Petros responds to Steven J. Mopsick, 30-year IRS veteran latest comment, that some Canadians have probably found that the Overseas Voluntary Disclosure Initiative penalty of 27.5% is actually quite a good deal, since these Canadians are tax cheats and frauds. UPDATE: Steven J. Mopsick responds with a Jack and Jill scenario of a wealthy montréalais couple with a Swiss Bank account.
Are you planning to buy that condo in Florida? Don’t. If you have one already, sell it, even if you have to take a loss.
Are you planning on taking that company transfer to the United States? Politely tell your boss, thanks, but no thanks.
Steven J. Mopsick explains to us why certain Canadians would gladly hand 27.5% of their wealth, including real estate, over to the IRS, who obviously needs the money more than us filthy rich Canadian tax cheats:
To all. I would respectfully ask that you read my post today on the 2% Payroll Tax and what I wrote about the IRS Manual and penalty administration particularly, the duty the IRS has to administer the FBAR penalties in a reasonable manner.
@Petros: may I suggest a change of perspective. You don’t know every Canadian who may have entered into one of the OVDI programs. In fact for some of them, and some Canadians who may be signing up to make one right now, would be embarrassed to talk to you about it because FOR THEM IT WAS A GOOD DEAL! THEY HAD BEEN FILING FALSE TAX RETURNS. In some cases, they would have done jail time had the IRS come to them first. Again, OVDI is not for everyone. Sadly, some people receivd bad advice about OVDI and did not properly weigh their options. I guess some tried to do it themselves. That said,
It’s one thing to be listed in a computer data base. It’s quite another for a government program to hunt for your name and spit it out for special abuse.
If you haven’t had any reason to think of the IRS for a period of the recent ten or twenty past years, you probably don’t have anything to worry about..
Respectfully submitted,
30 Year IRS Vet
If the IRS thinks it is ok to raid the RRSPs of Canadians, the War of 2012 really has begun. I think these two paragraphs tell us more about what is going on inside of the heads of the IRS than anything I’ve ever read; it reveals the mentality of Mordor.
Our Canadian friend, IJ, who made the mistake of moving to the states a few years ago, asks for clarification:
@Steven,
“FOR THEM IT WAS A GOOD DEAL! THEY HAD BEEN FILING FALSE TAX RETURNS. In some cases, they would have done jail time had the IRS come to them first.”Can you be more specific what facts would lead to jail time ?
Filing incorrect return with incorrect perception is not filing false return which IRS has to prove 1. affirmative act, 2. tax due, 3. acting willfully.
Did Tim Geithner file false return ? And so did Charles Rangel ?
IJ, is a Canadian in the 2011 OVDI, and he doesn’t think its a good deal at all. He is a minnow.
Unfortunately, there may be some other Canadians who live in the United States that have taken US citizenship there, but who find the OVDI a good deal. That I may grant. But they live in the jurisdiction of the United States. I just don’t know anyone like that. I don’t frequent the same country clubs.
As for those of us who are actually living in Canada, I can’t think of anyone who would see it as a good deal. I hate the extra-territorial tax reach of the United States. I believe its is evil and wrong. I believe any Canadian resident who pays an FBAR fine is inadvertently weakening the Canadian economy, and that it is a casus belli (Steven, casus belli is Latin for, “a reason to go to war”). Last I checked, Canada was a much needed ally of the United States: so why the hell are you raiding our retirement accounts? That is not the act of a friend but of an enemy.
I have much more to say to Steven, but I am absolutely tongue-tied, because the fury that I feel is keeping me from thinking straight. So I am going to take this to the Isaac Brock readership. Does anyone out there know of any Canadian residents and/or Canadian citizens, who think that the OVDI is actually a good deal because they are tax cheats and they have been filing fraudulent returns?
Originally published 7:33 am February 20, 2012
The IRS is not fit to make decisions on something as complex as international tax evasion. That’s why the implementation of FATCA cannot be tolerated. The January 25, 2012 letter written by the Institute of International Finance stated as much.
They also instructed the Financial Stability Board (FSB) to mandate the development of a global framework for addressing tax evasion which would avoid the pitfalls created by FATCA.
The US has proven that they have a very self centered approach to combatting tax evasion and will not make a good partner to any country unless there is a global framework in place that would punish organizations like the IRS for acting against the interests of another country that has a legitimate right to go after a particular tax evader.
