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@30 Year IRS Veteran, You wrote “I can tell you that Washington is certain to consider the problems of Canadians under FATCA and I am sure they will be addressed in the regulations once they are published and the whole world has a chance to comment.” I am not sure that I understand, can you explain “the problems ” that are unique to Canadians but do not apply, say to Brazilians, Mexicans, Australians or French, or to to other dual-nationals with US citizenship residing in other countries? Thanks so much.
Yes indeed the IRS is bound by law to enforce the statues that Congress enacts, but bear in mind that although FATCA was introduced and sponsored by Senator Levin (D, Michigan) its provisions were written in full and complete collaboration of IRS Comissioner Schulman and his top experts. It was exactly what he envisioned as necessary for the IRS to find and collect taxes on the hundreds of billions of dollars hidden abroad by tax-evading Americans.
@ Roger The IRS complicity in drafting FATCA is a very interesting point. I personally do not hold blameless the Executive branch; Shulman and Geithner have caused untold pain and suffering in the Expat community abroad. We have already discussed in this blog that FBAR is subject to the interpretation of the Secretary of Treasury, and entire countries or classes of persons could be relieved of the filing requirement (such as genuine residents abroad). Low-level bureaucrats may not be to blame, but the are nevertheless complicit–Does the line, “I’m just doing my job”, excuse those who enforce unjust laws? If the current implementation of the Bank Secrecy Act (FBAR) gives the impression that the IRS wants to round up US citizens abroad and plunder a percentage of their savings, it is only because of the OVD programs that Shulman has created and his minions have enforced.
I just want to know why the US wants to think it is “entitled” to a part of someone’s earnings when they make nothing in America?? Even if — if I understand the law correctly — someone makes 1 euro/ C$ / Aud, whatever, they are expected to file…
My parents have been pretty good at telling my extended family about this, and they all seem to understand this is US nonsense.
30 Year IRS Vet said:
“Moreover, whatever the final regulations say, the IRS would not have nearly enough resources or the desire to pursue Canadians over this except for the most egregious situations which is what the law was intended to cover in the first place.”
If that’s the case why did they employ the carpet bombing approach and build up so much ill will toward the US? They’ve alienated foreign governments and banks … these are the very people whose cooperation they need to catch the real tax evaders and money launderers.
Can we conclude from what’s happening as opposed to what should be happening as evidence that the IRS Commissioner is ineffective at his job and the wrong man to bring the real tax evaders and money launderers to justice?
@omg: “Can we conclude from what’s happening as opposed to what should be happening as evidence that the IRS Commissioner is ineffective at his job…?”
Was that ever in doubt?
@Roger… @ 30 yr IRS Vet.
Thanks for making the point about IRS collaboration with Carl Levin to slip FATCA into the Hire act in the dead of night. I think that point is missed or not known by many…
Yes, ultimately Congress is responsible for the Statutes they create, and that is a fair point. But…..as I understand it, the IRS was working as a Lobbyist for these ridiculous statutes, and helping create the language that would be added to the Hire Act.
With all due respect, …To now beg off any responsibility or complicity by saying….. “The poor folks at the IRS are simply trying to figure out what Congress meant when they passed FATCA, and do their duty to administer a very difficult law”…… is a bit much for me to stomach! I didn’t fall off the turnip truck yesterday! It is disingenuous at best, or shows a total lack of understanding how Statutes get created in the first place. Maybe that is not what you meant to convey.
Carl is incapable of writing this, and someone with inside knowledge of what they wanted, had to construct the language. Would that be just some young 20 something staffer with a BIG vision of world financial reporting? Hardly. It is some committee from the IRS probably comprised of attorneys, knowing what the IRS leadership wanted. They said, “Here is our opportunity, and here is our complicit Senator who will do our bidding and sponsor this amendment.” They wrote it and targeted it as an amendment on a Statute that was sure to pass. Which Democrat was going to vote against something called a “Hire” act during this time of financial strife?
Well…Mission accomplished. FATCA is Fact, and now you tell us the IRS are just poor victims struggling to determine Congressional intent? Hell Congress didn’t even know the provisions were in the bill, as they don’t read them, remember? How many pages was the Hire Act anyway? Actually small by Congressional standards. They could have read it. It was only 125 pages, if my googling is correct.
