Speaking out again, 30-year IRS Vet tells us that Isaac Brock was a great guy but that FATCA is not the hill that any of us wants to die on.
Steve Mopsick, a.k.a. 30-year IRS Vet, wrote the following comment:
I wish I could address everyone individually. I am going to stick my neck out and predict that as soon as everyone in Washington “signs off” on the current draft of the FATCA WITHOLDING REGULATIONS (which is what was due on January 31,– the form 8938 regs which most of you are concerned about, were published in December) there will probably be an IRS Notice announcing the Service’s position on certain deemed compliant factual scenarios which will cover almost all the accidental American fact patterns and many of the situations described on this blog.
I am also going to stick my neck out and predict (but not necessarily advise) that anyone who chooses to engage the IRS on FATCA and either decides to start filing what is required prospectivly or blows them off until they force themselves into your lives–as long as there is no unreported income which, for whatever reason is due and owing, I do not see the IRS piling up penalties and pursuing any one if they either just start filing if there is an obligation to do so.
Remember, both our government’s have a keen interest in collecting the taxes their respective legislatures have ordered them to collect.
As for the US, the government is looking for people WHO ARE LEGALLY SUBJECT TO IT’S JURISDICTION, and to just pay up if you owe the money or forget about.
When the Bank Secrecy Act came in 1970 and they stared to enforce it 2004, and FATCA followed it in 2010, a whole new concept was introduced with regard to the way our tax was reported to the government. Since the honor system, which is still the basis of our voluntary self reporting system, didn’t seem to be working , the government was now saying, “let’s see what you’ve got and we’ll let you know if we have any questions.” What is new here is there doesn’t have to be a “taxable event” for FATCA to apply. Up until now, there had to be a sale or exchange, dividends, receipt of interest, or earnings from a job before we had to tell the government about it .The theory of FATCA is, if you are going offshore with your property, Uncle wants to see where you are going with it and what you are doing with it.
The corollary to having the inalienable right to “life, liberty, and the pursuit of PROPERTY” is, under that pursuit of wealth, comfort, and a better life for our children, there is the sense, or at least the hope that educated and enlightened citizens would voluntarily report what they earned so that the government could buy the goods and services it needs for our protection and benefit. I am not complaining here, or defending what we have now. It’s just the way it is.
The IRS is extremely limited in what it can do and as a law enforcement agency and it tries to get the most bang for its buck.
Even if there were no Voluntary Disclosure Program, the IRS just doesn’t have the people to do a whole bunch of criminal investigations. That leaves the civil fraud penalty! Probably not, because the IRS has the burden of proof in Tax Court and when I remember having to prepare fraud cases for trial as an IRS trial attorney I recall they were a real pain in the neck to prepare and twice the work of the other cases we had where someone was trying to prove to the Tax Court that they really could live on $50,000 and still afford to pay $25,000 a year to charity. When it came to bringing fraud cases to Tax Court, young IRS trial attorneys are urged to work on the ones we were pretty sure we could win. Slam dunks so to speak– cases where someone’s combination of greed and stupidity were just far enough along the continuum of behavior for the Tax Court Judge to agree with the Commissioner’s hunch that the taxpayer we were torturing for a year or two had been willfully and purposefully arranging their financial affairs in such a way that they were hiding money from their accountant and sometimes their wives, but nonetheless making sure it didn’t show up anywhere on their tax returns which they knew were false and fraudulent when they signed them.
That leaves the FATCA/FBAR penalties. Remember, they were enacted to catch real bad guys. There has to be some wrong doing. You don’t get hit with a $10,000 automatic penalty just because you were standing in the wrong place. This is still America and if the government is being stupid we get to say it. You just have to do so in the right way and it’s usually to your advantage to do it in a way that doesnt make the person working there feel like crap.
I think all the fuss over FATCA for individuals (but not for the banks) is going to result in a big stall in the pipeline until the National Office cuts the field some slack to start waiving penalties altogether. There certainly should not be any penalties if there is no unreported income. If there is unreported income then the government has the right to ask how much, is there a pattern of behavior, and for how long has it been going on. Then in practice, what the IRS chooses to go after is all a question of degree.
