Thanks to USCitizenAbroad for posting links re Ms Ran Kim. Here is a piece she is listed on while interning at Caplin & Drysdale in Washington, D.C. (2012-2013, 2014)
Scott D. Michel, Zhanna Ziering & Young Ran Kim, U. S. Offshore Account Enforcement Issues, 16 J. Tax Practice & Procedure 65 (Aug./Sep. 2014).
U. S. Offshore Account Enforcement Issues
CONSIDERING "CITIZENSHIP TAXATION":
IN DEFENSE OF #FATCA– Hands Down Worst Academic Piece About FATCA ever Written https://t.co/qYvsrzpEyL
— Patricia Moon (@nobledreamer16) May 27, 2017
Profesor Paul Caron, on his TaxProfBlog posted the following article:
CONSIDERING “CITIZENSHIP TAXATION”:
IN DEFENSE OF FATCA 20 Fla. Tax Rev. 335 (2017):
by Young Ran (Christine) Kim
If any description could possibly be demonstrated over & over in this piece it would be the term “offensive.” I confess to a hard-edged bias against academia, likely for the same reasons as most people; i.e., the rather noticeable and consistent lack of everyday common sense. Even in my own field (piano performance, where a doctorate is called a DMA not a Phd) there is a prevalence of people who may be perfectly schooled in the accuracy of Baroque ornaments, precise methods of articulation in Classic-period pieces or any number of other tedious accomplishments yet their actual playing (which is the whole point of a performance degree vs an academic one) is so devoid of vitality and inspiration it is enough to make one weep. I don’t know if the same exists in all disciplines but one thing that does apply here is a complete (and I mean complete) lack of awareness on the part of the author, of the harshness of how these theories play out on the lives of REAL people. What would make much more sense would be to address these problems head-on rather than justify “concepts” through a lot of theoretical jargon.
The following comment says it well:
The people affected by “citizenship-based taxation” are U.S. citizens and Green Card holders who live outside the USA and are “tax residents” (and often citizens) of other nations. The paper discusses (sort of) “citizenship-based taxation” as an abstract concept without considering the brutal effects that it has on the people subjected to it. The acknowledgement of the difficulties with pensions, retirement planning, foreign spouses, mutual funds, CFC rules, etc. (the reality of citizenship taxation) is most notable in its absence. And no, FBAR and Form 8938 (as obnoxious as they may be) are reporting requirements and not the specific tax rules (PFIC, etc.) that affect Americans abroad. I suspect that this paper will be subjected to the criticism that it so richly deserves.
Posted by: John Richardson | May 26, 2017 1:14:02 PM
While this criticism can be equally leveled at the members of Congress who passed FATCA, the Treasury Department personnel who wrote the regulations and last but not least, the heartlessness of many tax compliance practitioners, there is something especially repugnant about those pontificating from their ivory towers, proclaiming that FATCA, citizenship-based taxation, global transparency and all the rest of it, are worth the grief being caused.
Ms Kim indicates her paper finds its origins in Ruth Mason’s recent article, Citizenship Taxation, [89 S. Cal. L. Rev. 169 (2016),
A major difference between the two is that Ms Mason basically sees citizenship taxation in a negative light while Ms. Kim attempts to find it as a natural basis to support FATCA.
She addresses three main arguments; the fairness argument, the efficiency argument and the administrative argument.
I.) THE FAIRNESS ARGUMENT
Individual taxpayers’ obligations to file Foreign Bank Account Reports (FBAR) or report under the Foreign Account Tax Compliance Act (FATCA) are not seriously onerous. The fact that citizenship taxation along with FBAR and FATCA enhances global transparency further supports the case for citizenship taxation……..because the rules have been improved through various exceptions and substantially high reporting threshold amounts.