@omg, arrow 🙂
@tiger: You asked: “still waiting to hear your response to Hijacked on your blogspot re pre-1994 expatriation!” I didnt see your reponse to my post on this asking for some more facts before I responded; I think I can give the anwser you are hoping for but I want to ask, what is going on between the taxpayer and the IRS between 94, and the present, if anything at all.
@ Steven
Absolutely nothing going on. The only time any tax forms were filed in the U.S were 1963 and 1964 for part-time work whille a student. Landed in Canada in 1964, have never had a U.S.passport, never filed a tax return since the 1964 tax year, never voted in a U.S.election (wasn’t old enough to vote prior to leaving the U.S.), never even had a bank account (I kept what little money I had in my mother’s freezer!).
@Petros: “Why is it that Jack and Jill owe anything to the IRS? ” answer: they are US citizens and the law says they have to file.”
You said: “I disagree with the extra-territorality of the USA taxation.” We know that. So….you need to get the law changed
I am just trying to offer a different persective on what is going on before you. What is NOT happening is any concerted effort or pursposeful action on the part of the US government to make life miserable for millions of Canadians. The US Treasury Department and its partners in the European Union are not going to back off getting their hands on each other’s banks list of depositors. That train has left the station. Participating Financial Institutions have until January 1, 2013 to get their applications in the the IRS and learn how to be a withholding agent for the United States government.
The US Congress passed a law with unitended collateral damage to innocent people.The next thing to do is fix that. I believe there are easy fixes which will relieve the uncertainty of many people.
You said, “This is a casus belli. I want the IRS out of my country.” We all respect your views here. But I would respectfully submit it is not a causus belli. Right now it is a problem most people would rather not have to address.
My only point is to ask if perhaps it might be best to concentrate efforts on advising the government how to make FATCA less burdensome on people who cannot afford a home in Malibu or the Hamptons. The IRS has to fix this in the regulations. The Congress is not going to repeal this law.
The government is going to have to figure out how to find the Jacks and Jills of the world without bothering ordinary citizens who are not trying to get away with anything.
The government does not have the money to torture 94 year olds in nursing homes. IRS special agents like to work on cases like Jack and Jill.
Respectfully submitted,
30 Year IRS Vet
@steven mopsickBlaze
Nothing going on with me either with the IRS since 1994. No passport, no SCN, no voting. Nothing.
The original answer to your question was on your Feb. 11 blogspot, copied here.
Your question:
“Do those “persons” who performed their expatriating act, pre 1994 have to file tax forms when applying for their CLN or are they exempt from the obligation?” I need a little more help from you here or any one who wants to chime in. I cannot give you any advice you can rely on because we do not have an attorney client relationship but my answer would depend on when was the last filing? Also without doing a bunch of research can someone take a crack at a little more of a write up on the issue? Please tell me exactly how you read section X of the referenced IRS revenue procedure?
30 Year IRS Vet.
My answer:
I have never filed a US tax return.
I came to Canada at the age of 7, became a Canadian citizen at the age of 20 in 1967 (expatriating act) and was told that by so doing I was giving up my American citizenship.
I read Section X as stating that anyone who relinquished citizenship before Feb. 1994 and who has obtained a CLN backdated prior to 1994 would not be required to fill out Form 8854 and would thus not be required to swear that they have been compliant with federal tax obligations for the last 5 years. I am unclear about the reference to Form 1040NR.
Thanks again for your time.
@ Mr. Mopsick
In other words, as stated on another thread:
“There is a distinction between the “even handed application of the law” and the justice of the law.
In other words, who cares how stupid the law is. The more important issue is that it must be obeyed because IT IS THE LAW.
Who cares if anybody knows that the law exists? The law must be obeyed because IT IS THE LAW.
Who cares if nobody would even have a reason to suspect that such a law exists? The law must be obeyed because IT IS THE LAW.
Who cares if the government has ample opportunity to alert people to a law that they don’t know about (FBAR for example). It doesn’t matter, IT IS THE LAW
… and the law must be obeyed
… despite vast collateral damage.
@highjacked2012: I do not think you have a filing obligation under your facts to file Form 8854. The form 1040 NR is a tax return for a non resident alien. The only reason you would file that would be to tell the IRS about something you thought you owed tax on. Hope this helps.
