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…
@Iota….” I daresay most are just following instructions and don’t care whether the forms they process result in good or evil for the taxpayers who’ve sent them in.”
Cough cough…..send in returns that are easy to process and everyone is happy.
Keith Redmond –
To paraphrase and to fill in a gap: There are no cases where the American overseas or the Accidental American was or will be troubled at the border over tax matters in conjunction with passport. Yea or nay?
After all, the access to the US factor is what has made the strange attempt to institute a worldwide FATCA regime even thinkable …
@ Clicker
You have to consider that some of us have been working for the last five years on this issue. Like Keith, we hear from many people who do not share publicly ( nor is their info shared by us). Some of us also have relationships with professionals in the field; Keith has taken an active role in talking to government officials in many countries in addition to endless number of expats. To date, the ONLY people who we KNOW FOR CERTAIN have been penalized are those who have come forward and entered the system. This of course, does not mean that all who come forward are penalized. However, add to our experience the fact we are not hearing anyone has received letters from the IRS since the turnover of info in 2015 and 2016. There is nothing to suggest that people with no US indicia, especially those who are real Accidentals, have much to fear. The only people who are saying this is wrong are those in the tax compliance community. Not all because it affects their livelihood but because of the fact that they cannot fathom someone could refuse to comply with a law just because it is wrong, particularly when it is the US behind that law. We all know how ruthless the US can be in any arena and this one is no different. And because they have seen others be punished by IRS penalties, ( not necessarily expats) they match those two ideas and come up with worse-case scenarios. That may be seen as conservative and protective by some and over-the-top by others. What matters is outside of either set of assumptions.
Life is not black and white. Not perfect. To assume the IRS will somehow suddenly become efficient enough to actually go after people they do not know exist, nor are likely ever to find, is not realistic. I cannot under any circumstance see why anyone in those shoes would willingly put themselves in a system that has no true right to claim them as “citizens.”
This is clearly immoral, it goes beyond the boundaries of what reasonable people consider acceptable in life.
It is clear, from the 1 million expat returns filed, that the majority of expats in the world are NOT filing. In spite of 2009, 2011, 2012 -onwards OVDP. In spite of the horrible pronouncements from people like Douglas Shulman. And in spite of the tax compliance community. The IRS does not have the money, the manpower or likely, the will to come after a set of people who are not going to owe annual income tax. It simply is not cost effective. And on a realistic scale, haven’t even addressed how on earth, after locating people, they are going to be able to collect. Most countries do not even have mutual agreement collection clauses in their treaties with the US. And the ones that do will not collect the on those who were citizens of that country the time the tax was incurred. Nor will they collect FUBAR penalties.
The lawsuits are starting as is the grumbling of countries who expect reciprocity. And the anger and resistance felt by those who are actively fighting this (even when they themselves are out of the system) is not waning.
At this point in time, unless one wants to remain a US citizen, or knows they are likely to be caught by FATCA, there are strong reasons to stay out of the system.
And ask yourself if all the information above, is discussed at a meeting with a tax compliance professional when a non-compliant expat comes into the office for the first time. I know what my bet would be.
There are 300 million tax returns. They are processed by computers. When Pauline from Paris or Tony from Toronto files there are no employer or bank slips for the computers to match. Hence the odds of a minnow overseas being audited approach zero. Keith is right and there is no need to invent nightmare scenarios.
This has been an interesting collection of comments. When reading them one gets the impression that there is some kind of U.S. law that specifically requires Americans abroad, accidental Americans, etc. to file a U.S. tax return. There is no law that specifically targets Americans abroad or accidental Americans.
Not sure if this this will help or hurt, but here is why:
Internal Revenue Code S. specifically decrees that ALL “individuals” (whereever they may live on the planet) are U.S. tax subjects and are required to file U.S. tax returns and (if applicable) pay taxes ON THEIR WORLD INCOME to the USA.
Read Internal Revenue Code S. 1 yourself:
https://www.law.cornell.edu/uscode/text/26/1
There is a “special rule” found in Internal Revenue Code S. 2(d) which restricts the taxation of “nonresident” aliens to income associated with the USA.
https://www.law.cornell.edu/uscode/text/26/2
“(d) Nonresident aliens
In the case of a nonresident alien individual, the taxes imposed by sections 1 and 55 shall apply only as provided by section 871 or 877.”
Therefore, the only people ON THE PLANET who are safe (as long as they stay away from the USA) are “nonresident aliens”. Nonresident aliens are defined in S. 7701(b) of the Internal Revenue Code.
