US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
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NB: This discussion is a continuation of an older discussion that became to large for our software to handle well. See US expat tax and FBAR: Discussion thread (Ask your questions) Part One.
Listen first to part of the unsuccessful oral arguments of an attorney trying to help his (I believe, US. resident) client move from OVDP to an application (only) to Streamlined:
https://player.fm/series/oral-arguments-for-the-court-of-appeals-for-the-dc-circuit/eva-maze-v-irs
Then read the U.S. Court of Appeals negative ruling:
http://federaltaxcrimes.blogspot.ca/2017/07/dc-circuit-rejects-injunction-end-run.html
What is the lesson to be learned?
@Stephen Kish, I thought if you were already in an OVDP you couldn’t change to Streamlined.
“What is the lesson to be learned?”
Avoid compliance condors. I know … probably the wrong answer. However they revel in and profit from complexity and confusion and that doesn’t sit well with me.
See also text here
http://www.leagle.com/decision/In%20FDCO%2020160725B22/MAZE%20v.%20INTERNAL%20REVENUE%20SERVICE
MAZE v. INTERNAL REVENUE SERVICE
Civil Action Nos. 15-1806 (CKK), 16-1085 (CKK)
Lesson to be learned is that the IRS is arbitrary and capricious, skewed towards enforcement and punishment – and in acquiring revenue in whatever confiscatory manner possible without regard to fairness or equity.
The IRS punished those who came forward earliest at their behest, focused on the low hanging fruit, is unfair in its treatment of similarly situated taxpayers, and apparently satisfied to mince up the small fry than expend effort on pursuing homeland whales.
And, text of July 2017 decision here;
https://www.cadc.uscourts.gov/internet/opinions.nsf/E4ED9B945B0F2F188525815D004DBAEA/$file/16-5265-1684045.pdf
@Stephen, I wonder (with reason) whether the opt-out and then transition rules were applied consistently, or whether/how often/in what circumstances there have been variations behind the scenes in some regards (ex. # of years submitted in OVDI opt out and subsequent transition to Streamlined, or to something unspoken but similar to it). It would be something that I would hope the Taxpayer Advocate would choose to look into, because it does not treat taxpayers similarly if those in the OVDI/P who transitioned out had to submit more years and potentially then face more years of legal and accounting compliance costs, potential jeopardy, tax and penalties than those who entered the Streamlined directly . The TAS is the only one who could probably try to get at some of the files and results that the IRS is hiding. Course the last batch of stats she tried to make transparent – regarding statistics of end results under Streamlined and the OVD programs that she tried to access and then publish were redacted by the IRS (as reported in her most recent report to Congress).
I may have posted this before, but it struck me again how unethical and unjust it is that the IRS has recently decided to update/adjust FBAR penalties amounts for inflation (as if the original confiscatory amounts weren’t sufficient to generate non-tax revenues for them in their FBAR’n FATCA and other information reporting “form crime” penalty fundraisers – levied even when they can’t assess even a penny of US tax against those living outside the US who’re already paying taxes in full to their home country of actual residence);
“………… A significant modification to the Guide is the penalty chart, which now reflect inflation-adjusted civil and criminal penalties. These increased penalty amounts apply to penalties assessed after August 1, 2016, whose associated violations occurred after November 2, 2015.
For example, the maximum amount for each Non-Willful Violation is shown to have been increased to $12,459 (from $10,000) for violations occurring after November 2, 2015. The minimum Willful Violation is shown to have been increased to $124,588 (from $100,000).”……
https://taxlitigator.me/2017/09/09/irs-updates-fbar-reference-guide-to-reflect-increased-inflation-adjusted-non-willful-and-willful-penalty-amounts-by-michel-stein/
“….Updated IRS FBAR Reference Guide is available at https://www.irs.gov/pub/irs-utl/irsfbarreferenceguide.pdf ”
Of course, they have WILLFULLY chosen not to update the FBAR reportable thresholds for inflation, so that 10,000 aggregate reporting threshold invented way back in 1970 – which in today’s dollar is already laughably low (remember, it is the highest ‘AGGREGATE’ balance of US deemed ‘foreign’ ‘reportable’ accounts in total, the highest level hit on any single day in the year).
So, the IRS will recognize the effect of inflation on their FBAR penalties, but not on the FBAR quicksand reporting threshold.
Neat trick.
The hypocrisy of the US government, and the IRS apparently knows no limits and no shame.