Ms. Kim asserts that the obligation to file FBARS is not “seriously onerous.” The very real threat of a non-willful penalty of $10,000 per account per year (or worse for “willful) is certainly enough to strike the fear of God in even the most reticent individual. The idea that this reality is not considered when evaluating FBAR is beyond reasonable. Articles about FATCA often cover only the reporting done by the FFI’s. However, the other component is the requirement to file 8938’s which duplicate information from the FBAR and can incur serious penalties. The average person is not able to complete an 8938 and will have to pay to have a professional do it. Nowhere in this article does the author address the issue of compliance costs for individuals which can easily be $2500 a year for someone owing no tax and involve 50 or more pages of returns. Not onerous? Furthermore, there are simply NO FIGURES yet, to make any claim that FATCA “enhances global transparency.” Professor William Byrnes describes
the oft-quoted figure of $10 billion. This amount has absolutely NOTHING to do with FATCA; it is largely comprised of penalties and interest collected through the OVDI programs (and does not even represent actual tax recovered). While the FATCA thresholds are higher, please, the threshold for FBAR remains at $10,000, the same figure when the Act was created in 1970 – 47 YEARS AGO!
FOCUSING ON THE ABILITY TO PAY PRINCIPLE
First, consent theory argues that taxing nonresident citizens is justified because retaining citizenship represents consent to such taxation.
One cannot consent to something one doesn’t even know about. Is the author completely unaware of the history underlying the persecution of expats once Treasury/Justice went after the Swiss banks in 2008? There are still likely more Americans abroad who remain unaware of the obligation to file taxes and worse yet, the oppressive information returns with penalties simply for not filing a piece of paper (i.e. no tax due). For those who do know and who retain citizenship, keeping it is much a matter of confusion and fear and could hardly be described as “consenting to taxation.”
Second, benefit theory attempts to justify citizenship taxation as an obligation of nonresident citizens in return for the benefits they receive from the government.
This argument is so ridiculous at this point it is hard to believe it remains part of the discussion. Cook v Tait is nearly 100 years old and does not address the large changes globalization has produced. There is the endless nonsense of hearing how “The Marines will come to rescue you,” after which you receive a full bill. How many living in first-world countries have any need for “rescue?” And last but not least we “owe” the U.S. for consular services (for which we pay, dearly in the case of renouncing – $2350 or $50 USD to notarize a single page). All tiresome and nowhere near justifiable for being taxed “the same” as Homelanders.
Third, social obligation theory
the underlying assumption of this theory is that people have an obligation to pay taxes to support the members of the society to which they belong in accordance with their ability to pay taxes, which should be measured by their worldwide income.
I remember my reaction to Prof Michael Kirsch’s comments (at the ACA Program in Toronto, May 2014, “CBT vs RBT”)regarding polity and such. It seemed ridiculous to me to consider those of us living outside the United States as being a member of that society in any meaningful way. In my own life, now 35 years outside the U.S.(over half my life), the only times I identified as a “member ” of U.S. society was when defending against strong anti-American sentiment (the first few years away) and national tragedies such as 911. I cannot see any way that those infrequent occurrences defined me as being an American more than being a Canadian. I would say a more meaningful and valid way to apply the social obligation theory is whether or not I support policies that promote the social welfare of those around me, whether or not I give the homeless guy I see everytime I go to the bank, a bit of money so he can buy some lunch. IOW, except in an idealistic or nostalgic way, one can really only measure his/her “social obligation” based upon what they come face-to-face with, i.e., where they live.
Due to the different factors affecting the ability to pay, such as difference in the standard of living or amenities between places, “it would be fairer to calculate a person’s ability to pay by reference to the place where she lives rather than to the place where she holds her citizenship.”
“actually tax them alike,” which would require the repeal of the foreign-earned income exclusion and the allowance of unlimited foreign tax credits, including foreign consumption taxes, as well as the implicit taxes and subsidies to compensate the differences.
