cross-posted from citizenshipsolutions
The FBAR Chronicles continue …
First, A Public Service Announcement – Mr. FBAR Get’s A New Filing Due Date
Latest #FBAR filing date is now Oct. 15. Applies even if the 1040 is filed after October 15. https://t.co/3eq1jIICvm
— Citizenship Lawyer (@ExpatriationLaw) March 16, 2017
This is one more of my posts about Mr. FBAR. Mr. FBAR is a mean, nasty vicious thug who has no place in any civilized society.
Thomas Jefferson once said:
Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.
My thoughts are that:
Were it left to me to decide whether we should have FBAR without outlaws, or outlaws without FBAR, I should not hesitate a moment to prefer the latter.
Unfortunately, Mr. FBAR has become the new symbol of American citizenship. Furthermore, Mr. FBAR disproportionately affects the local bank accounts of Americans abroad – becoming (in effect) a form of “domestic terrorism” against U.S. citizens living outside the United States.
Mr. FBAR As Applied To The Canada U.S. Dual Citizen …
As reported by CBC news, Global News in Canada, The Isaac Brock Society and various Facebook groups. a U.S. Canada dual citizen (Jeffrey P. Pomerantz – the Defendant) has been sued in Washington State, by the U.S. Department Justice, to collect FBAR penalties for the years 2007, 2008, and 2009. It appears that at the present time, the Defendant lives in Vancouver, Canada.
The actual “Complaint” filed in the Court which summarizes and explains the Government’s allegations is found here. (If you have read this far, you should pause and read the Complaint.)
The facts are horrendous. Basically the Defendant was assessed significant FBAR penalties which increased through interest charges to the point where they had grown to approximately $800,000 U.S. dollars (approximately 1,100,000 million Canadian dollars) by the time the law suit was commenced in 2016. FBAR penalties are frightening, draconian and are really a form of Civll Forfeiture. One comment, as reported on the Isaac Brock Society put it:
On a practical note, there is one commenter in particular, Kathy “Powell”, who could use upticks on the CBC article for her efforts to set things straight … if anyone here has CBC commenting privileges. (I gave mine up when “real names” were required.)
As for Jeffrey Pomerantz who is truly living “a friggin’ nightmare”, there’s just too little information to create a clear picture of his situation. I won’t judge him as others at CBC are doing. I’m just shaking my head at how those without a clue keep tossing in misinfoturds to muddy the waters even more. What is crystal clear to me is that the villain in this scene is the IRS/DOJ and even if Jeffrey Pomerantz is guilty of something he doesn’t deserve to be completely impoverished for it.
The complaint filed by the Department of Justice is here and should be read by all bloggers and other commenters. At first blush one gets the impression that this case is primarily about the IRS assessing an FBAR penalty on a Canadian citizen resident in Canada and that the penalty was based on unreported Canadian bank accounts. This interpretation reinforces the fear (real and legitimate) that the IRS might attempt to attempt to confiscate the wealth of Canadian citizens resident in Canada through civil forfeiture FBAR penalties. I do NOT believe that this is a fair reading of the Department of Justice Compliant. (The situation is bad enough without expanding it’s reach. There is no need to accelerate the “fear mongering”.)
This case is more like a Homelander with unreported bank accounts in Switzerland …
Here is why.
Please note that this story is based on FBAR violations for the tax years of 2007, 2008 and 2009. Based on the Department of Justice complaint, we see the exploration of the following factual allegations.
Factual allegations:
A. Was The Defendant a U.S. Resident Or A Canadian Resident During The Years In Question?
Although it is unclear, it appears likely that the Defendant was a both a U.S. citizen and a U.S. resident during all or some of the years of 2007, 2008 and 2009. The CBC article includes:
While the Justice Department’s complaint says Pomerantz lived in the United States during all three years, documents prepared by Pomerantz’s side found in the court file say he and his wife, a Canadian-Norwegian dual citizen, only lived in California for part of 2008 and 2009 before moving back to Canada.
Assuming that he was a U.S. citizen residing in the United States, his case (presumably) would have been viewed as that of a Homelander with offshore accounts.
B. Where Were The Offshore Accounts That Were The Basis For The FBAR Penalties?
RBC (Royal Bank Of Canada Accounts):
The Department of Justice complaint (paragraphs 12 and 13) describes the existence of RBC accounts which were opened “prior to or during 2007”. A reading of the brief suggests that the RBC accounts were NOT counted towards the FBAR penalties. The RBC accounts were in the name of a Vancouver, Canada based company. Although not conclusive, this suggests the the Department of Justice did NOT target those specific RBC accounts located in Canada.
