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
@ expat_business_man If Obama wants Shulman out it’s because Obama wishes to make tax policy more radical (i.e., in the marxist direction), not because he was displeased that Shulman couldn’t distinguish between minnows and whales. I plead with you folks: Obama IS the problem. This stuff is happening because Obama promised hope and change: Hope for folks on welfare who voted for him and change to the taxing schemes of those who don’t vote for him (the wealthy and expats). Obama is a redistributionist. He wants to redistribute your money that you earned internationally and give it to the people who put him in power. The person who Obama replaces Shulman with will only make it worse. Much worse. Believe me.
I agree with Petros. Obama is the real problem. We didn’t know him before he got elected but we know him now. If he wins reelection God help America because they’ll need it.
@Petros, Allow me to make one important clarification: I think you will find that the Expat community voted heavily in favor of Obama because during his campaign he comitted to “level the playling field” for US citizens living abroad. He was very clear in this. But once elected he promptly did nothing to keep this vote-getting commitment. ACA leadership has made many attempts to follow him up on this commitment, but the response has been absolutey zero. It is if this commitment had never been made. His actions speak much louder than his words. I suspect and sincerely hope that in this next election the vote will be very lopsided against him. To those of you who are expats, please keep this in mind.
@all, Well I sincerely hope he is not re-elected, BUT from what I am hearing from my family and friends, and their co-workers, they all feel he is going to be re-elected.. ARE THEY STUPID OR WHAT!! They complain about how he has run the country and then they talk about re-electing him.. I don’t get it..Please this can’t happen!!
This is going to be a very important election. It will change the course of the United States for a long time. I sure hope he doesn’t get reelected because he is clueless about business.
I was worried that Romney didn’t have what it took to beat Obama but after seeing what he did to Newt through negative ads I hope that he can do the same to Obama.
The American people can’t possibly want 4 more years of this. If losing your job and home doesn’t make you want new leadership nothing will.
@OMG, You are 100% right, surely to God they will not vote for him again. It will such a big mistake!!
If Obama is a Marxist then Romney is Che Guevara! Give this theme a rest, While the ones introducing the legislation that concerns us are democrats the most vicious attacks on expatriates have traditionally come from Southern Republicans.
Why do IRS Commissioners have 5 year terms instead of 4?
What would cause a commissioner to leave almost 6 months before his term is up?
First there were the 30 tax prosecutors that got transferred with no replacements and now Shulman is leaving early. Something is up.
@Petros, I agree the Obama nominee would be more radical. But I hope he has respect for the laws.
I was a democrat and last time I strongly supported Obama. Now I sincerely hope Obama is not re-elected. Last time millions of salient majority voted for him with false hopes and all of them now deeply disappointed. It won’t show up in monthly polls, but I believe the salient majority would abandon him. He made so many promises and change (created huge expectations), but not kept most of them and thoroughly disappointed the salient majority. There is no enthusiasm that existed in 2008.
Now country is direction less. The US built and prospered on capitalism. Now Obama is pushing towards welfare or socialistic state that is against its core nature, which always end up in disaster. Different parts of a complex system drag various parts of the nation in different direction, making it direction less leading to disaster. If he re-elects it is disaster for the US, since he can push his agenda without fear of elections and will be aggressive attacks on congress that polarizes and divides the nation.
Roger wrote
Roger, my line was incorrect. It is not that expats didn’t vote for Obama, it’s that their votes count for naught in the grand scheme of things, so that Obama et al. can safely ignore their issues.
Joe wrote, “If Obama is a Marxist then Romney is Che Guevara!”
Oh sorry. Obama is not a “marxist”, he’s a redistributionist.
A rose by any other name …
@petros, Expats votes count for very little, but remember that it was the 2000 election that was won by one electorial vote over Gore. That was because when the votes were counted, and recounted under close scrutiny of the the Florida courts, Bush won Florida by 327 votes. It was the overseas absentee ballots that gave him rhe slim majority that decided the national election. The Miami Herald, which had supported Gore and was in the forefront in demanding a recount, conducted its own post-mortem investigation and concluded that Bush had indeed won the election.
One of the rare cases where the overseas American votes did in fact count.
@omg
‘What would cause a commissioner to leave almost 6 months before his term is up?’ I think you might be reading too much into his leaving. There could be 101 reasons that he is leaving. I don’t believe it is indicative of somethng being up.Over the years, you see this sort of thing occur many, many times. Perhaps he has a job offer that he just can’t refuse!