While I was working for the Acting Chief Counsel in Washington I had the honor of visiting your CRA headquarters in Ottawa on IRS business and had a real sense of the difference in the feel for the place as opposed to what I was used to in Washington. Pretty cool place. Calm. Quiet. I have had the good fortune and privilege to fish around Vancouver, and we always feel an affinity for Canadians, whether we meet you in your home, ours, or abroad. We see you as “laid back” like some parts of California, and Oregon, and Washington State.
I read a little about Isaac Brock and got the feeling he was probably a really good guy. He died defending his adopted country because he chose to make a stand for what he thought was right. I don’t think FATCA is really the hill anyone wants to die on. I would respectfully ask some of you to just take a step back and remenber who you are . My prediction is the government is going to do the right thing here so that Canadians can get back to what you were doing before there were FBARs and FATCA
30-Year IRS Vet
@stevenjmopsick- yes the IRS is above the law. The IRS is making the law with minimal input from other countries but no matter which way you look at it the IRS is calling the shots.
The fact that the IRS can have an eternal hold over people who no longer live in America or who have never lived in America is an atrocity. It seems that we can never be free of this intrusive government that wants to dictate to us how we are allowed to live in our country of residence.
Having the power to track your people for all of their natural lives is not a lawful act. Forcing us to check in every year with the IRS in a kind of probationary hell is immoral and an affront to our dignity.
I have never been a crook and I don’t appreciate one bit that my character is assaulted like this on a regular basis by a country to which I OWE absolutely nothing. A country which I deliberately fled and want nothing at all to do with.
This treatment is not benign but tyrannical and it hurts me each and every day .
petros mentioned this today and I have to admit that I had forgotten all about this period of British history but I do believe that the history of ‘Impressment” does shed some relevant light today on the position of the U.S. expat relative to the U.S. government.
It is interesting to note the number of desertions that were committed by impressed sailors. I believe that a direct comparison can be made between the desertion tendencies of impressed sailors and the rate at which U.S. citizens are choosing to opt out of their impressed servitude to the IRS.
Oddly enough the courts of both countries upheld this practise because it was deemed as being “essential” to the existence of the empire. So the fact that U.S. courts may be upholding citizenship based taxation does not in itself serve as vindication of the practise. It only means that the judges are complicit in the violation of people’s constitutional rights.
We greatly appreciate your participation here, even when it inevitably leads to spirited debate.
I would just like to ask you what your own conscience is telling you about this unfolding history. Since the underlying issue here is clearly citizenship-based taxation, I am wondering what your years of service and experience with the IRS have taught you about this philosophy of taxation, how it emerged, evolved and continues to be supported and implemented by the US.
Knowing that this system is unique in the world, save for Eritrea, can you offer a basic critique and/or defense of the system itself, in light of the virtually complete dominance of residency-based taxation everywhere else on earth? I would be most intrigued and grateful to hear your thoughts about this stark contrast and the rationale behind America’s unilateral adherence to this particular vision of how taxation should be imposed.
Citizenship based taxation means just 1 thing!
More “possible” revenue than a residency based tax system.
It’s as simple as that! Unfortunately 🙁
I take great offense at the statement,
“I would respectfully ask some of you to just take a step back and remenber who you are.” I very much remember who I am. A Canadian who left the US 46 years ago, who became a Canadian 36 years ago, and who has faithfully filed my taxes in Canada. I’m caught in a nightmare because of a greedy, profligate US gov’t who has discovered that there is a large pool of people who were unaware that the US had re-claimed them. And who, by definition, then, have unreported income, as we’ve only ever filed our taxes in our real and chosen country. Steve Mopsick, I urge YOU to step back and think about what your gov’t and the IRS are doing. I say the US has NO right to see what I’ve got much less ask any questions about it.
@outragec- I believe that an analgous situation that can used as a rebuff to the directive- remember who we are- is to be found in the history of labour relations in the game of baseball. Specifically I am referring to the “Reserve Clause” which made the baseball player the possession of his team, by giving the team the sole right to indefinitely keep a player’s contract in force.