While all expats readily understand the reality that they are NOT “taxed the same” as Homelanders, the idea of being able to adjust all these factors to the number of foreign countries with all the differences in structure etc., absolutely discourages any realistic notion that this could ever be accomplished. Current retirement-oriented plans such as the Australian Super; the lack of recognition of tax-deferred vehicles registered by governments being treated the same as their US equivalents; requiring capital gains tax on the sale of principle residences which are tax-free in the countries where they are located ; and above all else, the obscene “savings clause,” all speak to the built-in bias the US has for anything “foreign” and its pronounced tendency to punish people for making use of non-US instruments. Add the effect of the Patriot Act, which makes it impossible to even open a US account with a foreign address and a non-resident American understandably lacks the will to try and weave one’s way through all these complicated, impossible-to-delineate requirements and procedures. The fact that the IRS does not clarify ambivalent sections such as §877A as well as the fact that no two compliance professionals can be counted on to give the same opinion is proof positive that disparate tax systems simply cannot be adjusted “fairly.”
when its critics condemned the new obligations to file FBARs and FATCA as an excessive compliance burden for nonresident citizens created by the Bank Secrecy Act.
There are no “new” obligations to file FBARs; they have been required (and unenforced) since 1970 and are part of Title 31. FATCA was NOT created by the Bank Secrecy Act. It comprises part of the H.I.R.E. Act (2010) and is part of 26 U.S.C. § 1471–1474, § 6038D.
II.) THE EFFICIENCY ARGUMENT
citizenship taxation may distort both Americans’ and non-Americans’ citizenship decisions, is not convincing
American citizenship renunciation rate is not particularly serious compared to other countries
residence-based taxation confronts an additional hurdle on top of enforcement difficulties: determining the residence of the individuals. Determining residence by considering all facts and circumstances creates problems beyond enforcement difficulties. The facts-and-circumstances test itself contains inherent problems when compared to a bright-line test
….and to what extent renunciation is treated as immoral and/or illegal, and so on.
The idea that citizenship taxation does not affect the decisions of Americans abroad concerning their citizenship is patently absurd. Without question, citizenship taxation IS THE MAIN REASON anyone renounces. Not because of tax per sé (don’t even think of trying to scare with the Reed Amendment) but rather, due to all the complications of trying to match two different tax systems. Add the non-financial issues such as the stress on marriages (to “aliens”), passing U.S. citizenship on one’s children, etc. etc. It has become a nightmare not worth living and something to escape if one can.
Ms. Kim devotes a long section to establishing the idea that the renunciation rate of U.S. citizens is “not particularly serious.” Again, we have someone indicating that unless the numbers are large, whether compared to that of other countries, the proportion of renunciations to the numbers of those abroad or to the number of entering immigrants, there is nothing being lost here. If that is the case, then the U.S. has virtually nothing to lose by simply letting these people go without all the forms, swearing under penalty of perjury and so on. One might occasionally consider that Americans abroad were once the best ambassadors the country could have. Now those tables are turned and some are more anti-American than any “alien” could ever be. Nothing like betrayal to warm the heart.
Regarding determination of residency, it is interesting that all 191 other countries of the world are able to surmount this difficult obstacle, which will be even more pronounced once CRS is operative. The “bright line test” which I presume means using citizenship rather than residency to base reporting on, is not truly useful given the fact that only the U.S. (Eritrea does not count) does this. When a U.S. citizen is living abroad with dual citizenship, with no determinant indicia, ask any bank how easy it is to establish whether or not one is a U.S. citizen. If it were clear, one would not see so many institutions refusing to serve Americans.
The Expatriation Act of 1868 gives all Americans the right to give up their citizenship if they so desire. It is not an issue of illegality. When a country treats its own citizens in the manner we have experienced from 2009 onwards (particularly the Accidental Americans who are not American in any normal understanding of the term), who is there to even suggest renunciation is immoral?
