Just Me sent me the following OVDI story from Jack Townsend’s blog:
I moved outside the US as a poor student, never having had enough money necessitating acquaintance with Schedule B.
For many years I did not know I was supposed to file US tax returns or FBARs. I learned this in early 2009 and filed back paperwork for a bunch of years together with an explanatory letter. (I live in a country where the taxes are much higher than the US, so thanks to foreign tax credit, nothing was due to the IRS.) As it turned out I sent in all the forms just a few days after the 2009 OVDI was announced. In mid-August 2009, I read the confusing OVDI FAQ and learned that what I had done was maybe not “good enough”. FAQ #10 seemed to threaten criminal prosecution for not entering the OVDI program. So with the deadline looming, I entered the OVDI.
What a mistake! I spent hundreds of hours on the documentation and countless nights worrying instead of sleeping. The examiner seemed like a reasonable person, but the rules she was supposed to apply were anything but reasonable.
When it became obvious that no reasonable solution would be possible, I appealed to the taxpayer advocate. I and my relatives wrote to a bunch of politicians, who all kicked my case over to the taxpayer advocate too. From the taxpayer advocate I learned that opting out was the best option for me.
(In the meantime I also changed my citizenship, as I don’t intend to move back to the US.)
Neither the taxpayer advocate nor the examiner knew what the audit would be like.
When opting out I provided a fairly detailed account of why ignorance of FBARs was reasonable cause in my case. (I don’t know anyone who has to file FBARs, never saw Schedule B. My peers were amazed when I told them about the US’s extraordinarily strange tax laws that require filing on money you already paid income tax on. Etc.) I also indicated that if the penalty were not reasonable, I would appeal and go to court if necessary.
Final decision by the IRS: no penalty and no audit.
(I think it was pretty clear from the paperwork I had already supplied that an would not be able to find anything that would lead to tax being due. I have plenty of “unused” foreign tax credit because the US tax rates are so low.)
Two years in hell are now over. A great waste of time, both for me and the IRS.
who is looking forward to voting in local election for the first time
Now I wonder if the leniency in the case will extend to the others in similar situations who have already paid their fines?
Mr. Geithner, you can end this nightmare now. Stop applying the FBAR rules to US persons abroad. Stop put too much of a burden on innocent people. Stop making US people into victims and forcing us to renounce our citizenship!
UPDATE: Sally told more later:
To Anon5% December 30, 7 pm
It took 5 months in my case, but I’m not sure that would be a big predictor for others.
The reason is that I was caught up in a procedural change at the IRS which ended up costing at least two months. I actually had to opt out twice. I had just sent in my opt-out letter when the IRS changed procedures, so I had to opt out again, with a new opt-out letter detailing the points the new committee needed.
I was also one of the very first cases that was referred to the committee, so there may have been some time spent with “start-up” procedures of the committee, in addition.
The final communication from the IRS was a set of fairly nondescript form letters for each year in question that merely said that the IRS had completed the review and made no changes. (Presumably the same form letter they send to you after an audit when everything turns out to be OK.)
I would point out that I could be a “poster girl” for the new IRS guidance, i.e. obviously not a willful non-filer, just clueless, live outside the US, have no income at all from the US, owe no taxes to the US and pay lots and lots of tax in my country of residence.
The examiner also did not doubt that I was a non-willful non-filer.
(I had never seen a Schedule B until Jan 2009. And when I did, learned about the FBARs from those little checkboxes at the bottom. And filed FBARs soon thereafter.)
By the way, I sent Mr. Flaherty a fan letter, even though I’m not Canadian and don’t live in Canada. (In the reply that came back–intended for Canadians–the Canadian government pointed out that while they do share information with the IRS that is relevant to taxes and governed by a treaty, the treaty does NOT relate to FBARs. Canada will not help the US with FBAR penalties.)
Happy 2012 to all!