Petros has convinced me to try my hand at doing my own posts, so here goes.
Thought I would start with this one. It relates to a recent “victory” of a financial sort for someone who joined the OVDP program back in 2009. We knew him as Moby.
After 27 long months, he won a long struggle with the IRS bureaucracy. He did not “just roll” over and pay out the absurd OVDP penalties designed for willful Whales. Instead he “Opted Out” of the process. This represents a real success if you don’t count the cost in LCUs (life credit units) that he expended in his effort.
I salute him for his decision to no longer be fearful of the process and lead the way for other Minnows! His is only the second report that I have seen. The other was by a gal named Sally. Both have resulted in the equivalent of a “You are forgiven, my son, go and sin no more” letter. For sure, he was in the confessional booth for a long time to get this equivalent of a “Middle Age indulgence.” We can argue endlessly as to why he should not have had to go through this torturous process in the first place. However, setting that aside for the moment, I just want to celebrate Moby’s release from OVDP purgatory. This Minnow can return to swimming freely in the ocean.
So let me start my first post with Moby’s report which has been posted over at Jack Townsend’s blog. I think it is illustrative that the “Opt Out” option is a viable one for those who have already entered the IRS OVDI Minnow hell. The point is, if you are already inside the processing factory, and you don’t want to be turned into fish fertilizer, you are going to have to wiggle yourself off the OVDI penalty conveyor belt. Moby did, and is now free again.
Below is his Report:
And here is the link to more discussions on the subject of Opting Out.
“Opting Out” of OVDI and OVDP; What is Really Happening? (12/12/11)
I just received what I think is my “opt out” result.
– Situation: Usual story; recent immigrant to US (GC holder), home accounts/affairs overlapped with move to the US. Entered 2009 OVDP; then opted out.
– Problem years: Non-filed FBARs for 2007, 2008. Non-filed 5471 for 2007.
– Schedule B: “No” checked (courtesy of TurboTax… blech!)
– Proposed FBAR penalty: $63K
– Total unreported tax: $14K
– Professional. help: Lawyer for amended returns and initial submission. Subsequent dealings were all solo.
– Reasonable cause: Didn’t know; couldn’t have known.
Only accuracy related income tax penalty was assessed (no FBAR/other penalties). What appears to be the final letter didn’t say much other than my “opt out” was approved by the committee, a normal examination had taken place, and the results were in accompanying Form 4549 (no changes other than accuracy penalty). So it looks like I’ve just got to return the 4549 with payment. There was no mention other penalties or any wilfulness determinations.
Of course, my inner Admiral Ackbar (“It’s a trap!”) suspects that I might get a subsequent letter demanding money for info returns. I’ll cross that bridge if/when I get to it.
I hope this information convinces more people to opt out. It’s hard to offer specific advice. I believe that the default position for immigrants/expats should be to opt out. I’ve seen some comments to the effect of “ignorance is no excuse”, but I disagree. Ultimately ignorance is the only excuse any of us have, it’s valid as reasonable cause, and it’s not our fault that we didn’t know about an unpublicized and (until recently) unenforced rule.
Things that convinced me to opt out:|
– Just Me: Showed that by fighting like a rabid Jackalope it was possible to get a better deal. Inspirational actions on his part, and doubly so for publishing his struggle for the benefit of the rest of us. I think he also gets lots of credit for getting TAS engaged and ultimately the TAD issued.
– The Canadians: I’m convinced this was a game changer. They got the issue the visibility it needed. With that many angry Canadians screaming for blood and the US ambassador to Canada making lots of soothing statements I figured that the IRS will be making every effort to be very lenient.
– My case: I figured that my case was as sympathetic as it gets. If I couldn’t opt out then no one would; so I felt compelled to do it for the greater good (not entirely my own preservation, anyway). It wasn’t until I sat down to review my 14 page opt-out/reasonable-cause letter (20+ hours to write!) that I realised how good my case was when all the facts were summed up.
– My new situation: By the time my case was assigned for processing I had already moved back to my native country. Easier to put up a fight when you’re no longer in the US, and have no need/desire to return to it.
I’ll continue to lurk in the forums as I would still like to pitch in if it helps. I’m much more flippant about the process now, but at the time it was the most terrifying and stressful episode of my life and no one should have to deal with it.
BTW: I bear no grudge against the agent I dealt with. He and his supervisor were very professional and helpful. Now the people at the other end of the pyramid are an entirely different story.