III.) THE ADMINISTRATIVE ARGUMENT
Citizenship taxation has been criticized as difficult to enforce on nonresident citizens abroad….Determining residence by considering all facts and circumstances creates problems beyond enforcement difficulties
Next to failing to point out the outrageous 30% withholding “sanction” inflicted on every other country of the world, this has to be the weakest argument in this paper. The fact that the U.S. cannot effectively collect anything outside of the country is the number one reason people feel safe in remaining “under the radar.” After the initial scare of 2009/2011 seeing that the people hurt the worst were those who tried to do the right thing, people started considering the reality that being identified (“caught”) may amount to virtually nothing for a number of reasons. First of all, the majority of expats who are not compliant are NOT wealthy tax cheats with foreign accounts in order to deprive the U.S. of tax revenue. They are first of all, compliant where they live, which speaks volumes. Secondly, they have these “foreign” accounts in order to live their lives. This is in no way comparable to Homelanders who are guilty of tax evasion when they stash money in tax havens (and let’s not forget Delaware, Nevada, South Dakota and Wyoming, shall we?). The Revenue Rule still stands; even the 5 countries with Mutual Collection Agreements (Canada, Denmark, Sweden, France and the Netherlands)WILL NOT collect on those who were citizens of their countries at the time the tax was incurred. Canada WILL NOT collect FBAR penalties. With regard to fear about crossing the border, if one is not in the U.S. system, there is nothing for the IRS to report to DHS or CBP etc. All these things may change over time but as it stands now, the most IRS can do to most people, is send them a letter asking them to pay. EXACTLY WHAT IS THE POINT OF HOLDING ON TO CBT IF THERE IS NO WAY TO COLLECT?
Is the Compliance Burden Actually Onerous?
the IRS has provided the OVDI that a U.S. taxpayer can utilize to avoid criminal sanctions for the failure to report the existence of, and income earned on, a foreign account on tax returns as well as for the non-filing of the FBAR. In exchange for avoiding criminal sanctions, taxpayers will generally be subject to a 27.5% penalty on the highest aggregate value of their undisclosed offshore assets.86 In addition, for non-willful violators, IRS provides Streamlined Filing Compliance Procedures (SFCP), a program that was expanded in 2014 to cover a broader spectrum of U.S. taxpayers residing abroad and to provide penalty relief. Therefore, nonresident citizens who no longer have a strong economic and social connection with the United States or happenstance Americans are no longer likely to be subject to the severe FBAR penalties.
To suggest that OVDI and Streamlined “make everything alright” is to avoid the real issue altogether which is that citizenship taxation is simply wrong. No other country on earth “claims” its citizens for life. (Eritrea does not count). No other country on earth taxes its citizens after they abandon residence. No other country on earth applies an Exit Tax on assets that were acquired prior to obtaining residence in that country. There are reasons why no other countries do any of the things associated with citizenship taxation. It’s high time the United States stop this appalling abuse of human rights.
THIS ARTICLE FURTHER AIMS TO DEFEND the administrability of citizenship taxation in conjunction with the Foreign Bank Account Reports (FBARs) and the Foreign Account Tax Compliance Act (FATCA).
FBAR-absolutely not the way it is being conceived of now. FBAR, created in 1970 was aimed at uncovering money being laundered in smuggling, the drug trade and terrorism. It also was not originally conceived of being applied to those outside the U.S. Once the DOJ/Treasury departments went after the Swiss banks, they realized they could stretch the intent of FBAR to apply to non-resident Americans and the penalty regime thickened.
The criticism… has continued even after the U.S. government committed to enter into Intergovernmental Agreements (IGAs) in an attempt to address those concerns
A huge oversight on the part of the author. FATCA was without question an extraterritorial imposition on other countries. Only the United States would be as uncivil as to suggest imposing a 30% withholding charge on their allies and trading partners. The U.S. appeared not to understand that other countries could not comply even if they wanted to as privacy laws prevented the level of reporting required by FATCA. Banks would be sued were they to comply. To suggest that the US committing to the IGAs was a gracious act is revolting. Under the guise of being rooted in tax treaties, the IGAs simply bypassed what should have been required; that Congress ratify such agreements and implement legislation to do so. There is nothing in FATCA that warrants the creation of the IGAs. The U.S. downloaded ALL of the costs of compliance to the other countries. There is no mention of any penalties for the U.S. failing to comply. The U.S. made only the vaguest promises of reciprocity. It is simply unbelievable that the immorality of taking capital out of other nations is considered acceptable by the United States.
