The IRS is coming up with a proliferation of new rules and reporting requirements. FATCA legislation introduced Form 8938 to duplicate the Bank Secrecy Acts’ unconstitutional FBAR. Then the US announced both KFOR and FCTR. Now there is a new tax form requiring that man’s best friends of US origin also file a 1040-K9 (NS) (via :@FATCAed):
— U.S. Citizen Abroad (@USCitizenAbroad) August 10, 2013
This is a rather disappointing article from an author who has written on this issue before. Why disappointing? The general tone seems to equate Americans Abroad with tax evaders and terrorists (whatever those are). That said, it’s one more article reporting the increasing numbers renouncing U.S. citizenship.
The U.S. launched the tax crackdown after the terrorist attacks of Sept. 11, 2001, and ratcheted up its efforts after 2009, amid evidence that UBS AG UBSN.VX 0.00% and other foreign institutions helped U.S. taxpayers hide assets.
Some taxpayers have applied for IRS limited-amnesty programs, in which they pay stiff penalties for past noncompliance but avoid prosecution.
Tax lawyers say the crackdown has ensnared smaller violators who weren’t intentionally evading U.S. taxes.
In addition, a law enacted in 2010, the Foreign Account Tax Compliance Act, or Fatca, requires foreign financial institutions to certify they aren’t hiding U.S. taxpayer assets, which lawyers say is leading some to reject U.S. customers.
Taxpayer penalties for failing to report assets can be severe, including up to 50% of an account balance for each year.
I have received an okay to publish these notes from the Speaker of Part 2 of the meeting that was held in Toronto on June 15. I apologize that they are not in narrative form; I don’t have total memory of all that was said nor did I understand everything that was said and I fear giving the wrong impression if I were to attempt to elaborate. Hopefully, the general sense is correct. I wanted to do them as a separate post so that more might see them; it seems less people will benefit if they were buried as comments only. Many ideas were remembered by commentors on the original post but there are some important ideas that need to come out. The Speaker did an excellent job outlining and organizing a lot of information that many will need as they try to figure out what to do about their own situation. Also, I did not take any notes on the first session as it was my understanding that it was to be completely private and I thought it would be inappropriate for me to do so.
I received a request today to create a post from a link and three comments sent by a fellow Brocker. We met at the June 15 meeting here in Toronto and since the meeting, he has commented here on the blog as Bob. It is very nice to actually be able to match another name with a face here at IBS! Below is what he found interesting:
I think this article speaks for itself regarding U.S. treatment of its citizens, especially those who are most vulnerable or “easy prey.” I’ll quote three passages, just to highlight why I think it’s relevant for us.
“This article seeks to help readers make the connection between the public and secret behaviors of the U.S. government as it continues to oppress those individuals within its reach that occupy a politically marginalized status…”
“…If your government espouses freedom for all but abuses citizens of its own as well other countries, its pronouncements are pure propaganda. Your principal task then becomes to resolve that contradiction and, as best you can, align your personal with your public or political behavior. In the U.S. of A., that concern from the ‘70’s has come full circle…”
“…As always, particularly in these troubling times, don’t mourn, organize. Remember what Eugene Debs told us nearly one hundred years ago while he was in prison for opposing U.S. involvement in World War I:’While there is a lower class, I am in it, while there is a criminal element, I am of it, and while there is a soul in prison, I am not free.’ Finally, let me close by amending Jeremy Bentham’s opening aphorism above — ‘Secrecy is but another word for fear… and shame.’”
While I read the article, I was struck by the many parallels created between the situations demonstrated and so many facets of the experiences we have described here on the blog, all at the hands of the (supposedly) greatest democracy in the world. All are linked by fear and control, shame and punishment , confusion and lack of legitimacy, and all result in some form of torture, perhaps in varying degrees, but torture nonetheless. All emphases are mine.
The first interesting aspect of this article is the short description of the history of surveillance of US citizens by the US government. The Federal government has been wiretapping individuals prior to World War II when FDR authorized wiretaps of those suspected to be Nazi sympathizers. The National Security Act appeared in 1952 and after that, it was simply accepted practice to spy on citizens. As Noam Chomsky says, “Governments should not have this capacity. But governments will use whatever technology is available to them to combat their primary enemy – which is their own population.”
Bush, (well really, Cheney, Rumsfeld and the gang), began warrantless interception of Americans’ voice and e-mail transmissions overseas immediately after 9/11. The Terrorist Surveillance Program (TSP) referenced Section 215 of the Patriot Act, and was authorized by being signed in into law in October 2001. In contrast to the TSP, PRISM was enabled by the Protect America Act (PAA) of 2007, which placed it under the jurisdiction of the Foreign Intelligence Surveillance Court (FISC), itself established by the Foreign Intelligence Surveillance Act in 1978 to prevent a repetition of the warrantless domestic wiretapping conducted by Nixon and his subordinates. When the PAA expired in 2008, Congress rushed to keep PRISM lawful and passed the FISA Amendments ACT in 2008, whose Section 702 authorized warrantless surveillance of domestic voice and internet communications to other countries. I think of TSP vs PRISM as being somewhat like the Bank Secrecy Act/FBAR being under Title 31 and abused by IRS applying aspects of Title 26 penalties and getting away with it.