Swiss Bank Accounts In The Name Of A Turks And Caicos Corporation
The Department of Justice pleading (paragraphs 8 to 10) allege the Defendant opened:
- five swiss bank accounts in the name of a Turks and Caicos Island Corporation;
- that the Turks and Caicos Corporation performed no active business but was opened for the sole purpose of holding the Defendant’s investments (paragraph 7); and
- that the income from the accounts was NOT reported on the 2007 – 2009 tax returns (paragraphs 22, 36 and 44).
In other words, the FBAR penalties should be seen as penalties imposed on Swiss bank accounts (sounds horrible) which were located outside the Defendant’s country of residence (in a tax haven).
The Two CIBC “PERSONAL CHECKING” Accounts Opened Prior To 2001
Paragraph 5 of the Government’s Complaint describes two CIBC accounts that:
- were opened prior to 2001
- remained open during the years of 2007, 2008 and 2009
- were not reported on an FBAR.
(Because they were “checking accounts” it is unlikely that they generated taxable income.)
Although we can (I think) assume that these accounts were located in Canada, the compliant does not specifically state this.
Nevertheless, my impression is that:
- although the CIBC accounts were included in the group of accounts that were part of the FBAR penalty base (see paragraphs 17, 31 and 41);
- the FBAR penalties were motivated by the Swiss bank accounts opened for the benefit of the Turks and Caicos Corporation.
To summarize …
Nobody deserves the treatment that this defendant was subjected to. It is however, wrong to interpret this case as the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents. There is enough FBAR hysteria already! This case should be seen as the IRS attempting to impose an FBAR penalty based on the unreported offshore Swiss accounts that were for the use of an offshore (Turks and Caicos) corporation used to hold personal investment assets.
Although FBAR penalties are (in general) unconscionable, unfair, draconian and a form of civil forfeiture):
this case should NOT be interpreted that the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents.
This post has been based largely on the Department of Justice complaint as filed in the Court.
Further to the Pomerantz case, from reading the documents it seems the IRS has hired skip tracers without much effect. The money may well be gone. There is no indication he is a Canadian citizen immune to collection by the CRA but if the money is outside of Canada — and indeed if he has gone elsewhere with some kind of travel document — this will be just another of those cases left on file, albeit with a judgment that might or might not be enforceable somewhere. From what I can tell, the skip tracing specialists did exactly what I did: research the Internet and read the court papers. There’s no mention yet of a cancelled passport or a writ ne exeat republica and some suggestion that Pomerantz has left Canada. Assuming that we are talking about Jeffrey Paul Pomerantz, age 68, with family in the USA the challenge for him is that his American family cannot inherit without risk of seizure of funds on the principle of transferee liability. That could lead to some hard negotiation with the IRS since the US heirs could disclaim. I’ve seen this happen in the past.
Is there transferee liability for penalties or only for taxes?
If there’s transferee liabiliy without due process for penalties on taxes (pretending that the 16th amendment’s override of the 5th amendment applies to all of Title 26 USC instead of just taxes), is there transferee liability without due process for penalties on non-tax allegations (Title 31 USC and anything else)?
Tricia,
Thanks for a re-visit to the documentary on the life of Aaron Swartz — and what it means both lives, Aaron Swartz and Jonathan Prince, lost the way they were!
Re. the comment about the same money being subject to FBAR penalties when moved from bank A to bank B. FBAR penalties are calculated based on the balance on June 30 of the year following violation. So any closed accounts will not be double counted, since money can only be in one place at one time.
@NRT, Please support what you have to say with an article or something. I personally don’t have any reason to believe that Pomerantz’s statement in the Global article is not correct. In any case, the term “aggregate” is an IRS/US Treasury perpetrated scam.
@NRT, Also, there is no reason to think what you say about June 30 date is true.
Second, a husband and wife each had money in the same account and both were fined for it. The US government does count the same money twice.
Hence the largest reason why I’m renouncing.
Sure, I could go on about tax policy un-fairness, or my political reasons as to why I want out. But the biggest reason is because my wife is sick enough to where I had to get powers of attorney done, and that I have to protect both of our interests from what is clearly a predatory government.