IV>) FATCA:MERITS AND CONCERNS
The OECD’s AEOI and the U.S. FATCA are two important developments, but FATCA plays a more important role.
First, FATCA provided critical momentum
Second, FATCA facilitates multilateral implementation of AEOI by creating an extensive network with more than 100 countries in the world, at the center of which is the United States.
This is unsubstantiated nonsense. First of all, it is bizarre to say FATCA “plays a more important role” Who gains from FATCA other than the United States? So far, nobody. The United States is at the Center of AEOI/CRS? The US has not even signed on to CRS. There are huge differences that matter greatly. The OECD AEOI/CRS agreements are determined by the countries involved; the terms of residency are established by those exchanging the information. FATCA is vastly different in that the United States alone determines who is/is not a “US Person” “US Citizen” irrespective of the status of such a person to the other country. And so far, the U.S. is not “paying its fair share” by requiring its banks to implement the same systems and legislation required (imposed) by FATCA. The IGAs do not constitute “acceptance” by other countries. To think otherwise is ridiculous. One could not possibly view such stipulations as reasonable.
criticism that…. FATCA exposes taxpayers’ private information to potential abusive use by foreign tax authorities.
This is a matter of real concern to Americans abroad living in some of the more troubled areas of the world-or those living Colombia in South America and particularly in some of the Middle East countries. Ironically enough, the U.S. has had some of the worst breaches of security and leakage of private information; certainly this is disturbing and worrisome.
Ms. Kim’s discussion of the Bopp FATCA lawsuit I will leave to someone else.
Second, opponents of FATCA and EOI argue that an EOI system removes a country’s unilateral control over its own tax policy, resulting in the forfeiture of sovereign autonomy. Although such argument has withered since the U.S. government entered into IGAs with other countries, it was strongly asserted by Canadian opponents of FATCA when the IGA Implementation Act included in Bill-31 was debated in Canadian Parliament.
How outrageous to suggest a foreign country does not have the right to have unilateral control over its own tax policy. The proof is in the pudding. The U.S. would never allow the equivalent. The IGA’s are the proof.
I have watched the video of the Canadian FINA hearings on FATCA many, many times. It is not possible to convey the absolute disgust we have for the majority Conservative government which minimized completely, the capitulation that occurred with the implementation of the IGA. It was nothing more than protecting the banks, without any regard to the effect it would have on Canadian citizens resident in Canada.
However, a government’s control over its tax policy is more severely harmed when a country segregates itself from the global community and loses the ability to enforce effectively its own tax laws against its taxpayers with interests in foreign jurisdictions
More unsubstantiated nonsense. This is an opinion completely unsupported up by any facts.
A Case for American Exceptionalism
conclusion, if FATCA makes the world better off by enhancing global transparency on tax information, then this may serve as another support for citizenship taxation, as well as an example of constructive exceptionalism.
While all of us raised in America understand unconsciously what exceptionalism is, it truly takes living outside the country to appreciate how incredibly arrogant and offensive it is. It is questionable whether FATCA “makes the world better off….” that a questionable tenet should “serve as a support for the imposition of citizenship taxation.” It is nothing short of reprehensible that the author should suggest what the U.S. has done is “constructive” or in any way justifies the gross aberration of power demonstrated by the creation of FATCA.
I don’t know…I sort of think that if America had access to that kind of rationality expats wouldn’t be deemed to be all living in D.C.
IBS posters sometimes compare CBT to slavery, but to me it seems much more like a colossal case of coercive control.
I’d rather see you dead little girl than catch you with another State…
…and, BTW, that goes for your kid born there too.
