IRS Commissioner Douglas Shulman, on Thursday (April 5), in a question and answer session at the National Press Club in Washington, indicated he would step down when his term expires in November. As we have all heard before, he repeates the numbers of how many have come forward (33,000) and how much they have collected ($4.4 billion). Yawn, yawn. And particularly offensive is the following:
We view offshore tax evasion as an issue of fundamental fairness. Wealthy people who unlawfully hide their money offshore aren’t paying the taxes they owe, while schoolteachers, firefighters and other ordinary citizens who play by the rules are forced to pick up the slack.
His entire speech is at the IRS newsroom.
One of the first sites I visit everyday is Jack Townsend’s Federal Tax Crimes Blog. And not surprisingly, he has written about Mr. Shulman. (emphases mine):
I wonder if the Commissioner really understands how misfocused the program really is. Does he really understand the difference between whales and minnows, both of which he sweeps into the same net? Punishment should not be the same for both. Yet, the IRS offers a program of one size fits all, where the penalties for the whales (most of whom are really bad guys in terms of tax noncompliance) and the minnows (most of who are not). I am sure that the Commissioner and the IRS see the opt out as the safety valve as the way to deal with minnows and nuance, so that the inside penalties really apply to only on the bad guys. But the opt out because of all its uncertainties and interminable delays poorly serve a community of taxpayers who should receive at worst a light tap on the wrist and who are willing to be compliant into the future now that they are fully educated about the expectations of the IRS.
I strongly urge the IRS to move swiftly to publish guidance for how taxpayers will be treated on the opt out audit. That guidance should not cover the whales — who are the ones likely to deserve the onerous penalties and should stay within the program penalty structure without opting out. The guidance should make the punishment fit the conduct — I don’t say crime because in these cases there is no crime. That would mean in many, perhaps most, cases a future compliance (some call it a warning) letter or a relatively light slap on the wrist and at least an implicit welcome into the community of taxpayers with full knowledge of what is expected in this area. This would help alleviate a lot of the angst that these good people have about entering the program and getting right with the IRS. That way, these taxpayers can feel more comfortably about opting out in the first place and, because they will know something about the administration of the opt out audit, will not feel that for long periods they have the Sword of Damocles hanging over them.
One of the commenters to this post relays yet another horror story about what he/she is experiencing in OVDI.
Anon5% Apr 6, 2012 12:16 PM
The IRS OVD programs, for those of us in the know, appear to be the equivalent of letting the Keystone Cops loose in the Treasury Department.
What irks my ire most about Commissioner Shulman’s remarks is that the hallmark of a true leader is seriously missing. It would not take much to acknowledge the missteps with respect to minnows in the OVD programs by implementing a clear policy for rectifying the situation. Nothing needs to be said. The policy would speak for itself. This kind of action is seriously lacking. An action of this sort would allow the Commissioner to save face as well as help many victims of the poor policy planning. Let me illustrate by example.
As a minnow, I have recently had to abandon my legal counsel because I wish to opt out and I can no longer afford them. They have told me their costs will be greater than my penalty. In our last conversation, my former lawyer told me that people like me, minnows, were suffering greatly since a “one size fits all” policy was implemented. He told me that when FAQ 35 discretion had been allowed, he had a client who had USD 300 million in assets overseas and who, in OVDP, faced a fine of USD 60 million. The client spent over USD 100,000 on legal fees and my former lawyers were able to obtain discretion from an IRS agent so that the client paid a penalty of USD 50,000.
If I am not mistaken, Just Me paid a penalty of $25k. This is so unfair it makes my blood boil. I kind of doubt our dear friend has assets of $300 million. Yet the wealthy man paid only double . How on earth could anyone think this is justifiable, reasonable or FAIR?
Another commenter, who I believe is a lawyer offered this:
How about getting an electronic petition going, one of those thingys that you can add your name, address, email, etc, to and edit a standard letter and it gets sent to Commr. Shulman outlining the reasons why this OVD program is silly, unfair and actually serves to undermine tax compliance by highlighting who gets prosecuted and who does not? Occasionally, I sign up for letters to my Senators and Congressmen and I always get a thank you back so I know they got the letter. I will sign it for sure as will many lawyers, accountants and people who are affected by it. I would not have known much about this program were it not for this blog, but now I know and it infuriates me. This is just a bad idea on many levels. I cant imagine how infuriated those involved in must feel.
Anon’s comments about being a leader point out all that is not noble about people in positions of power in the US government. (I almost said “our”). A real leader would at least defend himself against the “allegations” made by Ms. Olson in the TAD. He escapes by claiming he is only required to respond to the annual report to Congress. Rather cowardly, don’t you think?