….and again. I don’t do FBARs. It is an affront to dignity, and basic justice, to do nothing wrong, and yet have to constantly prove it.
I don’t feel that I should owe anyone anything, that will criminalize me until proven otherwise, and then have to do it again, and again, and again….
“…there is no reason to think what you say about June 30 date is true.”
It’s in the manual:
https://www.irs.gov/irm/part4/irm_04-026-016.html
So many dates floating in the muddy, shark-infested waters of FinCEN114 (FBAR) … April 15th (filing date), October 15th (automatic extension date) and June 30th (filing violation calculation date). Riddle me this … During 2016 Mr. Befuddle takes $9000 from his only account and puts it into a new account at a different bank. Even though it’s the same money, he is supposed to file a 2016 FBAR by April 15, 2017 (automatically extended to October 15, 2017), because there are 2 accounts to report, totalling $18000, which is over the $10000 aggregate amount. In March of 2017 Mr. B. takes out all of his $9000 from the new account and closes it. Therefore he has no balance in any account on June 30, 2017. What is his penalty for not filing a 2016 FBAR? Is it $20000, $10000 or $0? Or is it some other number? Why give an automatic extension to October 15, 2017 if the violation calculation date is June 30, 2017? And why pick June 30, 2017 to calculate the penalty instead of December 31, 2016? This is confusing.
Please excuse me if I’ve muddled this all up … just finished doing Canadian taxes and I’ve got a lot of numbers in my head right now.
@NRT, you are incorrect about the FBAR not double counting.
“….any closed accounts will not be double counted, since money can only be in one place at one time….”
Tell that to Greedy Mr. Fincen and the US Treasury.
Why when I rolled over my (legal, local Canadian funded and sited ) ordinary GICs when the term deposits matured – and the account # changed did I have to report the highest balance on any single day in the year for each and every account – even though it was the same money?
The reportable value was the highest amount the account hit on any single day in the year. So, if one borrows money for a mortgage, and the money alights in your chequing account just long enough to be taken out again immediately in order to pay to purchase a house, and that constituted the highest balance of that chequing account in the year, my understanding is that that is the reportable FBAR balance. Despite that the balance could be entirely a loan – and thus the highest value actually represents a large debit – and not some fictional untaxed credit in terms of the account balance. But FINCEN pretends it is an actual credit.
So not only would they force us to report the balance more than once in counting towards the aggregate reporting threshold – but also in terms of transfers between accounts and rollovers, but they make us also report loans or debts as if they are credits/assets.
The US Treasury is using the nonwillful FBAR and other form filing LAYERED penalties to creatively invent ways of generating revenues by hook and by crook even when no possible actual US tax could be assessed or owed. If they can’t assess tax, they’re happy to extort money some other way from those living outside the US and already paying taxes in full to the country where we live, work, bank, and receive ACTUAL benefits. The NON-willful penalty has only existed since 2003/4. And they’re working that scam – with the onus transferred to the ‘taxpayer’ to prove the non-willfulness to a level of satisfaction that they refuse to define in any understandable way. Only modifying their behaviour slightly when rebuked by the Taxpayer Advocate.
And theoretically even our UStaxablechildren born ‘abroad’ and those deemed legally incapable are supposed to file their own ONLINE with the Financial CRIMES Enforcement Network.
What an oppressive unconstitutional confiscatory unethical shameful scheme.
If the balances weren’t double/triple/multi.. counted to arrive at the false ‘aggregate’, and debts weren’t also counted as assets, and POAs and other non-personal non-beneficial ‘signatory’ or co-signatory powers – even potential future ones (ex. named executor or POA for Financial affairs as a contingency) and the aggregate didn’t also include even non-personal non-beneficial accounts (ex. when you’re the volunteer treasurer for your kid’s local NON-US baseball fundraising committee or your church and can sign cheques and deposit the bake sale funds ….) – and excluded the account balances of the NON-US persons with local NON-US accounts that USPs might have some kind of contingent future cosignatory powers over, then lots of people ‘abroad’ might never even reach the laughably low aggregate reporting threshold in order to fall prey over the lip of and into the predatory FBAR threshold trap.
