory withholding, liens, tax courts, and a “rebuttable presumption” that the IRS is always right. Beyond the US borders there’s not much they can do.
“I also strongly believe that if the IRS were to enforce CBT fully, it would soon be gone.”
We’ll never know, because the IRS can’t enforce extraterritorial collection fully. Here and there, where there’s a collection agreement, or US assets, or a “bad bank” they can force into freezing accounts, or a case where they’ve got courtworthy evidence – in such cases, they can enforce. Beyond that, they can only deal with the returns that do come in, and write letters; and in most cases they have no idea who to write to because they don’t know who is an American or who is required to file.
That’s why it’s possible for some of us to find workable solutions to the US tax predicament. To self-relinquish, or keep schtum, or file minimal information and renounce. It’s as good as we’re likely to get, in my opinion. And it may not last. Collection agreements could spread like wildfire, just as FATCA did, and then non-US-resident USPs would be royally screwed.
If you want to be an American, shouldn’t you accept their laws and comply? If you can’t tolerate their laws, and can’t change them, why do you want to be an American?
Fred (B). As soon as you have filed 5 years , all roads lead to renunciation. I love your KISS approach- highly recommended. Ain’t nobody going to audit a 10,000 account. The new Treasury Sec left 100 million off his declaration. The new health sec is an inside trader. The groper in chief doesn’t pay taxes. Do nothing is exactly right for accidentals.
…and we still dont know what the IRS will do with the information banks have been sending them due to FATCA…..
Can Lynne or someone tell me who was the idiot that said. “Congress has Spoken” the week before the FATCA Finance Committee meeting? I’m going to publicly shame his @$$ on Twitter? I plan to publicly expose him as a Canadian TRAITOR!
http://isaacbrocksociety.ca/2015/10/18/october-19-is-election-day-in-canada/comment-page-3/#comment-6729840
From 2015:
@Calgary411
You’re not a chump, you were ambushed like so many of us were .
Now we live with the consequences of our actions.
It’s like a festering splinter all for the lack of a good pair of tweezers, you can’t remove. You try to forget about it, but you’re always drawn back to it. You know it won’t kill you, but you know your life would be so much better without it.
Some say that Trump’s going to like FATCA and CBT because it brings in revenue, or at least it has the appearance of doing so. With repeal of both part of the Republican platform, won’t the value in repealing them be discussed at all before he tosses their repeal, like the fact that CBT is unenforceable?
@bubblebustin – “Some say that Trump’s going to like FATCA and CBT because it brings in revenue, or at least it has the appearance of doing so. With repeal of both part of the Republican platform, won’t the value in repealing them be discussed at all before he tosses their repeal, like the fact that CBT is unenforceable?”
The first unknown is whether the question of repealing FATCA will be raised.
The Rand repeal bill and the Meadows repeal bill both died with the last Congress, and somewhat to my surprise have not been resurrected for the new one. The bit from the platform was cut-and-pasted into the Freedom Caucus todolist but that’s no more than a 300-item memo: there’s no formal procedure whereby each of those item gets its 5 minutes of consideration.
Who knows? We’ll just have to wait and see.
@iota
“If you want to be an American, shouldn’t you accept their laws and comply? If you can’t tolerate their laws, and can’t change them, why do you want to be an American?”
Because I believe with the possible repeal of CBT now on the now current government’s platform, the law can change. We’ve never had a better chance.
Well, now that Obama’s out and Trump is in I’ve just started my stopwatch re: the repeal of FATCA and the elimination of CBT. Anyone want to place a bet on how long?
@maz57
I’ve never been a good gambler. That’s why I went to Vegas for the shows and weather.
Maz57 repeal of FATCA- more than 4 years. Repeal of CBT- not in our lifetime. You heard it here.
@George
Thanks, but I stole it from Lincoln 🙂
Sometime I think of the repeal of CBT is like the fall of the Berlin Wall – that the forces that kept it there were gone long before it was physically dismantled.
Mr Trump, tear down that wall!
@calgary411, Mike Allen was the one that said, “Congress has spoken”.