“Rights are free.”
‘In practical terms, rights are non-existent until/unless agreed and backed by law.’
Rights are non-existent even when agreed and backed by US Supreme Court precedent and US law and US constitution and IRS regulations.
Most famous is the right not to be a witness against oneself in a criminal proceeding. US Supreme Court ruled in US v. Sullivan and Garner v. US that people have to file tax returns and report income even though they can claim 5th Amendment on particular questions such as source of income. This particular right is still honoured by the IRS administratively and US Tax Court, but not by the US Department of Justice and US courts other than Tax Court.
Less famous is the right to a Notice of Deficiency. The Internal Revenue Manual exists by authority of 26 USC section 7805 and guarantees that the IRS must issue a Notice of Deficiency when the taxpayer requests. Even when the law guarantees the right to deficiency proceedings, when the IRS yet again violates the law US Tax Court ruled that I don’t have the right to deficiency proceedings.
The difference between Russia and the US is that mass media report on US speeches about human rights. There’s no difference in the actual denial of rights by both countries.
“Imperialism brings its own specific contradictions and injustices,”
Yes, but our specific problem is that US citizenship brings worse contradictions and injustices than US imperialism. US non-citizen nationals get RBT. Even when they have the right to reside in the US, the US doesn’t tax them for their unused right.
“Rights are non-existent even when agreed and backed by US Supreme Court precedent and US law and US constitution and IRS regulations.”
Not “non-existent.” Corrupt disregard of a legal right doesn’t make it go away. And legal rights are not to be sneezed at.
While reading through the earlier comments, this seemed relevant as it relates to FATCA….
“It’s not that liberals aren’t smart, it’s just that so much of what they know isn’t so.”
– Ronald Reagan
Substitute the word “liberal” with “those in favor of FATCA,” and boy does it ring true!
“those in favor of FATCA”, aka FATCAnatics.
As a general rule, I wouldn’t attack a graduate student. They are somewhat prisoners of their committee, deeply insecure, and without any real influence. My big question would be whether this work has any real originality. At least in terms of content, it sounds very much like Kirsch and Zelinsky.
If you think that the material has been plagiarized, by all means run it through one of the numerous free anti-plagiarism tools available. If you find plagiarism, inform the journal and get them to retract it. I would be a bit surprised to find that it contained copying, since journals nowadays normally run things through plagiarism detectors so that they don’t have the embarassment of a retraction.
OK, the hands-down worst academic travesty about FATCA ever written was forced by an academic committee instead of being really believed by a graduate student who should know better. It’s still the hands-down worst academic travesty about FATCA ever written.
When I fabricated a social security number for my wife and wrote an explanation on Form 1040X of my reason for doing so, was it offensive and ludicrous that I fabricated a social security number for my wife? I think the answer is yes, even though the action was forced on me by ruling of US Court of Appeals for the Federal Circuit.
Norman, why did you “have” to fabricate a number for your wife? It doesn’t make sense that a court would tell you to do something that’s normally illegal like that.
Courts don’t have to make sense. If they did, they wouldn’t be needed because we could rely on sense instead.
The background is a bit lengthy. Regarding my own social security number, in calendar years 1992 to 1996 the IRS disclosed social security numbers on the outsides of envelopes next to names and addresses. In 1993 and 1994 I asked for notices as required under the Privacy Act of 1974, why did the IRS disclose social security numbers to US and Japanese post offices. The IRS still owes me answers. In 1994 I found their envelope in a public road, disclosing my social security number to all passersby, so I stopped asking the IRS and I applied for a replacement social security number. The Social Security Administration agreed that I was elegible for a replacement social security number, but they wanted to see my current US passport instead of an expired one. I couldn’t let them keep my current passport for a few months and then return it by unregistered mail because Japanese police could arrest me if I didn’t show it on demand. I tried to negotiate with them occasionally. In 2004 I learned that my Japanese visa stamps could be transferred to my Canadian passport so in 2005 I sent my then-valid US passport to the SSA, they hung onto it for a few months and returned it by unregistered mail, but they still didn’t issue my replacement SSN. In 2010 the SSA reneged on their 1994 letter and rejected my application for replacement SSN.