@all
I am just grateful that as someone who has not considered myself an American for 40+ years, that I don’t have to vote and won’t be voting. I agree that Obama is a disaster but I haven’t seen anyone on the Republican side that I would trust either. With possibly one exception – Ron Paul – and he is such a long shot that ‘it ain’t gonna happen’.
@all
Some thoughts on how and why Shulman is the worst IRS Commissioner ever:
http://www.rothcpa.com/mt/bingbong.cgi?tag=Worst%20Commissioner%20Ever&blog_id=1
Watch the video posted by Petros. At one point it notes that 1/3 of Americans do not pay taxes.
I hate to say it, but I believe Obama’s chances of reelection are very good. The more and more the election becomes about “class warfare”, the better his chances are. Petros is right in that Obama is about the redistribution of wealth. In December he launched his campaign in Kansas with the theme of class warfare. In January of 2012 his State of the Union Address emphasized ‘class warfare”.
Democracy in America has become a game where the political process is used to get somebody else to pay your bills. So, far 1/3 (or more) of U.S. taxpayers don’t pay taxes (relying on the revenues generated from the rest).
He realizes that a majority of American voters would prefer to have the minority pay their bills. At every campaign stop the message will be:
Vote for Obama – I will make sure that somebody else pays your bills!
Great speech in Kansas:
http://articles.latimes.com/2011/dec/06/news/la-pn-text-obama-speech-kansas-20111206
@ex_pat_businessman; re”Only good thing is I last 6 pounds due to the stress, which I couldn’t do in previous 3 years.”
Me too. What shall we call the new diet?
@renounceuscitizenship, how about this for a slogan:
Vote for Obama and you may never have to pay taxes again since it will be impossible to find a job due to his job killing policies.
@Badger: You said: What shall we call the new diet?
How about: Shulman ‘bait-and-switch” FBAR weight loss plan?
It is unproductive to argue whether the Dems or Republicans are worse. We cannot influence the election. This discussion draws attention from our real problems- how to deal with the US government. T o think it would be better under the GOP is quite unrealistic.
@Chester12
The question is whether we would be better able to deal with the U.S. government under Romney or under Obama.
What we know is that there is no way to deal with an Obama government. A Romney government might be different.
@omghesstillanamerican- I am not a lover of President Obama but in fairness to him I would point out that the rise in America’s unemployment began in 2007 under Bush. I would also point out that it was Bush who used trumped up charges and invaded a sovereign nation that was not at war with the U.S. He then proceeded to invade another nation and in the process none of these wars was funded. It was also Bush who brought in the tax cuts for the wealthy and implemented a drug program for seniors, none of which was paid for.
I have watched the critics slam the recovery as being one of the worst recoveries ever but they refuse to admit that this recession was one of the worst ever. America has suffered a very traumatic blow to its financial under pinnings and this won’t be fixed quickly. Some of it will never be reparied. The U.S. economy may forever bear a scar from the 2008 collaspe.
Neither the Republicans nor the Democrats are friends of the U.S. expat. Both parties believe in American Exceptionalism and citizen taxation is a part of this shared mythos. Attacking expats is a cheap, pain free, no risk way to gain votes at home. Expats have no control over the image of them that is presented by polticians to resident Americans and resident Americans could care less about the lives of expats. Unless the expat community wants to start buying advertising time on t.v. and radio the true story about them will never get out.
I have to disagree Chester12. The Republicans have been pushing for a territorial tax system for awhile now. That’s the beginning to the solution to our problem. It may start with corporations but logically it has to quickly lead to residence based taxation for individuals too. Since corporations and individuals are both labeled “US Persons” by the IRS eventually they deserve equal treatment.
Obama on the other hand has pushed back hard whenever the Republicans put forward a territorial tax plan.
We are caught in the middle of an ideological war. The true story is not being told by any newspapers. This war will be won by those with the most money, which in this case are corporations. That can only mean good news for us too eventually.
@omghesstillanamerican
Well put – I agree that this is the link. Both corporations and people are U.S. persons. Hence, the pressure to treat them in the same way. It is very very likely that the U.S. will move to territorial taxation for its corporations.
This is also a way to argue the issue where the focus will NOT be on wealthy expats on the beach (a person I have never met but is ingrained in the American psyche).
@recalcitrantexpat
‘Both parties believe in American Exceptionalism’ – How true. In fact, I think that probably all American homelanders have that same narcissistic view. The attitude is they are ‘the best’ and therefore, their way is the only ‘right’ way.