The practice became even more pervasive with the appearance of PRISM. The irony of this should qualify the US government as having one of the “prohibitors” discussed below; i.e., lacking capacity to manage their own affairs. ( As I am writing this, a commercial for a CNN special on Nixon is airing, “Should the Tapes Have Been Destroyed?” Forty years later, this gross violation of American values is still entrenched in the American psyche). Senator Frank Church chaired committee hearings held prior to the implementation of FISA in 1975-6 after Nixon’s 1974 resignation. According to a recent article in The Guardian by Daniel Ellsberg, Church had this to say about the NSA and similar departments:
“I know the capacity that is there to make tyranny total in America, and we must see to it that this agency [the NSA] and all agencies that possess this technology operate within the law and under proper supervision, so that we never cross over that abyss. That is the abyss from which there is no return.”
This most definitely reminds me of Allison Christians and Abby Deshman (at the Dec 15 FATCA Forum) describing the fact that once personal banking information is reported via FATCA, there is no recourse to having it removed, no way to appeal any mistakes that (almost certainly) will occur. In addition, of course, on the very serious level, the inability to get off the no fly list. The world witnessed the brutal effects that misinformation had on Mehar Arar and the callous disregard the US government displayed toward Canada once the RCMP’s error was exposed.
Ellsberg and the ACLU want Section 215 of the Patriot Act and Section 702 of the FISA Amendments Act repealed. Add Senator Rand Paul calling for the repeal of components of FATCA. We all get it. What on earth is lacking in the perception of the majority of the Congress, Treasury, and the IRS?
Guantanamo was opened in 2002 to house suspected terrorists. Guantanamo detainees were “charged with no specific crimes and were denied access to legal counsel.” This effectively put the detainees in no man’s land, without any legal standing. Again, the hypocrisy of this demonstrates clearly the disregard the US government has for the most basic principles it was founded on – fairness and the rule of law. How is it that the government considers itself able to strip a person of all rights, lacking even a legal ability to fight charges? Even more disturbing is the recent response of the government to the huger strikes of many of the inmates – force-feeding. The World Medical Organizations stance is that force-feeding is a form of torture. Doctors treating the inmates there say they are being coerced to violate the Hippocratic Oath; this is completely analogous to the situation of having no choice but to surrender and give consent to one’s banking information to be given to the IRS. These doctors have no choice nor do expats.
President Obama has established a de facto gun control registry through 23 executive orders, which directs States to report more consistently and thoroughly to the National Instant Criminal Background Check System (NICS). One important objection appeared in HIPAA-protected institutions, which says reporting those who meet NICS criteria for mental health prohibitors would violate the privacy laws protected by HIPAA. These are the “prohibitors:”
• involuntary commitment to a psychiatric hospital
• danger to self or others
• incompetent to stand trial
• not guilty by reason of insanity
• lacking capacity to manage their own affairs
As we all know, the FBI includes expats along with criminals and people with “prohibitors” from obtaining firearms. HIPAA exists in order to keep our personal health information private; closed to others without our expressed and signed consent. It’s other charming aspect is that it also exists as a way to punish those who renounce by being included on the “Name-and-Shame” List. (I will be absoluted delighted to see if my name appears soon, having filed 8854 for 2012). In order to get around this problem, (completely analogous to the farce of IGA’s to get around the privacy laws violated by FATCA) the Privacy Rule would be amended to allow them to report to the NICS database any individual who met one or more of the “prohibitors.” Read: any account with US indicia must be reported. Congress saw no need to change the HIPAA Privacy Rule when it amended the NICS reporting system in 2008. So once again, we have a situation similar to that of Treasury authorizing itself to act in order to tailor the rules in accordance with their own agenda. Never mind that Congress has already spoken. The Bazelon Center for Mental Health cited data in the Federal Register that depicted the great bulk of NICS registry data for all individuals, including that related to the “mental health prohibitors”, as coming from the criminal justice system and the civil courts, which are not HIPAA-covered. Without a doubt, this is an abuse similar to that of expats’ personal financial information being totally exposed via FATCA/IGA.