November is 7 months away. Though I doubt Mr. Shulman will get off his horse about his accomplishments regarding offshore tax evasion, it would be interesting to see if we could find a way to insist on a breakdown of who those 33,000 were, as well as try to force some kind of response at least to the FAQ 35 issue. I would expect, if the American people read about the wealthy man with $300 million paying $50,000 compared to Just Me paying $25k, maybe a few would come around. Somebody should make the Congress and Shulman exposed for what they done.
I wonder if it would be worth trying to set up another petition. The FATCA petition moves slowly and I don’t know if there would be a way to get people interested in another one.
Ideas?
http://federaltaxcrimes.blogspot.ca/2012/04/shulman-recounts-his-tenure-and.html
But before his term expires let’s hold his feet to the fire demanding that he confirm that the front-runner in Egypt’s upcoming presidential election, who was born in Egypt to a US citizen mother, and therefore is a US citizen, is totally up-to-date in his US tax obligations and FBAR reports. If not, he should be extradited to the US to stand trial for tax evasion.
http://worldnews.msnbc.msn.com/_news/2012/04/06/11058704-us-tie-could-foil-conservative-islamist-egyptian-presidential-candidate.
I totally agree. Being unfamiliar with him, I googled him and let us do hope he is disqualified:
Abu Ismail is a candidate for the Egyptian presidential election of May 2012. As of early April 2012, he is considered the front-runner, and enjoys notable displays of popular support.[1][2]
In foreign policy, Abu Ismail is in favor of ending Egypt’s peace treaty with Israel and has spoken of Iran as a successful model of independence from the United States.[2] His domestic agenda includes opposition to the dominant role of the military in Egyptian politics and Salafi social reforms such as lowering the age of marriage to puberty,[1] or veiling women and segregating them from men in the workplace.[3]
http://en.wikipedia.org/wiki/Hazem_Salah_Abu_Ismail
Iran as a successful model? Social reforms? Good lord………..
I wouldn’t expect any change in U.S. taxation policy with regards to citizenship based taxation. It seems to me that the basis of the agrument is at root “emotive” and not “legal”. The funadmantal question of by what means the extent Congressional spending power can be limited to U.S. jurisdictional boundaries while taxation power isn’t similarly limited is a Constitutional issue that Washington refuses to address in any other terms than one of emotion, eg. patriotism.
However it seems to me that, both legally and Constitutionally, the two powers are coterminus. In other words the U.S. government’s power to tax cannot extend beyond its power to spend. Taxation and appritopiation are both two sides of the same coin.
@Nobledreamer, Abu Ismail ‘s views could be considdered middle-of-the-road among the Muslim Brotherhood which undoubtetly has strong support in Egypt. If he does not run, he could be replaced by someone with even more extreme views from within that organization who, like Iran, favors the total destruction of Israel.
Many in the Obama administration don’t make it past the first term with him (I am aware Shulman is a Bush appointee). Obama has already had two chiefs of staff–Rahm Emmanuel and Bill Daley–both part of the Chicago machine, both quit before serving to end of the term. Hillary Clinton will not take a second term as Secretary of State. Timothy Geithner will not serve a second term. There are probably others.
This indicates to me that the problem is Obama. People should wake up and smell the coffee.
I second nobledreamer’s idea about a petition
change.org is a popular site for on-line petitions.
How about a petition at tis site 😯
https://wwws.whitehouse.gov/petitions
OOOppppssss 😳
forgot the the “h” in this
@ UncleTell
I’d like to say it was a good idea but the number of signatures needed is pretty high and the petitions often fade off the first page, out of sight, pretty quickly. Also, giving your name to the Whitehouse might not be such a great idea. I don’t think Obama listens anyway … he just plays a listener on TV.
@all- basically I believe that if the increasing number of people who are willing to dump their U.S. citizenship hasn’t already had an impact then I think that a petition that is signed by a bunch of people, whose vote doesn’t matter anyways, isn’t going to be acknowledged either.
@Roger,
Yes, of course, you are right from that perspective. I have read about the origins of Al Quaeda and the Muslim Brotherhood and they certainly have evolved to an incomprehensible set of “values.”
I fear especially for the women of that country.
I will never understand their position about Israel. Never. I can certainly understand Israel’s concerns and why they would consider striking first. (Not to say I agree). And Ahmedinajad-I cannot believe the UN actually allows him to get up and rant like he does. Let us hope reason prevails and we do not end up seeing this potentially dangerous situation become even worse.