We wouldn’t be here now if not for the willful IRS invention of the non-wilful FBAR penalty and the reversal of the onus of proof turned around and placed onto USPs ‘abroad’ to prove our innocence before the US Treasury assumption of our guilt. Which FATCA just builds on. Now we’re guilty – merely by reason of having had a US birthplace or parent. And then there are all those LAYERS of penalties that can apply even if the person had an income so low that it didn’t even trigger a US extraterritorial tax reporting requirement, much less a US tax assessment. And have to prove in our own NON-US country of residence, our NON-US home, that despite being ‘guilty of having US indicia’, we’re innocent – by being ready to hand over a CLN.
@ badger
All very good points made in your comments. And after FinCEN’s FBAR false aggregate trap comes the IRS’s 8938 false aggregate trap and its equally absurd penalties for miss/non filing. With double reporting, loan reporting, signing authority reporting it doesn’t really take much to exceed the higher 8938 limit too.
One reason it’s going to be fun to follow the Pomerantz case is that it will demonstrate how impotent the US government is when it comes to collecting penalties outside its own borders.
They can aggregate accounts and generate penalties all day long if they want. Who gives a rat’s ass when your money’s outside the US and you’re not obliged to pay them so much as a dime?
“@NRT, you are incorrect about the FBAR not double counting.”
The money’s double-counted for threshold purposes, but not (according to the IRM) for the purposes of assessing “wilful” penalties as in the Pomerantz case.
All of it pretty much unenforceable beyond the US borders, as per Nononymous’s comment.
@All
Note that the dates in the IRM have not been updated for the change in due date from 30 June to 15 April.
Also, there has been a change in the IRS’ method of computing the penalties. It is clearly described in one of the articles that @badger linked (may have been in another thread) : http://www.taxlitigator.com/wp-content/uploads/2016/06/Evolution.pdf – The Continuing Evolution of FBAR Enforcement by Steven Toscher and Michel R. Stein.
Starting on page 53, it explains revised examination guidance on penalty assessment. For willful violations the maximum total penalty over the 6 open years will be 50 percent of the highest aggregate balance (it is not clear whether they are double counting in this figure) unless extraordinary facts and circumstances warrant a higher penalty (not to exceed 100%). For non-willful violations the penalty will generally be limited to $10,000 per year (not per account) – again, this can be increased in extraordinary circumstances.
These revised guidelines were released in Nov 2015, so most of the cases making their way through the courts now would probably be from the earlier, more draconian, guidelines.
Of course, the whole idea of FBAR and FBAR penalties is outrageous, especially when it comes to my account in the bank around the corner.
Interesting.
So that’s> what they’re worried about – the Eighth Amendment.
I wonder if Pomerantz knows…
“The meaning of the phrase as applied to the quantum of punishment for any particular offense, independent of the offender’s ability to pay, still awaits litigation”. And presumably the IRS would like to keep it that way.
Long quote above comes from https://www.law.cornell.edu/anncon/html/amdt8_user.html#amdt8_hd7
So NOW into the equation of how high a FBAR penalty might be we have to factor in how long ago did the “offense” occur (different criteria for different years), willful or not willful (only the Lord High Executioner knows for sure) and any circumstances that the IRS and FinCEN might toss into the mix to raise or lower the penalty (impossible to predict this one). However, the most important factor is the ability or lack of ability for them to collect from someone outside their borders who has no US assets to seize. The only thing certain here is the uncertainty. You might do better to stay in the frying pan than to willingly leap into the FBAR fire, especially if you reckon your government will hold the frying pan well above the flames.
Another article which mentions Jeffrey Pomerantz but it goes off on a historical tangent about citizenship.
http://www.counterpunch.org/2017/03/20/the-limits-of-citizenship/
“…the most important factor is the ability or lack of ability for them to collect from someone outside their borders who has no US assets to seize.”
That, plus the context. It’s surely very unlikely the IRS would risk a court case to collect FBAR penalties from a non-US-resident USC merely for failure to file FBARs for ordinary local accounts. The tax code commentary I quoted above seems tonsuggest that’s the kind of outrageous scenario that could risk raising the Eighth Amendment “excessive fines” issue.
@iota
Sure, it might be unlikely, but why should I take a chance? Especially for that government? All they really have to do, is ‘crack a few heads’, and convince (frighten) others into falling in line.
But like I said….I don’t do FBARs. Certainly not in regards to my wife’s business. But with all that said, it makes what I need to do in response to the situation, that much easier to do, as it’s now distilled down to a base choice of either divorce, or renunciation.