They are well aware of this FBARweaponizing of the local legal accounts of those deemed UStaxablepersons held where the ordinary law abiding live in their home country outside the US (often created from local POST-tax wages generated outside the US).
@EmBee how do you define “compliance condors”?
Others have already written about the effects of inflation on the FBAR.
http://www.citizenshipsolutions.ca/2017/06/25/u-s-uses-inflation-to-first-increase-the-size-of-fbar-penalty-base-and-then-increase-the-size-of-actual-penalties/ .
I just rediscovered this, and so my post above may be redundant and no longer news, but the evidence of US government/IRS willful skullduggery hits me anew every time I read or re-read it.
Again and again I discover or rediscover a list of compelling reasons that for me continue to point to; “all roads lead to renunciation”……
@ Phil
Roy Berg.
Re the compliance condors (especially US exports to Canada) and the US extraterritorial tax compliance gold rush:
From the US Chamber of Commerce back in 2014;
“…….Here’s a hot tip for accountants and tax attorneys: now is a good time to develop specialized expertise in advising clients who may be seeking to expatriate from the United States. That demographic looks more and more like a real growth opportunity……….”
https://www.uschamber.com/above-the-fold/exit-strategy-fatca-tax-law-keeps-pushing-americans-give-citizenship
@Phil, Re: condors
For a primer,
1. go to “Search” (top right corner of any Isaac Brock page)
2. type in “Condor”
3. hit “Enter” key
@Embee
Well said. I’ve seen Mr. Berg work a room of expats.
QUESTIONS:
l. How much and where is US Social Security income taxed for a former US citizen (i.e. now considered to be a non-resident alien by the USA), currently living in Canada?
2. If tax is withheld in the USA (e.g. 30% tax on 85% of the SS income) does a NRA have to file a NR-1040, even if the amount is well below the filing threshold (assuming there is one)?
@Embee
The US SSA does not withhold tax on social security payments made to NRAs resident in one of the nine countries that have an effective social security tax clause in their US income tax treaty. Canada is one of those listed. Typically with this treaty treatment, social security is taxed only by country of residence, and there would be no requirement to file any US tax return for these payments.
https://www.ssa.gov/international/AlienTax_Page24.html
http://www.taxplanningguide.ca/tax-planning-guide/section-2-individuals/us-social-security-payments/
Seeking some information on U.S. IRS practice affecting U.S. persons overseas:
As I recall, in the past when I emailed questions to the IRS on how to fill out a certain form, what this IRS statement really means, etc., the response was that (I guess because I was “overseas”) IRS would not answer my question but told me to contact someone from the tax compliance industry.
Is the above correct? If so, is the lack of help directly from IRS limited to U.S. persons overseas or does it include homelanders as well?
Is the lack of direct IRS help formalized as part of stated IRS policy? If it is, can you please find me a reference on an IRS site and a link if possible?
Thanks
@Stephen, I can’t find anything very specific answer to your very interesting question. It is pretty interesting when the IRS specifically reroutes taxpayers needing information to the compliance industry.
Perhaps only the Taxpayer Advocate can answer your question about whether what you describe is only being experienced by those from outside the US, and whether it is now formal policy rather than some improvisational informal tactics. You could submit it to Olsen’s office and see what happens? If they don’t know, it might be something they’d be really interested in investigating. Certainly the IRS should not be trying to fob off taxpayers seeking information, and referring them into the clutches of the compliance industry.
In a general sense, FWIW;
There continues to be a shrinking of any access to help whatever from the IRS for those trying to comply, whether in the US (or from outside).
ex. see latest criticisms from the Taxpayer Advocate;
https://taxpayeradvocate.irs.gov/news/nta-blog-taxpayer-assistance-center-service-continues-to-decline-impairing-taxpayers-ability-to-receive-in-person-assistance?category=Tax%20News
ex. “…Beginning in 2014, largely citing funding limitations, the IRS sharply curtailed the scope
of tax-law questions it would answer. It now answers only “basic” questions during the
filing season. It does not answer tax-law questions at all after the filing season, including from the more than 15 million taxpayers who file their returns later in the year.19
This policy applies both on the IRS’s telephone lines and in its TACs. …”
https://taxpayeradvocate.irs.gov/Media/Default/Documents/Budget/Nina%20Olson%20Testimony-7-26-2017%20Hearing.pdf
Even when I asked questions and got no or insufficient answers from aprox. fall 2011 onwards (ex. at one point I was told to email a particular contact because those on the phone couldn’t answer my question or wouldn’t (ex. regarding FBAR and joint account reporting with a NON-USP spouse if the spouse owned most of the assets in the account, and reporting their info to the US would violate local law and right to privacy since they had no legal duty to the US)” that is a tax law question” so we can’t answer it” was the gist of the answer via email. I was never specifically directly advised to go to the tax compliance industry. About the time of my expatriation I always found it very difficult to get them on the phone, had lengthy periods on hold, they had trouble answering why I was getting erroneous demands for sums they couldn’t give a reason for, it took months and months for them to fix it even after the computer error was identified – an explanation of the basis of which I had to press them for.