Another interesting parallel of citizens being slighted by their own government is the refusal of the US to ratify the UN Convention on Rights for Persons with Disabilities (CRPD), even when their objections were included via the Reservations/Understandings/Declarations (RUDs). Should the RUD’s be included,the intention of the Convention to bring US laws into line with the Convention is compromised. One most unfortunate result of this would be the fall of all laws which allow for involuntary hospitalization and of the involuntary administration of psychoactive medications. The refusal to ratify this convention is based on the far right’s fear that any international treaty represents a surrender of sovereignty. Yet they expect nothing less of those they choose to force their laws on. Non-ratification closes the only feasible avenue of hope for disabled persons who cannot renounce their US citizenship, putting them in peril of lifelong slavery to IRS reporting. The UN’s Special Rapporteur on Torture has declared all involuntary treatment or treatment without informed consent a form of torture.
In last year’s Senate session, despite the RUD’s, the CRPD was defeated and it does not appear on the Committee’s agenda for Congress’s current session. Sound familiar? Congress knows of the unfairness of FATCA/IGA regarding violation of privacy laws (even insisting on the inclusion of non-US spouses’ personal financial information) as well as the obvious 8th amendment violations with the levying of onerous FBAR penalties. They sit there and do absolutely nothing about it. Obvious violations of the Constitution simply don’t move them, doesn’t matter at all. Perhaps the desire of expats to eventually achieve true representation in the Congress would not matter; the fact is, the ideals the country is based upon have disappeared from the horizon and the vast majority of people in the country are absolutely and totally powerless.
Statement Of Secretary Jacob J. Lew On IRS Principal Deputy Commissioner Daniel Werfel’s Report Released Today
“Our tax code has to be administered with the highest of standards and without bias. Earlier today, I met with the President and Daniel Werfel to review his 30 day report and the progress that has been made to restore the public’s trust in the IRS.
Last month, the President appointed Mr. Werfel, a dedicated public servant who has served presidents of both political parties, as acting head of the IRS. On his first day on the job, I asked him to take three immediate actions, as appropriate, within his first 30 days: 1) ensure staff that acted inappropriately are held accountable 2) examine and correct any failures in the system that allowed this behavior to happen and 3) take a forward-looking systemic view at the agency’s organization.
Today, Mr. Werfel has responded to this directive in his report. Thanks to the hard work of Mr. Werfel and the IRS leadership team, important progress has been made in strengthening the IRS so that it can provide high-quality and fair taxpayer service. Deputy Secretary Wolin and I look forward to continuing our ongoing engagement with Mr. Werfel and the IRS team to accomplish this critical goal.
For instance, since Mr. Werfel’s appointment, the IRS has new leadership in place at all five levels of management responsible for tax exempt applications. Additionally, Mr. Werfel has created a new Accountability Review Board, and has taken action to address the backlog of applicants who were waiting for tax exemption status.
Nevertheless, more work remains. I am committed to taking action to make sure we get this job done. An essential element of restoring the public trust is improving service to taxpayers. To that end, I have asked Mr. Werfel to spend some time outside Washington in the coming weeks to meet with taxpayers, business leaders, and community officials and to uncover new ways to make the IRS more efficient and consumer friendly.
The assessments and actions outlined in Mr. Werfel’s report have charted a path that will improve performance and accountability, and will help ensure that we appropriately address the actions identified by the IRS Inspector General.”
So where is the celebration and line dancing Examiners partying over this important anniversary?
Maybe this was what that IRS line dancing video was all about.
Or were these managers who came from the same IRS Small Business Division that was responsible for administering the OVDP penalty collection, only celebrating their $5.5 Billion contribution to the general revenue that 100 years of rule making made possible!
A economist friend, who I email correspond with, has made some broader salient observations and points about the recent EU FATCA meeting, which Victoria has eloquently blogged about here. As he points out, FATCA has greater impacts than just those on Dual Citizens and accidental Americans living in Europe that we all should be concerned about irrespective of our status.
I thought I would ask his permission to share his thoughts to add and expand the discussion. Rather than just bury them in a comment stream, here or here, I thought I would make a separate post as they are extensive. He wishes to maintain anonymity for the purpose of this post.
Note to Reader: When you watch, and/or read the testimony of the US Treasury guy, Mr Robert Stack ( Deputy Assistant, Secretary for International Tax Affairs, International Tax Council of the United States Department of Treasury) you will notice that there has been no mention of the IRS. However, he represents the face of the IRS for FATCA administration and enforcement. The IRS Commissioner reports directly to Treasury Secretary Jack Lew who reports to Obama. The IRS is NOT an independent government agency. The International Revenue Service (IRS), as guided by the Administration and Treasury are the ones that implement the Treasury FATCA IGAs specifically and 544 pages of FATCA regulations generally.
So, when you hear Treasury in the context of this EU public hearing, think IRS, as they are the ‘heavies” given the task, with full enthusiasm for the mission, I might add. The Economist commentary below used IRS terminology only, but I have included both for clarity, as it relates to this EU FATCA Public hearing.