To say that one is obligated by accident of birth to an involuntary perpetual membership in a group runs contrary to personal liberty. The individual and the State are not one and the same thing. Both the American Constitution and the Bill of Rights make this distinction very clear.
Outragec. 2 things. I think Steven Mopsick meant something else. I think he meant we should relax a bit because the IRS ,in his opinion, will not be all that interested in us. Think of who we are- small players in a gargantuan system that has no way to find us, to tax us or to penalize us.
I think he is telling most of us not to voluntarily step into the system if we are long time Canadians with few or no US ties.
KalC. Thanks – maybe I’m still too emotional about all of this, but it certainly struck me the wrong way! I’d be the first to admit that I’m a very small player in this, however, I guess I just don’t have any faith in that the IRS won’t get to me, eventually. And what little I have, I want to keep. My fear is that they WILL find us in 2014. If he is, indeed, telling us not to voluntarily declare (I didn’t get that, personally), then I agree with him. a) That would be agreeing that I am a US citizen, which I’m not, and b) I would have to agree to pay a penalty for crime I didn’t commit.
At any rate, I am trying to relax a bit about this, but, as I’m sure we all know, it’s a bit difficult. I haven’t slept properly in a month, since I found out that I could? am? affected by this. But, I’m trying…
Outragec Good on ya mate. What stopped us from entering OVDI 2011 was the mere fact that all the material was to be sent to the criminal division of the IRS in Austin.
It was a very close call and cost $10,000 to get it all ready before we came to our senses
I agree with KalC, what Steven Mospick is telling those of us who became citizens in “the 60’s,70’s and up to the mid 80″s and have had no contact with the IRS since those dates, to most defnitely not file tax returns.
A seminar put on in my city by a very large law firm stated that if you became a Canadian pre 1986, then you are no longer considered an American. If you research the history of U.S. Expatriation Law, there is a(1986) amendment to the Immigration and Nationality Act that basically states that prior to that date, if you performed the expatriating act, voluntarily and with intent, the burden of proof would be on the State Department to prove you did not intend to relinquish. As long as you have done nothing since your date of Canadian citizenship ie apply for a U.S.Passport, vote in a U.S. election, open a U.S. Bank account, then the “preponderance of evidence” is in your favour that you really did relinquish your U.S citizenship when you became a Canadian citizen.
For people who became citizens after the date of the Amendment, the burden of proof is on the individual to prove to the State Department that they did really intend to relinquish. Since 1990 the State Department has basically said that unless you let us know that you no longer want to keep your U.S.citizenship, we will assume that you do.
@tiger thanks for that mention about the seminar by the large law firm. So if it’s common knowledge in legal circles that if you became a Canadian pre 1986 you are not a dual US citizen then banks should just accept your Canadian Citizenship as proof you’re not a US citizen since the paperwork will show the pre 1986 date. There should be no need to get a CLN especially since they seem impossible to get.
Tiger – you have made my day. Thank you thank you.
Oh and if the bank wants you to sign a W-8BEN which is a form that says the beneficial owner of an account is foreign you should be able to sign it in good conscience. As a Canadian who no longer holds US citizenship you are foreign.
Whatever you do don’t sign a W-9 or anything other than a W-8BEN. I would leave the section on Tax Treaty Benefits blank, in fact provide only the most minimum of information. Name and address should do it.
I fill out W-8BEN’s all the time because I sell to American customers through my company. The only information I put on there for my company is the name, country of incorporation, and the address, then I sign and date at the bottom. I leave everything else blank. This form doesn’t go to the IRS anyway, it’s just so the customer can have it on file as proof that my company is foreign not American.
Thank you, omg.. this site is a blessing – my panic is reducing by the hour…
You are welcome. I am not a lawyer but I don’t believe a large law firm would be making statements like the above one referring to pre 1986, without having done their homework.
@Omghe – I plan on showing my bank my citizenship document with the date on it; also, I have requested my citizenship file through “Access to Information and the Privacy commisioner”; I will probably also download some relevant info re the 1986 Amendment to the INA. Like you said, I will be more than happy to fill out the W-8BEN, which I have always done on my investment account. Most definitely not fill out a w-9!