So, with all due respect, the justification you site for our misplaced anger, might apply down at lower level manager or staffer, i.e., someone “just doing their job.” Can’t really be angry at them. I get that! However, this justification does not hold any water for the Leadership who has been lusting after this additional power. Hold the “woe is me” refrains from the “poor IRS people” for those that are easily duped, as I am not buying it.
And in less you think, I am just some old cynic out here in the ether, I speak from some experience as how laws get passed. I have one amendment to one Congressional Statute that has my imprint all over it. And I am not proud of it.
A law was passed that helped divvy up “USPS mail” between airlines in Alaska that got slipped into a spending Statute by the late Uncle Senator Ted Stevens. (Call it the ‘mail to nowhere’ bill if you like!)
Little ‘ole me, got a ‘real politic’ lesson on how legislation happens, and had a major hand in writing the language working as a lobbyist for an airline group. We got our way! And when the Alaska villages protested the changes in flight schedules that resulted, I could say, “Oh we are just poor little airlines trying to figure out the intent of Congress, and if you don’t like it, you should direct your anger at them, not us!” Yea, right. I became a cynic on that day!
@Just Me
There is a difference between the IRS and the US Treasury department of tax policy office. In theory the tax policy office is reponsible for designing tax policy whereas the IRS is responsible for enforcing it. Having said that the tax policy office is a badly degraded office compared to what it once was and most definately compared to its Canadian equivilent Finance Canada’s tax policy branch. Its not clear whose fingerprints were on this act precisely. My experience in Canada is governments like to give themselves a lot of flexibility in implementing actual legistlation whereas in the US the Treasury and IRS don’t seem to have a lot flexibility in this one. Congress does maintain a fairly extensive internal tax policy department as part of the JTC(Joint tax committee) so I suppose that is one place to look.
30 year IRS vet
would you consider representation for those folks wanting to enter ovdi 2012? Would you look at their fact pattern and
see if they are candidates for disclosure of how to become compliant
Suresh: Just so you know, we have not restricted access to Mopsick website. If you wish to contact this law firm for representation, you do so at your own risk. This website, the Isaac Brock Society, has not officially recommended or endorsed tax professionals.
30 year IRS vet – For a while i thought that i was discussing with an IRS agent who currently works in the IRS and could be a sounding board for the situation a majority of us are in.
But looks like that is not the case. I think users should identity themselves more clearly. Maybe the tone in the mails and the mention of Washington D.C, Chief Counsel etc, anger should not be directed at IRS, made me think that i was discussing with a current IRS agent handling offshore issues. But looking at posts from others, other seem to have made the same assumption.
I appreciate you including your law firms URL and that makes it clear that you are not a current IRS employee.
@Tim…
Thanks for your comments, and I understand those differences although I probably take some license in lumping them together since IRS does report to Treasury.
However, I also understand that Statutes are created with a lot of mays not shalls, and the IRS is given wide discretion in implementation and regulatory rule making. Look how unenforced FBARS were for so long, before they decided to become more harsh with the power they were given.
My point is a simple one, while Congress surely bears the blame for voting for Statutes whose contents and impacts are unknown, the IRS does not come out of this as poor non complicit victim in legislation that gets created. If Treasury and/or the IRS opposed FATCA, it would have never seen the light of day.
Whether it is via Treasury attorneys or by IRS attorneys,or a combination of the two (likely) the IRS/Treasury leadership had a role in the bills creation. To now claim difficulty in understanding Congressional intent just doesn’t wash with me. Just ask Shulman or Geithner what they intended. That is about as deep as they need dig. I am sure no one (or few) but Carl Levin in Congress knows what was intended. JTC is a fair point for you to make. (They would be the few).
Maybe I am wrong, and too cynical, but I have seen how the sausage is created. I had my little part in creating some of it. The IRS can also lobby Congress to undo what they have done, and create amendments to strike a different balance, if they wanted. They could have stopped it in the first place.