My point is this:
Americans abroad are NOT being targeted. It’s just that it’s harder for them to argue that they are “nonresident aliens” (unless they have relinquished U.S. subjectness”).
Again, the code doesn’t specifically target Americans abroad. The code includes all those who are NOT nonresident aliens. Should everybody on the planet apply to the IRS for a certificate that they are a nonresident alien as defined by the Internal Revenue Code?
I don’t think the IRS is specifically looking for people outside the USA, who do NOT qualify as nonresident aliens.
Do you mean passport revocation? Not been used yet, that I’ve heard of. Most non-US-resident USCs don’t have any kind of certified US tax debt, let alone $50,000
What made FATCA thinkable, and doable, was the Swiss bank fiasco, which fired up the US to go after (some) Swiss banks for soliciting tax haven business from US-resident USCs.
<blockquoteAmericans abroad are NOT being targeted. It’s just that it’s harder for them to argue that they are “nonresident aliens” (unless they have relinquished U.S. subjectness”).
No need to argue anything if they don’t enter the system, is there?
@DoD – “the odds of a minnow overseas being audited approach zero. Keith is right and there is no need to invent nightmare scenarios.”
Hear hear!
Keith: Are you still going to Washington this month to speak to Congress? Even if you feel there is no problem for accidentals there is still a big problem for all other Americans abroad. I was corresponding with a person (not an accidental) last week who had made an attempt on his/her life over this and, thankfully, appears to have decided to fight back. CBT has got to go and now is the best opportunity we have ever had in the history of our movement to get this done. Your advertised January trip to Washington in tandem with a change to a government that actually has promised to right this wrong is the best hope we have *ever* seen. Please don’t let your anger be diluted in your presentation.
I don’t much care whether or not IRS officials *want* to bother with people like me. But I care very much that they are mandated by law to do so! The Canadian lawsuit is about much the same thing. I think we all agree that compared to Europe we’ve all gotten off fairly lightly here in Canada. Yet we are prosecuting this lawsuit because our formerly free country has adopted a law … it matters not that it is, so far, largely unenforced … that mandates the reporting of its own citizens of a particular national origin, etc. etc. to the tax authority of a foreign country. We cannot allow such a law to remain on the books. And the problem law at the root of this whole disastrous mess is CBT and it’s got to go.
Accidentals are affected by the mess, even if some of it is the result of perhaps over-inflated assumptions and lack of knowledge. Keith, they need you, too, even if you and others may perceive that the need is not acute.
Solid advice by Keith over on FB. Thanks for reposting over here @Tricia.
I’m at the point where I no longer care if my bank staff know I came here from the US (some do)– I am quite forward if it ever comes up in conversation that I torched my USC. “Came from there, loved Canada, wanted to become Canadian and gave up my USC when I became Cnd.” Followed by, “Even if I wanted to keep it, and I don’t, the US would still try to tax me even though I haven’t lived there in almost 25 years. Can you believe that? No other country does that. It’s impossible to keep your USC in Canada.” The response I invariably get is, “Wow, that’s crazy!”
@George (TOR)
“The “problem” is that at some point a young programmer could decide to write some code that goes through the data sets and starts generating substitute tax returns on millions of expats.”
To expand on what USCitizenAbroad wrote (if I understand him/her correctly) there has been NO point at which some programmer wrote some code that actually exempted non-resident citizens from enforcement procedures. It would have had to have been authorized by someone.
So as long as it’s on the books it’s enforceable, practically speaking.
@iota
Agreed. 100% of the IRS agents I’ve had anything to do with (1) feel the law is the law, evil or not.
“Sending out unenforceable computer-generated penalty notices would be pointless.”
It’s not pointless because it helps them keep the ill-gotten proceeds of their embezzlers, helps them pile penalties onto the victims, and helps them seize assets that might happen to flow through the US (and/or through FATCA cooperating banks or countries).
Though even if it were pointless, that wouldn’t stop them.
“It appears from the cases that get prosecuted that the IRS pursues foreign account cases where
(a) there’s a lot of money; and
(b) they have or can obtain evidence to the necessary standard; and
(c) there’s a clear path to collection – i.e., the pursued person
(i) lives in the US (as most do), or
(ii) lives in a country with a US extradition treaty, and can be shown to have committed a felony (such as perjury; hence the jurat).
Every foreign accountbcase I’ve seen reported has fallen within these parameters.”
For criminal cases that might be so, but for civil cases should I repeat yet again what they continue to do to my wife?