30 Year IRS Vet
@Steven,
Thanks for your contribution from a very different perspective.
Do you really believe IRS’s goal is to make people into filing compliance or they are taking advantage of the situation (most people were (are still) not aware of FBAR TD 90-22 form) and now it is big money time — I even believe that IRS does not really want taxpayers being in compliance — that would certainly a big loss for IRS to take their life time savings/retirement.
Also, I wonder if IRS is the decency to publish the detail of billions they have collected
How much of are tax related penalty and how much are indeed this FBAR related penalty.
I am sure — what they have bragged the billions collection is from 20% (25%, 27.5%) penalty on taxpayers life time saving.
In my case, I might have only $3K tax due, but they are about to impose $30K penalty –as they want to take on RRSP — that would be my 10 years bloody saving.
Do you take comfort as 30 years IRS vet on this kind robbery ?
@Steven: I filed US tax returns when I worked part time in high school and college in late 1960s. I filed tax returns for the two years I worked full time in 1970 (eight months) and 1971 (eight months again) in US. In 1972, I filed a return for the income I earned working eight months in US in 1971.
I became a Canadian citizen in 1973 with clear direction from US Consulate I was renouncing US citizenship. I signed a document confirming my understanding. I was not given a copy of the document, did not receive a CLN and was never even told a CLN existed.
I have been tax compliant in Canada every year since I began working here in early 1972. I have had no US income since then and have filed nothing with IRS . I have had no contact with IRS since I filed for 1971 tax year in 1972. In fact, I don’t even remember what my SSN was and I lost my card long ago.
I have had no reason to file returns since 1971 tax year. I’ve certainly had no contact with IRS since 1994. I’ve never had a US passport (and don’t want one!) and never voted in a U.S. election.
@ Calgary411: I am afraid you missed my point. @Petros asked why Jack and Jill owe tax to the IRS. I replied because they are American citizens and the law says they have to file. If you don’t like the law then try to get it changed. Or, you can excercise your free will to obey the law or not.
30 Year IRS Vet
@Steven: Re your answer to hijacked 2012.
Are you stating that someone who performed the “expatriating act” prior to 1994 but has not yet informed the State Department of that act, because they always thought they had relinquished their citizenship , would not be obligated to file 5 years of 1040’s and a form 8854 when they notify the Consulate of their expatriating act and obtain a back-dated CLN?
As I mentioned in my earlier post – absolutely nothing going on between the taxpayer and the IRS for 48 years.
While this is getting to be a long winded thread there is an important point I think should be made. Since the early 1990s Canada has been sharing information on US “residents” with accounts in Canada. Thus if someone from Malibu or the Hamptons flies up to Toronto and opens an account the bank will file a non resident reporting form to the CRA listing their US address and indentification information that Canadian banks are required to collect under Canadian KYC/AML laws. In turn when CRA gets the information from the Canadian bank they send at electronically to the IRS International office. In fact when this agreement was implemented in 1995 CRA sent all the “back” non resident returns to the US going all the way back to 1988 and in fact several people in the US as I have heard were notably “busted” for not disclosing Canadian income to the US. In turn the IRS collects from US banks information on their Canadian resident account holders(Canada is the only country the US does this for at this point in time) and then automatically forwards that information to the CRA. This has been procedure going all the way back again to 1995. Why is there a need to change this arrangement if it already capturing people in the Hamptons and Malibu so to speak. If it was so important for the US to get information on US Citizens resident in Canada why didn’t they insist upon this back in 1995. I have absolutely no problem with the US trying to expand this arrangement to other countries beyond Canada but at this point Canada has done its part.
@Tim,
I was indeed told by TD bank and Scotiabank about CRA and IRS information sharing. And indeed that once I changed my mailing address to US address, Canadians banks put label on me — US resident — I was not allowed to trade mutual funds.
In that respect, I was not hiding anything from IRS. I always thought that the banks would send T slips to CRA and then CRA would share it to IRS.
@Steven: Might I add to Calgary411’s comment above. How does one comply with THE LAW when one lives in another country, is a citizen of another country, has minimal or no contact with the foreign country imposing THE LAW has made no effort whatsoever to communicate THE ARBITRARY LAW to those affected?
Oh wait, this isn’t about THE LAW. This is about getting $$$$ from penalties and other tax grabs through bullying.