Also in 1994, before ITINs were invented, I obeyed IRS instructions and applied for an SSN for my wife. The SSA has never granted nor rejected that application.
In regard to our US tax returns for 2006, 2007, and 2009, the IRS told us to apply for ITINs and we obeyed. The IRS rejected four of my wife’s ITIN applications, finally granting the fifth one in December 2010 and we received it in January 2011.
In February 2010 the IRS said I had to refile our 2005 and 2006 returns using my new SSN, which I would be happy to do, but I didn’t know the SSA was going to renege on their 1994 letter. In September 2010, a few days before the SSA’s renege, the IRS said I had to refile our 2007 return using my abused original SSN, and I had to omit my declaration of withholding of prior years’ overpayments which had not been refunded, and I had to commit perjury by signing the preprinted jurat instead of writing an honest declaration myself. I obeyed. The IRS accepted it. In October 2010 I did the same in refiling our 2005 return. The IRS accepted it. But the IRS still refused to refund our withholding.
On refiled returns, I wrote my original abused SSN, wrote that my wife’s SSN was applied for, and wrote that my wife’s ITIN applications were rejected. The IRS did not complain. Regarding the IRS’s impositions of penalties, the IRS told US Tax Court that the social security number problem was not a reason for calling our returns frivolous, and the only reason was that I had written honest declarations instead of signing the preprinted jurat. The IRS knocked 90% off the asserted penalties. But Tax Court didn’t have jurisdiction over the overpaid unrefunded withholding, even though that exceeded the amount of penalties both before and after the 90% reduction. The IRS forced me to refile a few other returns too, forcing me to commit perjury in the jurat, for example declaring to the best of my knowledge and belief that an employer’s salary and tax report (equivalent to W-2 and T-4) was true and complete even though the Japanese government and Tokyo District Court know that the report was false.
To try to get a refund of overpaid withholding, I had to sue in US Court of Federal Claims, then appeal to US Court of Appeals for the Federal Circuit. The Department of Justice complained that even though our refiled returns reported my orignal abused social security number, the refiled returns reported that my wife’s SSN was applied for and ITIN was rejected instead of reporting an SSN for her. The courts agreed. My failure to report an SSN for my wife was frivolous, showed that I lacked a genuine honest endeavour to comply with US tax law, prevented Court of Federal Claims from acquring jurisdiction over my suit for refund, and left the money in possession of Monica Hernandez and her cohorts.
I filed a motion for rehearing in the Federal Circuit and reminded them that the SSN never granted nor rejected the application for an SSN for her and the IRS rejected all ITIN applications for her prior to December 2010, but the court didn’t care. In order to demonstrate a genuine honest endeavour to comply with US tax law, I had to report an SSN for her anyway, even though the only way to do so is to fabricate one.
By the way, the IRS didn’t accept the Federal Circuit’s ruling. Even though the court overturned the IRS’s acceptance of the October 2010 refiling of the 2005 return, the IRS did not unaccept it and they still say they accepted that return. But I obeyed the Federal Circuit anyway. In 2014 I filed an amended return using Form 1040X, fabricated an SSN for my wife and explained why. The IRS accepted that one too, but still didn’t pay my refund.
The Federal Circuit didn’t call my wife frivolous for failing to fabricate an SSN. The Federal Circuit called me frivolous for failing to fabricate one for her. So as my efforts continue, whenever I have to sign any declaration I report the SSN that I fabricated for her retroactive to October 2010 together with the ITIN that the IRS assigned her in December 2010, and whenever she signs any declaration she only reports her ITIN. No one has complained.
Yes it used to be illegal to fabricate an SSN, until the Federal Circuit made it mandatory.