Besides, even where they penalized me, it wasn’t for committing perjury in the jurat, it was for FAILING to commit perjury in the jurat. I used to write honest declarations, which they accepted in years where no Form 1099 was involved (that’s the form Monica Hernandez embezzled from). For years where Form 1099 was involved, they coerced me to commit perjury, and they accepted the perjured declarations. Even for a tax year where the Japanese labour standards bureau, unemployment office, and Tokyo District Court knew the falsity of a salary and tax form issued by an employer, the IRS coerced me to declare that the form was true and correct.
“There are no cases where the American overseas or the Accidental American was sought after by the IRS through the courts, full stop.”
That might be true technically but it’s very highly misleading. The IRS does enforce collection action. Court procedures pervert the relationship between accuser and accused so the victim has to be the one to pursue the IRS in court, but the victim does have to go to court.
Flight attendants and pilots seem to get most of the publicity when the US imposes tax and penalties on the portion of salaries earned over international waters. I’ve previously posted four Tax Court cases where Americans in Canada were deemed self-employed and were dinged for failing to pay quadruple self-employment taxes (double to Canada and double to the US before the social security treaty started to exempt them from the US portions).
Then there’s me and my wife, but we’re not alone. The IRS’s Taxpayer Advocate reported to Congress in 2011 that thousands of honest taxpayers were forced to renounce US citizenship because they were penalized for honesty. My wife never even was a US person but just made the mistake of marrying one.
‘The employees at Treasury will be subject to annual evaluations. They will need to “get work done” and files moving off the desk.
An employee making it her mission to harass John and Jane Expat living in France and paying loads of tax in France is going to waste a lot of time for that employee.’
The case gets dumped in her lap and she gets a high evaluation by showing that she harrassed John Expat and Jane NonResidentAlien living in Japan and paying loads of tax in Japan.
Even when her declarations in support of the IRS’s position in court, signed under penalty of perjury under 28 USC section 1746, are so badly perjured that on the day after calendar call the IRS’s lawyer deletes the perjured declarations from the collection of exhibits, she still gets a high evaluation by showing how many hours she spent harrassing.
“Cough cough…..send in returns that are easy to process and everyone is happy.”
Almost a bingo. That’s exactly what the IRS demanded when they demanded me to commit perjury. The only unhappy person is an idiot who has unfortunate tendencies to be honest.
“When Pauline from Paris or Tony from Toronto files there are no employer or bank slips for the computers to match. Hence the odds of a minnow overseas being audited approach zero.”
The opposite is happening. IRS audits of minnows overseas are INCREASING.
(They only exclude me because I filed motions to try to compel them to audit me, and then they’d have to find where the embezzled withholding went.)
“So as long as it’s on the books it’s enforceable, practically speaking.”
It’s enforceable in cases where the IRS can enforce it. Mostly, they can’t, when the person lives outside the US and has no US assets and doesn’t voluntarily provide the relevant information and evidence.
“IRS audits of minnows overseas are INCREASING.”
Really? Where did you see that, if you don’t mind me asking?
“Sending out unenforceable computer-generated penalty notices would be pointless.”
Could someone tell me what’s stopping computer-generated notices from being sent to non-US addresses?
“The IRS does enforce collection action. Court procedures pervert the relationship between accuser and accused so the victim has to be the one to pursue the IRS in court, but the victim does have to go to court.”
If the IRS already has the money (e.g. via withholding), do you mean?
I can see that a person would have to go to court to try to retrieve money that has already been withheld, but most USCs outside the US are not subject to withholding unless they hold US assets.
“Could someone tell me what’s stopping computer-generated notices from being sent to non-US addresses?”
Nothing, as far as I know. Computer-generated notices could be sent, they could then be ignored.
“IRS audits of minnows overseas are INCREASING.”
‘Really? Where did you see that, if you don’t mind me asking?’
https://www.bloomberg.com/news/articles/2015-04-09/the-irs-has-new-favorite-people-to-audit
https://tax-expatriation.com/2014/07/22/does-the-irs-investigate-united-states-citizens-uscs-and-lawful-permanent-residents-lprs-residing-overseas/
http://www.taxmeless.com/IRSaudits.htm
https://irstargetsexpats.wordpress.com/category/irs-audit/
and a bunch of others
“If the IRS already has the money (e.g. via withholding), do you mean?”
That’s part of it.
Another part is that they file liens and levies, which become enforceable if they use a method of notification (such as US Postal Service) that takes more than 30 days to deliver the notice to you.
https://www.ustaxcourt.gov/UstcDockInq/DocumentViewer.aspx?IndexID=6828389
No doubt, but it might be worth the price of stamps, envelopes and stationery for the low-hanging fruit alone.