It should not have to wait for letters to Senators/Congressman from a far flung Expat Diaspora to raise a stink and awarness. ACA has been working the issue hard, but there are few other Expat groups so organized that can lobby or fight this. I am looking for evidence that the IRS really wants changes in FATCA or will do anything different without pressure just because it is the right thing to do. So far I see the opposite, but will amend my views given the evidence to the contrary. I guess we wait the next FATCA regulatory guidelines.
However, as you know, they (the IRS) have gone a step farther than FATCA, and have attempted by regulatory power to create DATCA, or the domestic version of FATCA to impose on all US banks the requirements to disclose the amount of interest paid to nonresident aliens, under the ‘what is good for the goose is good for the gander’ theory.
http://www.accountingtoday.com/news/Congressman-Tells-IRS-Back-off-Bank-Disclosures-60322-1.html
So, what do you make of that? Are they just trying to intone Congressional Intent, or do they have a larger mission here? So far, it seems they have been deaf on Congressional intent here, but there has been no further reporting that I have seen so not sure.
Fair questions, I think, but you can correct if I am wrong. I am very open to contrary opinion or thought. I would like to be less cynical of our poor IRS officials. There is only one official, I am not cynical about, and that is Nina Olson. So far IRS leadership are ignoring her. I am watching for their response to her TAD and report to Congress to figure out IRS intent, as that intent has more relevance to us right now.
BTW, I am pretty sure that ACA has been lobbying the JCT, as I think you are right, that is the place to look now. Maybe in the current offshore hunt, they can call off the dogs.
I think 30 Year IRS Vet should change his username to be more clear that he is not currently with the IRS and he has a business interest in participating on this site.
We assume everybody is following the conversation at the same speed we are but some folks dont’ have time read through all this stuff and figure out who is who. We don’t want to lead lambs to the slaughter…
I’m 100% against the FACTA because it results in account closures and all other nasty things. But if the US wants to apply extraterritorial taxation, let us have the same deductions as mainlander Americans have. I have a strong feeling that we wil ** Drain the US treasury!*** Then they might reconsider citizenship-based taxation.
From a Canadian perspective(and also I suppose from New Zealand perspective too although I am not as familiar with all the details in NZ) I think essentially the US is in the position that Canada was in the final years of the old wholesale/manufacturers sales tax before the “new” GST(the Canada/New Zealand/Australia verison of VAT) came into place in the late 1980s. You essentially had many people in business effectively “burning the house down” as to how the old wholesale sales tax was effectively killing Canadian exports and Canadian business and how these problems would only escalate after the US Canada free trade agreement came into effect. One the other side you had most of Canadian public who did not even know about the old MST(which was a hidden tax) and its highly detrimental effect on exports but KNEW very much that what the replacement GST was and how much they didn’t like it. In the middle you had the politicians(of the governing Conservatives) that knew they to save the business community and manufacturing sector from annihaltion but also knew that instituting the GST(they still very much needed the revenue from the old MST) was certain to end their political careers. Here are some news videos and public service announcements from that time period. (Note: the governing conservatives of the day were reduced to TWO I repeat TWO seats in the next election. The next government a Liberal one promised to scrap the GST in that election only to break that promise in time for the 1997 election). The whole thing was made even more messy by the “stacking” of the Canadian Senate.
http://archives.cbc.ca/politics/federal_politics/clips/13230/
http://archives.cbc.ca/politics/federal_politics/clips/12071/
Some public service announcements from the day:
Dear friends from the Great Country to the North:
There have been a lot of thoughtful comments in the past few days and it is a privilege to participate in this discussion group.
A word to clarify who I am. After 30 years with the IRS I retired from the government and entered the private practice of law focusing solely on representing people before the IRS. I most definitely do not work for the IRS but I know a whole lot about it and how it works. Any person currently working for the IRS who published the things I have on the internet would be fired the very same day. The IRS speaks through its public relations office in Washington or through notices, announcements, regulations, revenue rulings and other approved avenues. All IRS employees have to have any public comments cleared first by someone above them. Even the Commissioner of Internal Revenue coordinates his significant comments to the press through the Treasury Department since the Commissioner of the IRS is also an Assistant Secretary of the Treasury Department.