I found that the TAS agents always followed up as promised, but other than a manager that the TAS specifically set up a phone conference with, other agents did not send promised letters, did not phone back, etc.
I find it interesting though that outside her Reports to Congress and Objectives reports, her published comments about dwindling access to IRS help and information generally focusses only on service s provided or available INSIDE the US to homelander residents (ex. https://taxpayeradvocate.irs.gov/about/litc ), though she knows very well that those outside have next to nothing at all. In fact, even with these events, https://taxpayeradvocate.irs.gov/news/taxpayer-advocate-service-to-conduct-problem-solving-day-events?category=Tax%20News&taxissue=3541 https://taxpayeradvocate.irs.gov/news/national-taxpayer-advocate-public-forum-transcripts?category=Tax%20News none took place outside the US – even in border cities like Niagara Falls ON and Niagara Falls NY.
I note that some feedback to the TAS touches on the current refusal of the IRS to provide written answers;
ex.
“…Recd 3/3/2016: I would like to know why the IRS (Internal Revenue Service) no longer offers written
interpretations with respect to tax compliance. I called the IRS hotline and asked a specialist about a
particular tax situation dealing with debt forgiveness. She answered my question however she would not
provide me a written interpretation since there is no publication, form or tax bulletin that specifically
addressed my concern. Taxpayers used to be able to receive written interpretations regarding tax law and
regulation which is important should the IRS challenge a tax return in an administrative hearing. Title 26 of
United States Code, Subtitle F, Chapter 65, Subchapter A, Section 6404(f)(“Abatement of any penalty or
addition to tax attributable to erroneous written advice by the Internal Revenue Service”) explains the
abatement a taxpayer is allowed should a written response by an IRS employee be in error that resulted in a tax penalty.
Clearly the Congress of the United States provided a means for taxpayer relief due to erroneous written
advice given by an IRS employee. Recently it now appears the agency has removed the mechanism for a
taxpayer to ask and receive a written interpretation which is admissible evidence in any administrative tax
law hearing. Please consider reinstating the means for taxpayer to receive a written response to a tax
situation when the correct answer is not clearly stipulated in tax law, regulation, publication, tax bulletin or
advisory notice.”
from;
https://taxpayeradvocate.irs.gov/Media/Default/Documents/PublicForums/PublicForumComments.pdf
(Note that several of the other comments in that document are regarding accidentals and others living outside the US).
I only see this regarding how ‘international taxpayers’ are to access IRS help’
https://www.irs.gov/help/contact-my-local-office-internationally
and,
“How to Get Tax Help
The IRS Office in Philadelphia provides international tax assistance. This office is open Monday through Friday from 6:00 a.m. to 11:00 p.m. EST and can be contacted by:
Phone: 1 (267) 941-1000 (not toll-free)
FAX:1 (267) 941-1055
Email: Email the IRS
(e-mail is for general tax questions; NOT questions regarding your tax account)
Mail: Internal Revenue Service
Philadelphia, Pa 19255-0725
Taxpayer service, formerly offered at the foreign posts of duty, is no longer available. See Contact My Local Office Internationally for more details on international services. https://www.irs.gov/help/contact-my-local-office-internationally
Help with Unresolved Tax Problems
If you are experiencing a tax problem that is causing you economic harm or has not been resolved through normal channels, you can contact the Taxpayer Advocate.”……………….
https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad
Basically the website takes you around in circles when you select ‘help’ links. Ex. https://www.irs.gov/forms-pubs/more-information
This is part of what the TAS flagged re services to homelanders. The IRS wants to pretend that an online webpage can satisfy taxpayer needs for information and help, in order to cut back on other assistance in real time, and apparently also by email.