It it was about THE LAW, the US would respect THE LAW they strongly and clearly communicated to those of us who “renounced” decades ago. If it was about THE LAW, your country would respect my country’s Privacy LAW, my country’s Charter or Rights LAW, my country’s Human Rights LAW, my country’s Bank LAW. and my country’s tax LAW.
As you suggested to someone else, if you don’t like MY country’s LAW, you can try to change it. Oops, silly me, that’s exactly what IRS is trying to do, isn’t it?!? Because only the LAW of the Great United States matters anywhere in the world, right?
Well, we’re not going to accept that LAW. That’s exactly why we’re trying to change YOUR country’s LAW as it affects us (and our children!) in OUR independent and sovereign nations.
@IJ
What is interesting IJ is not clear at this point that the reciprocality the US is offering to the five FATCA partners countries in terms of giving info on people in those countries that have US accounts is any better than what they have been giving Canada for years. Thus it is hard to see what incentive Canada has to be a FATCA “partner” country compared to what the US is giving the Europeans. There is an obscure set of IRS rules that dictates what US bank must collect from Canadian resident account holders again Canada is the only country they have information sharing with. I’ll try to link to is someday.
@Tim,
I saw a letter from major Canadian banks executives early last year to IRS — they were concerned about FATCA adding duplicate work on banks which have been in place for many years regarding information sharing.
See this link
http://www.cticompliance.com/assets/pdf/FATCA_TDBankComments.pdf
.
@Blaze
I agree with Steven that US tax law is validly enacted by Congress. I also agree although I might be in the minority here that the IRS is really not the problem so much as the US Treasury Department, Congress, OMB, and the Joint Taxation Committee is. I do believe though that cannot possibly have been enough discussion in the senior levels of the IRS and the Tax Policy Department of US Treasury as to all the implications of the current policy. I am not sure whether it was here or someplace else that Steven mentioned if you actually look at the FATCA regulations they are really based on a staff report of the Joint Taxation Committee back in 2009. So in some sense could the IRS implemented different rules yes, but in this political climate are they really going to against the JTC which is a branch of Congress No. At the end of the day this is a political problem that needs to be solved through political pressure and no don’t expect we will make too many “friends” in the US especially if we are sucessful.
@ij
I have seen that letter too. Clearly the Canadian implications were not really thought through. I don’t think the US really thinks of FATCA from a US Canada perspective. The problem with US Canada relations as a former top official in the Department of Finance commented is that Canada knows where all of the US’ bodies are burried in the way other countries. I do think politicians in Canada are starting to take note of this issues far more than in other countries but are unwilling yet to start a really big fight with the US.
@Steven: In discussing the LAW, what happens when Douglas Shulman violates it? Apparently, not much. Here is a information Brock The Badger posted on another thread. I have taken the liberty of moving it here and asking for your comments as to how the LAW applies in this case:
From Brock The Badger:
I just saw this re: Shulman’s intention NOT to respond to the TAS Nina Olson; See: http://www.rothcpa.com/taxupdates.php
at Roth & Company, P.C. Tax Update Blog
“IRS Commissioner Shulman: you obey the law. Me, that’s different.” February 20, 2012
……’Tax Analysts reports that IRS Commissioner Doug Shulman will simply ignore his statutory duty to respond to a Taxpayer Advocate Directive on abuses of offshore taxpayers in the Offshore Voluntary Disclosure program..’……’From the (Tax Analysts) story ($link)’: “IRS Commissioner Douglas Shulman has no plans to respond in writing to National Taxpayer Advocate Nina Olson’s taxpayer advocate directive (TAD) on the IRS offshore voluntary disclosure program (OVDP) despite a statutory requirement that taxpayer advocate recommendations be responded to within 90 days, Olson said February 17….”
#
@Steven So you see, you don’t think what is happening is a casus belli, but it hardly differs from the causes of the War of 1812 in severity. We called this website the Isaac Brock Society because Isaac Brock prepared Canadians for a war that the politicians believed could be stopped via diplomacy. But aggression cannot be appeased, it must be stopped by diligently fighting for the rights and sovereignty of one’s own country and that is what patriotism is about. I will fight for Canada. I will die for Canada if I have to. The great country to the North of you is your ally, for now. But if you continue in the way that you are going, it will not be long before everyone wakes up to the fact that the United States is desperate–you are debasing your currency so fast, and you are searching funding left right and centre to stop the bleeding. In a few months, if you don’t stop debasing the currency, you face the spectre of hyperinflation. And after that, riots. We know what’s going on and your desperate attempts to make US expats follow your laws will fail; fail they must, because even if you were able to collect, which you can’t, it would hardly stop the financial disaster but for a few hours; the US is spending over 9 billion dollars a day.