As a private citizen I can say whatever I want to say about the law, our government, and the IRS. I am free to comment about things people say which are wrong or inaccurate and in my practice I find that my clients appreciate me because I often get them money back from the IRS when I can prove the IRS wrong. I also tell my clients up front when they take on the IRS in an audit or in court if the law is against them or if they have not properly understood the law or if they have little chance of succeeding.
I had a number of interesting jobs with the IRS as an attorney. I was a litigator for the IRS representing the organization in the United States Tax Court. I was also an assistant to a man who became the Acting Chief Counsel of the IRS responsible for managing all the IRS attorneys in the country. That was very interesting because I got to see up close and personal, how tax laws are enacted, how the IRS fits in the Washington scene vis a vis the Congress, the U.S. Treasury Department (where tax policy is formulated in cooperation with the White House), and the Department of Justice which represents the IRS in all US courts except the United States Tax Court.
Please trust me on this: the IRS does not make tax policy. Tax policy is determined by the Treasury Department and the White House who then fight it out with Congress who accepts what the Treasury Department wants, rejects it, or compromises on it.
When an idea for legislation in the Executive branch of government gets some traction, it is true that tax attorneys from the IRS work closely with the Treasury Department to craft the actual language. If a tax proposal continues to be viable, the Treasury Department takes it across town to Capitol Hill where people from the tax writing committees (in the House—Ways and Means, in the Senate, Senate Finance).
Often times the attorneys from the IRS who worked with their counterparts at Treasury on a proposed bill will then work with attorneys from the Congressional Tax writing committees who in turn work with the staffs of whoever in the Senate and the House is willing to introduce the bill in their respective houses. Sometimes lawyers from the IRS are still involved at this stage, often times not.
The reason I am so “defensive” about the people who work for the IRS is because I know from my 30 years’ experience that they are normal people like you and me. I have also learned that people who work for the IRS are over represented in our population amongst people who work with kids, do volunteer work, are involved in church activities and everything else Canadians and Americans think of in terms of what is good and right for society. They are not scheming in their offices on ways to deceive, cheat, or oppress people.
FATCA was conceived because our system of voluntarily self-reporting income and deductions was not working. The theory is, in a democratic society, the government has no right or reason to know what assets we hold or the extent of our personal wealth. The theory is that with an enlightened and educated citizenry, we are on our honor to honestly report our gains and losses on our tax returns. Unfortunately, the government concluded that that was not happening and many Americans were using off shore bank accounts and other foreign investments to cheat their fellow Americans by not paying their fair share.
FATCA was designed to target Americans who were cheating on their taxes through the use of offshore accounts. FATCA is a sad commentary on the fact that in some instances, our honor system was not working. No one in the US government was thinking of Canadian citizens who had little or no connection to the United States when FATCA was enacted.
Nevertheless, the statute which came out of Congress (not the IRS) literally applies to some dual nationals who were minding their own business and not looking for trouble, not cheating the American fisc or the US government and who couldn’t care less what the Americans were doing to administer their own tax system.
So we have a problem and the question is how to fix it. In my next installment I will address what can be done about it from Voluntary Disclosures (which are not for everyone), to organizing a writing campaign to make sure the detailed rules cover Canadian problems, doing nothing and simply blowing it off!
Respectfully submitted,
30-year IRS Veteran
Thanks for that explanation 30-year IRS Veteran.
Here I was thinking the Americans were just out to pick our pockets cause they ran out of money!
Does it take a rocket scientist to figure out that you should exempt bonified overseas residents even if they are technically American?
DATCA only requires reporting on non-resident aliens.
But with FATCA if you even ever french kissed an American the IRS wants you to fill out a form! We feel like the IRS is crawling up our butts and till now couldn’t figure out why.
OMG: What a perfect description!
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30 Years writes: “In my next installment I will address what can be done about it”
I look forward to that. You also mention “final regulations which are set to be published any day now.” What exactly is this expected document? Schulman’s reply or something else? Should we wait to see what these regulations are before making any decisions?