What follows are his comments with a little editorial license:
Consider this a public service reminder :)
The IRS periodically sends sends out a Newswire by email that you can subscribe to, if you dare!
Today I received the following email notice – IR-2013-54. I have been searching the email to find a direct link to the message it contained. So far, all I have found are “broken links”, but I have not found a specific one with this information. (I did not engage in an exhaustive search, so if anyone else finds the link, please post it in comments, and I will update.)
Update: Direct IRS link as provided by MarkPinetree. Thanks
I decided to reproduce the email message here with emphasis which is mine. Some Brockers have already seen this, but for those that haven’t, this is the ‘W’ component of my CCW acquiescence - Comply, Complain and WARN.
You can send this to your friends who might think they want a U.S. Green card, or voluntarily want to join the US Tax, Form and Penalty Club. Appropriate heading might be: “Buyer Beware: Why You Might Want to Reconsider That Green Card or Citizenship Choice.”
Whether or not you decide to send this to U.S. Citizens (including dual citizens) residing abroad that are still doing “The Ostrich” with their heads in the sands about what the IRS is demanding is your decision to make. Please don’t consider me an IRS co-enabler here. LOL I am not advising what to do, I am just passing on the “demand notice”. Continue reading
Shulman went through the first of at least two testimonies he is required to give concerning the #IRS scandal. Today, he appeared before the Senate Finance Committe. It did not go well for Mr. Shulman. He said he was “dismayed” and “saddened ” after reading the IG’s report that indicated targeting had gone on within the IRS concerning 501(c)(4) exemption. applications. In his usual instructive yet digressing style, he appeared to try and give the appearance of acceptance that the the questions concerning the fairness of the IRS’ actions, were justified. Yet he did not apologize and claimed he wasn’t responsible for what happened regarding the targeting. Sounds rather like a terrified USC trying to appeal to the IRS that he/she wasn’t responsible for not filing a tax return, or an FBAR, since he/she had no knowledge of it, doesn’t it? Apparently the panel was not particularly sympathetic to Shulman (or Miller).
See the video of his comments at:
Interestingly, Baucus took the unusual step of swearing each witness in. I wonder what level of risk that involves. I hear that famous phrase “under penalty of perjury” ringing deliciously in my ears!
“Shulman has come under fire for telling a House committee in March 2012 that the IRS was “absolutely” not targeting conservative groups. He was briefed on the program in May but never disclosed it to Congress before stepping down in November at the end of a six-year term.” If he could claim the IRS was not targeting in March 2012, it would appear that he knew it was going on. What difference does it make that he was briefed in May. What matters is that he knew, it was his responsibility to follow through and get to the bottom of it, given the seriousness of the matter. The fact he did not tell Congress is what should nail him. And what does that remind of us? Willfulness. Willful blindness (NOT!). Hm, what’s the penalty for that? Lying to Congress could land him 5 years in jail.
Mr. Shulman’s testimony “frustrated Republicans already irritated by Miller’s contentious appearance before the House Ways and Means Committee last Friday and shed little additional light on when key figures in the White House and Treasury found out about the IRS targeting.” I find it interesting that, although partisan-based, the Republicans seem to feel Obama is responsible so how could anyone not find Shulman responsible? It was his job to lead the IRS and knowing there was a problem, it is inexcusable that he did not investigate the full extent of it. Orrin Hatch said the fact Shulman and Miller found out in May 2012 and did not notify Congress amounted to “a lie of omission.”
A Democrat, Rep. Joseph Crowley, indicated he believed Shulman lied to Congress under oath when he told lawmakers last year that the agency did not give special attention to certain groups.
Baucus and Hatch sent a letter to the IRS on Monday seeking an exhaustive list of information about the case as part of a full investigation by their committee. There is a deadline (can’t find the original info) and there was no mention of any possibility of an extension. Hmmm, what kind of accuracy penalties, in addition to non-filing compliance, could we be looking at here? LOL!
According to The Hill, the Justice Department has launced a criminal investigation into the matter. And Lois Lerner will plead the 5th tomorrow when appearing before the House Oversight Committee.
Tune in tomorrow to the House Oversight Committee hearing where Mr. Shulman will appear again.
Slashdot had an interesting link to a post about the IRS and their rather disturbing insistence that reading people’s email doesn’t require a warrant.
It seems the ACLU has requested information via the FOIA because the IRS asserts that it can and will continue to make warrantless requests to ISPs to track down tax evasion.
Apparently the outdated Electronic Communication Protection Act allows federal agencies to request and read any email that is over 180 days old. Even more startling is the IRS assertion that the fourth amendment doesn’t apply to email at all.
In fact as recently as 2009, the IRS has claimed that there is no expectation of privacy for emails, and in 2010, asserted that email stored on a server is fair game.
Is the IRS reading my email or yours? Probably not. But it’s disturbing to know that they can and think it’s within their rights to do it if they want to.