This is from one of the criticisms of the IRS Future State plans;
“…..In the 2015 Annual Report to Congress (ARC), the National Taxpayer Advocate identified the IRS’s
plans for its “Future State” as the number one most serious problem facing taxpayers .1 Among other
things, she cited concerns about the IRS’s lack of transparency with taxpayers and Congress about the
plans; the move away from person-to-person assistance and compliance contacts in favor of impersonal
electronic “self-service;” and the reliance on private third parties to provide for-fee assistance for core tax
administration services previously provided by the IRS for free, thereby increasing taxpayer costs for the
“privilege” of paying their taxes .”
http://docs.house.gov/meetings/WM/WM06/20170519/105946/HHRG-115-WM06-Wstate-OlsonN-20170519-SD001.pdf
Note this very important phrase;
“….and the reliance on private third parties to provide for-fee assistance for core tax
administration services previously provided by the IRS for free…”
https://www.irs.gov/newsroom/national-taxpayer-advocate-delivers-annual-report-to-congress-focuses-on-irss-future-plans-for-taxpayer-service
“Reduced Service Levels. The Advocate expresses particular concern about IRS intentions regarding what is not stated in the plan. “Implicit in the plan – and explicit in internal discussion – is an intention on the part of the IRS to substantially reduce telephone and face-to-face interaction with taxpayers,” the report says…”…..
“……….The Future State plan also calls for expanding the role of tax return preparers and tax software companies in providing taxpayer assistance – an approach that likely would increase compliance costs for millions of taxpayers who now obtain that assistance from the IRS for free.”
………”……..In recent years, the IRS has already begun to reduce taxpayer services, including by declaring all but simple tax-law questions “out of scope” for the IRS to answer during the filing season; declaring it will not answer any tax-law questions after the filing season (including questions from millions of taxpayers with proper extensions of time to file); eliminating preparation of tax returns in its walk-in sites; and eliminating an online program that allowed taxpayers to submit questions electronically.”…..
“…“Pay to Play” Tax System. Olson characterized the combination of reductions in personal service and the IRS’s plans to direct taxpayers with questions to preparers and other third parties (along with the expansion of user fees, discussed below) as creating a “pay to play” tax system, where only taxpayers who can afford to pay for tax advice will receive personal service, while others will be left struggling for themselves.”………..
“….Said Olson: “This has been a difficult report to write because while the intent to reduce telephone and face-to-face service has been a central assumption in the Future State planning process, little about service reductions has been committed to writing. Therefore, it is impossible to describe the scope of contemplated reductions with specificity…”…..
“……….”…In a Dec. 4 memorandum to the Commissioner, the Advocate conveyed concerns about specific user fees that are under consideration; the memorandum is published in the report but has been substantially redacted at the request of the IRS……..”……
IR-2016-01, Jan. 6, 2016
Don’t you have to pay them to get them to answer a question? Currently between $200 – $28,300.
https://www.irs.gov/newsroom/for-letter-rulings-and-similar-requests-electronic-payment-of-user-fees-starts-june-15-replaces-paying-by-check
(Don’t) Cheer as the I.R.S. Grows Weaker
An interesting read about the IRS’s inability to do it’s job. Or ‘How I learned to stop fearing the IRS’
https://nyti.ms/2Ehesx5
Thanks, Portland. Also on YouTube:
“On behalf of the hard-working Americans across the nation who are eager to see their paychecks reflect the benefits of this historic legislation, I request that you expedite any requisite updates to the relevant guidance on withholding,” reads a self-serving letter to the I.R.S. from Senator Rob Portman, Republican of Ohio. “On the other hand, we don’t give a shit about hard-working Americans across the rest of the world. I request that you keep finding more ways to screw them.”
The IRS’s criminal Investigation 2017 annual report is available here.
https://www.irs.gov/pub/foia/ig/ci/2017_criminal_investigation_annual%20report.pdf
It makes interesting reading . If you browse thru the field office reports , it becomes clear that all prosecutions involve whales.
“If you browse thru the field office reports , it becomes clear that all prosecutions involve whales.”
Except when IRS employees are prosecuted. But you have to read TIGTA’s reports for those because the IRS doesn’t report them. When the US Department of Justice prosecutes a criminal working for the IRS (including a criminal working in IRS Criminal Investigations, Donald Centreal Smith), it’s always a minnow. Why doesn’t the DOJ catch the whales, the ring leaders? Because the DOJ has its own reasons. The ring leaders aren’t in the IRS.
How I learned to not fear the IRS
https://nyti.ms/2Ev19bk
(They are owed 138 billion ((that’s a B)) and can hardly collect a dime)