One of the main frustrations of all this has been conflicting advice from people with sometimes vested interests.
Apparently I’m in a fairly typical situation: long-term dual citizen expat (in the EU), never knew I needed to file at all, then a couple of years ago found out and caught up for past years – but an ex-CPA relative did my returns for me, ticked the “no” box on schedule B without asking me, and stupidly I didn’t review the forms before sending them off…. I have around $200k in foreign accounts from general savings and selling a house – all generated in my EU country of residence, and compliant in that country. Unlike others here, renunciation is not an option, and in fact I intend to to return to the US later this year with my new (foreign) spouse (meaning I need to be current for a visa application).
So far I have been advised very different things by different professionals: 1) file amended returns for the past five years with FBARs, and the current year done properly (including the new 8938 form), along with letter of explanation of reasonable cause. This seems most in line with the IRS December fact sheet for expats and dual citizens, though that document says nothing about mistakes on previous years; 2) “go forward” and file only the current year correctly, and “assume” the past ones were okay, then hope for the best; 3) do nothing on past years, file for an extension on the current year then move all my money in small transfers under $10k to my US accounts, then tick the “no” box on schedule B once it’s all done, and otherwise file as normal; 4) discuss VD with a lawyer. The last two seem most risky, albeit for entirely opposite reasons.
Does anyone actually KNOW anything? Are any of these options objectively better than any other in the real world? With no offense intended to 30-year, can these lawyers actually be trusted to give objective information and advice, or are they more concerned with promoting their field of business and hoping to lure in frightened expats to ramp up their billing hours? On other blogs, no matter how professional and expereinced people are, advice goes only up to a point – and that’s the point where it’s time to engage the services of a lawyer… (the one who owns the blog, perhaps?). Fair enough, but it would be nice to know where people are coming from, and their motivations.
So, I’m grateful for this blog since its grass-roots, change- and goal-oriented, and isn’t fear-mongering. Once my situation is resolved I will defnitely write letters to the IRS and to every politician who will listen. Until then, I’m too paranoid.
@Vet: Petros has started two separate threads with your postings. I hope you will check out the numerous comments there.
@30 year Vet… Yes please do follow the separate threads that Petros has created out of your comments. That gets your POV and comments more visibility, and allows us to have a proactive discussion which your contribution is important.
They are located at…
Comment from a 30-year tax lawyer
http://isaacbrocksociety.com/2012/02/01/comment-from-a-30-year-tax-lawyer/
The rationale behind FATCA: 30-year IRS vet
http://isaacbrocksociety.com/2012/02/02/the-rational-behind-fatca-30-year-irs-vet/
A couple things:
Firstly, I have consulted an immigration lawyer who has confirmed that it is his understanding that those who committed expatriating acts before 1994 should be exempt from the exit tax regime. He also recommended the Isaac Brock Society as an excellent source of information. I confirmed that I already spend multi-hours on the site.
I do understand the above Special Rule under section 511(g) as it pertains to the exit tax, but I really don’t see how it applies to not having to submit back tax reports and FBAR’s even after having received a backdated CLN. Tax reporting requirements and FBAR’s have been around a lot longer than the Exit tax. I understand the logic of why you shouldn’t have to comply with reporting requirements, but logic seems to have very little to do with it. Is there a reference or resource somewhere for this?
Found this site clarifying the sequence of events in obtaining CLN.
U.S. Department of State Foreign Affairs Manual Volume 7―Consular Affairs
http://www.state.gov/documents/organization/113465.pdf
Information is sent to the IRS after CLN is approved. Interestingly, names of people who have successfully renounced/relinquished are also sent to the FBI! Good grief, how ridiculous is that?
FBAR has a six year statute of limitations. If you expatriated before 1994, then the FBAR statute of limitations has been passed.
As for taxes, well that was so long ago. The requirements before 1994 did not include Form 8854. I don’t think there is any requirement for someone who expatriated before the Reed Amendment (1996).
hijacked2012 said: Interestingly, names of people who have successfully renounced/relinquished are also sent to the FBI! Good grief, how ridiculous is that?
They’re going to have to increase the FBI’s budget alot soon!