@All
I didn’t really think a petition would be the way to go. There probably is no way to get the Comm. to own up to what he has really done.
I wonder if we could get the breakdown (of the 33,000/$4.4bn) by requesting the info via FOIA. I explored it a little last nite but was too tired to piece through and figure it out.
I just cannot stand the idea that some rich fatcat would not pay more than twice what Just Me had to pay. It’s disgusting.
@all…
Well, I think I have exhausted the subject on my feelings of Commissioner Shulman and his contributions Tax enforcement. Good riddance. I biggest fantasy is that he someday has to suffer at the hands of his own OVDI program.
When you see such strong comments by the well known attorney Jack Townsend, who is not known for hyperbole, saying what I have been saying about Minnows and Whales since my first letter to Shulman, I feel somewhat vindicated. At least he adds his voice to a chorus of competent attorneys (with DOJ and IRS background) now speaking strongly which makes me feel that my assessment way back in the beginning was not wrong. Not that it matters anymore. I am sure he will find some good high paying job advising those that are victims of his wonderful programs. That is what they all do.
Let’s hope that someone who “gets it” about what is wrong with IRS complexity, like a Nina Olson is his successor. Probably not. Carl Levin would filibuster the appointment.
More info has come out in the press in the last couple of days. It appears that Abu Ismail’s mother became a US citizen after he was born. She had a daughter who lived in the US with an American husband which his mother used to visit for extended periods. She apparently was a registered voter in California and it is believed that she used a US passport to enter and depart from the US.
So Abu Ismail would not himself had US citizenship, but after Mubarek was deposed, the interim government managed to introduce some sort of decree which disqualifies a president being elected who has a parent who has citizenship in or is or was a dual citizen of another country. What they were trying to avoid was an Egyptian coming back home who had lived in the West and becoming a Presidential candidate, but it apparently never occurred to them that a Muslim Botherhood leader like Abu Ismail might be excluded as well.
All of the smoke has not yet cleared, but some of it has.
@all
I have been too busy the past few days to really sit down and digest Shulman’s speech. Tonight, I want to see if the National Press Club had any questions to challenge any of his assertions of offshore success. I think I know the answer without watching, but to be fair, I plan to…
Just reading his speech, this one self described focus of his, says everything you need to know about the OVDI programs…
” I’m a believer in relentless and myopic focus on priorities!”
MYOPIC… Really? That is what you want to celebrate? He is so myopic that he can’t distinguish Whales from Minnows, and yet trumpets this as a “core” belief?
Frankly, I want someone heading an organization that is just the opposite of Myopic, for god’s sake… I have to get back to work, as this just pisses me off the more I read… grrrrrrrrrrrrrr !!!
@all
Obviously the next Commissioner will be appointed by Obama. This could be very very interesting. If not done quickly, Romney could make this a campaign issue. If it’s a campaign issue, then OVDI might just get on the radar. Or is this just a fantasy? I have always felt that Romney is the only candidate who might be sympathetic to citizenship-based taxation, OVDI, FATCA, etc.
@Roger
Maybe the same sort of irony as in ACA fighting so hard to get citizenship for all who were entitled only to have the US gov decide to extend it (later) in the perverse way they have (ex-“relinquishants”)
@renounceuscitizenship- I was thinking the same thing. It seems that his overseas financial accounts are giving him an image problem and I also was thinking that if he became President that he MAY deal with this whole issue.
I am sure that any successor that Obama appoints will be given the same mandate that Schulman had and will be of the same character. We have to remember that the Commissioner isn’t the problem. The root of the problem resides with the political handlers and years of unchangeable tradition in which the U.S. sees itself as EXCEPTIONAL..
@Just Me
myopic about priorities? as in unfair ones?
sorry if I got you going again. 🙁
@recalcitrantexpat
Glad to find a “like minded” person. You probably know that the Romney family has a vacation home in Canada. In addition:
– Romney spent at least a year living in France as a young man;
– Romney’s father and Ann Romney’s father were born outside the U.S.
– I once saw an article that suggested that Romney might have a claim to Mexican citizenship (whether true or not the thought may have crossed his mind)
– it is clear that Romney has foreign bank accounts (either directly or indirectly) and he obviously is not evading or even avoiding tax
– he is very business focused which means that he will clearly see the reasons why territorial based taxation will be good for American business
– I don’t think that it is a huge jump to move from a shift to territorial tax for companies to territorial tax for citizens
I really believe that he is the only candidate who:
1. Has the mental ability to put this together; and
2. Has come into contact with enough of this so that he might just be interested in it
3. It will give him a point of clear differentiation from Obama on the campaign trail. Now, I know that there are some who might see this as politically risky. But, he will surely get the support of U.S. business if he takes some of these positions.
