I wanted to make this a separate post so that it doesn’t get lost in the long line of comments.”
First, thanks to Mr. Mopsick for willing to post on this blog. He is the only lawyer (as far as I know) who has written complete posts. I thank him for sharing his perspectives. After reading the comments: it is worth remembering that his central message is that he is willing to talk to people – everybody has a different situation. Furthermore, the members of the Isaac Brock Society have proven that they are very knowledgeable about this issue and are perfectly capable of evaluating the value (or not) of specific legal advice.
But, the main purpose of this post is as follows:
It’s the trust issue stupid!!
The IRS has demonstrated that it cannot be trusted.
Trust is always important. Trust is pivotal when the IRS says that (to paraphrase): It can change the rules of OVDI at any time – including AFTER YOU ENTER THE PROGRAM. Now I expect that Mr. Mopsick will deny this, but there is no guarantee that if one enters the program that the rules will not change once you are in. Remember OVDP 2009.
Evidence that the IRS cannot be trusted includes:
1. After people entered OVDP (2009) the IRS changed the rules regarding when “reasonable cause” can be raised (this has been well documented in previous posts);
2. Commissioner Shulman was required to respond to the TAD directive by January 26, 2012. He has not (my apologies if I am wrong on this) to date responded. This suggests that the IRS does not think it is bound by the law – rather they think they are the law.
3. The resurrection of OVDI was announced on January 9, 2012. At that time the IRS promised procedures for U.S. and dual citizens living outside the United States to come into compliance. To date (even though we are in tax filing season) these procedures have not been announced.
4. There was no IRS response to Ambassador Jacobson’s infamous “70 year old Grandma” speech.
To use the words of Taxpayer Advocate: “The IRS silence continues to be deafening”.
Almost everybody distrusts the “cross-border professionals”. But, regardless of the quality of the legal advice, one still has to be able to trust the IRS. How is that possible?
The issue is not the “cross-border professionals”. The issue is that people cannot trust the IRS.
Alternatives to OVDI – The December 2011 FS for U.S. Citizens and U.S. Citizens Living Outside The United States
Mr. Mopsick listed a number of options for people to come into compliance. It is interesting that he omitted the possibility of coming into compliance under the terms of the December 2011 FS. Assuming no issue of “criminality”, anybody who is considering OVDI should also consider the December FS. The differences between OVDI and the December 2011 FS are here with subsequent commentary here. These posts described the differences as follows:
Here is a summary of the basic differences between OVDI and the Fact Sheet For U.S. citizens and Dual citizens living outside the U.S.:
1. OVDI presumed “criminality” – the whole point was that a participant would avoid criminal charges. There was NO room for introducing evidence of “reasonable cause” (unless one used the opt out provision and entered into a complete audit – along with the six figure cost).
2. The IRS Fact Sheet does not presume criminal behavior. – The IRS is acknowledging that there are people who were unaware of their filing obligations. As a result, the fact sheet assumes and the IRS is stating the “reasonable cause” is alive and well. This does NOT mean that all taxpayers will able to establish “reasonable cause”.
3.The IRS is delinking the FBAR issue from the tax return issue. (This is what OVDI failed to do). In other words (at least the way I read this), you could owe some tax and still plead “reasonable cause” on the FBAR issue.
4. The IRS has given examples which create a possible basis for a finding of “reasonable cause”. Once again – this is NOT legal advice – 0r any other kind of advice. You and your adviser must read these examples carefully and consider your specific facts. The examples appear to fit the circumstances of many typical U.S. citizens living abroad.
5. The IRS is requiring returns to be filed for the last six years – presumably the 2005 – 2010 years. As you know OVDI required the filing of returns for eight years.
This is not intended to be legal advice (or any other kind of advice), but if you are considering OVDI you should also be aware of the 2011 FS.
Once again thanks to Mr. Mopsick for his participation. His mission: “to boldly go where no lawyer had gone before!”