When the end comes, you are going to need friends. Don’t burn your bridges today through your arrogance. You are going to need Canada, to keep from starving and to keep gas in your cars.
Oh, and one more question: Was the IRS going to give Canada a share of the take from Jack and Jill? No? I didn’t think so.
You should watch the Sopranos. Even Tony Soprano gets a piece of the action whenever the New York mob comes into New Jersey and does some extra-territorial business. The United States is a bully, believing that they own everything.
@Mr. Mopsick
DUPLICATE POST
I guess we completely miss each other’s points. Is that called agreeing to disagree?
I can see that your belief is THE LAW IS THE LAW, no matter the lack of common sense behind it. It appears to me that your belief is the same as Carl Levin, Douglas Shulman and so many others, including the media of the US – that expats around the world are in fact tax cheats. It is my perception from recent events that the puppets in power do not recognize that the US is following the path of other great nations in its blindness to the need for change ( such as citizenship taxation and of course the great military industrial complex warned about by President Eisenhower). It is my perception that the US, as other past great nations, will not learn from history.
Do you have the inside answer – did the good IRS Commissioner thumb his nose at Nina Olson and the TAD he was to respond to? Has he stonewalled Nina, the mediator? Is there any way US persons abroad can respect his word or have any trust in what the IRS says they are trying to do? The Taxpayer Advocate Service was the voice of reason, our representation, but the IRS rules with an iron fist.
Just as the law is the law is the law; I feel that a bully is a bully is a bully – whether it be a schoolmate, a marriage partner, a boss, a country or countries. It is all about control and dominance over another. When trust is gone, the relationship is dead.
I thought it real when I was WARNED that I would relinquish my US citizenship upon becoming a Canadian citizen in 1975 – where is the US’s responsibility to have communicated to me that this was no longer true when the country changed its law? Where was my choice in the matter of retaining my US citizenship? I had made my choice – I took the Oath of Canadian Citizenship in 1975 because that is where I wanted to live, raise my family, work, pay my Canadian taxes, volunteer my time, be a contributing citizen. I liked what I experienced and what I saw for my life here in Canada.
I foolishly thought I had no tax responsibility to the country which I had relinquished my citizenship. The US for decades turned a blind eye to me and to the estimated six million around the world regarding responsibility to file taxes. Did that not set some sort of precedent? Where was the US’s responsibility to absolutely communicate to us, all along, that we did have to file our taxes returns each year, no matter what the cost to us, no matter the little or zero revenue it brought in to the US? Where was our education on FBARs? Why does the US not even have a tax office of any kind in Canada? Why cannot we get answers to our tax questions from the various IRS phone numbers we are to call, usually with long distance charges? Why is the only advice I’ve received from the IRS is to consult cross-border accountants and US tax lawyers for my answers? Why are the regulations so complicated that my compliance depends on me being able to use my retirement savings for fees to cross-border accountants and US tax and immigration lawyers?
I respect my heritage and also the many “good people” in the US just as you say you respect the “good people” of Canada. However, I want no more of my remaining energy to go to an unsustainable relationship. I want to regain the joy in life that I had before this tsunami hit. I want my energy to go to worthwhile endeavours in my family, my community, my country.
It is disappointing; it is more than sad, but the marriage didn’t work.
@calgary411, you could not have said better. What you have written rates nothing less than a triple AMEN!
@ Stephen Mospick Feb 20 8:57pm
THANK YOU for that reply. This confirms what I have believed for some weeks now, and also confirms what several friends I’ve been helping have been told in other consultations.
It’s thin comfort for folks who expatriated after 1994, but good and important news for those who did so before 1994 (and who have done absolutely NOTHING to exercise or claim rights of US citizenship since committing their expatriating acts allegedly with the intent of relinquishing USC, which is a very important point for those folks to be aware of and be honest about — as highjacked2012 obviously has been). I think this is very good news for Blaze, Tiger, Johnnb and others I’m no doubt forgetting.