I believe his cottage is in Grand Bend Ontario. Maybe the Isaac Brock Society should send him a message from:
Grand Bend Ontario and the rest of the world!
@renounceuscitizenship- Yes, it is good to find someone else of similar views. The only other two candidates that I would have liked to have seen run are; John Huntsman and Ron Paul. When I listened to Mr. Huntsman discuss his views on the economy and world issues I found him to be the most erudite of all the candidates. Unfortunately for him America is not interested in well thought out policitcal positions that question long held U.S. views. Ron Paul was my second choice because he understands how much of a threat FATCA is to the world economy and he wants to regin in the IRS and the Federal government.
When it comes to Romney I can only hope that he will see from his own life just how harmful is the U.S. position on extraterritorial taxation and foreign financial account reporting.
Personally I think that we should have no contact with Romney until after the election. If he is seen as being influenced by U.S. citizens who do not reside in the Staes then he will be associated with helping people evade taxes. Tax evasion is already the line that some are trying to tack on to his foreign bank accounts. Plus he is having enough trouble himself overcoming his past record of laying off people and owning two Cadilllacs etc.
@renounceuscitizenship; No doubt, Mitt Romney indeed is a dual US-Mexican citizen. His father George was born in Mexico to US-citizen parents and Mitt, born outside of Mexico to a Mexican-citizen father was therefore a Mexican citizen at birth. It is not something he would need to claim, because he had it from birth. In this respect Mexican nationality law is simlar to US law. But he does not have to file Mexican tax returns or pay Mexican taxes because Mexico, like most of the countries of the world except the US, practices residence-based taxation rather than citizenship-based taxation.
What could be more effective is filing mass applications for information under (Freedom of information act), asking percentage of minnows residing abroad (i.e. foreign address) in the 33,000 and total penalties collected from minnows.
This law as some teeth (http://en.wikipedia.org/wiki/Freedom_of_Information_Act_(United_States) see section under ‘Scope’):
The act explicitly applies only to executive branch government agencies. These agencies are under several mandates to comply with public solicitation of information. Along with making public and accessible all bureaucratic and technical procedures for applying for documents from that agency, agencies are also subject to penalties for hindering the process of a petition for information. If “agency personnel acted arbitrarily or capriciously with respect to the withholding, [a] Special Counsel shall promptly initiate a proceeding to determine whether disciplinary action is warranted against the officer or employee who was primarily responsible for the withholding.” In this way, there is recourse for one seeking information to go to a federal court if suspicion of illegal tampering or delayed sending of records exists.
It is hard to deliberately ignore few thousand requests from minnows, who are sufferers of this jihad and miss-information. It would become increasingly harder to deliberately evade so many requests and plead ignorance later (if someone fillies a complient).
This information about percent of minnows (in the 33,000) and amount of penalties (in the 4.4 billion) would be a great defensive tool. I am sure IRS doesn’t want to publish that information until they left with no other choice.
Even after clear warnings from TAD, US ambassador to Canada and many tax-practitioners, this information exposes that the IRS deliberately treated minnows no differently than the real tax-cheats (who live in the USA and deliberately hide money in tax-heavens).
But we must try to systematically expose IRS’s ‘bait-and-switch’ and show how IRS destroyed the lives of innocent dual-citizens (who owe little or no taxes and not tax-cheats).
To make quick buck, IRS lost trust of 6 million strong expat community, causing irreparable damage to the US economy in general and exports, tourism in particular. Many of us relinquishing our citizenships and also reduce our visits to the USA. This alone costs billions to tourism industry.
Each expat structure his investments to avoid US, due to complex regulations, forms and any inadvertent mistake could ruin his life/business. For example, many expat business people working on avoiding US suppliers whenever possible (to avoid falling in the filing trap), since it is impossible to find a tax advisor in our countries. Many of the tax experts didn’t know about FBAR until 2009.
This OVDI proved that we can’t do business with IRS in good faith: Although we don’t owe any taxes, reasonable cause will not save us from huge life altering penalties (years of uncertainty, distraction from business and huge legal fees). Any dependency or relationships with US suppliers are used by IRS as leverage to extract fines, if one inadvertently missed filing obscure forms.
None of these acts are wrong or even unethical, since we must avoid people/organizations with whom we can’t deal in good faith, especially when they have all the powers to enforce their will.