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
loss guaranteed! : )
I’m seeing all of this from the eyes of a lowly Canadian beaver. To me it always looks like the American Eagle is trying to fly with two right wings. It’s only an intransigent belief in American “exceptionalism” which tricks it into thinking it is soaring when in essence it is flapping on the ground like every other creature country in the world today. It matters not which party is in power. Both are dedicated to making the rich richer and the poor poorer and too bad for the middle class because they are being forced down not up. Sadly back in Canada, Harper adores the American Eagle so much he eagerly feeds it our sovereignty just to ingratiate himself to it.
Chester12 has it right. To pin any hope to donkey or elephant is delusional. It is all a tale of a beast. The system will grind along regardless of puppets and spectacle. Any anticipation of direction reversal runs counter to the long view. A power in decline is a power in denial, and therefore even less likely to do an about face. Each Brocker has exactly one real vote — to that vote, in most cases, ten toes are attached.
Ok all…. I have resisted being drawn into the partisan arguments about which party is most likely move us towards a ‘territorial tax system’ for individuals. I am not taking a partisan side. I would say, sadly, neither.
I hear the arguments that the Republicans want a “territorial” system for Corporations, and so it would naturally follow that it would also include mere mortal individuals.
My answer to that is simply this.
If that were true, than individuals should be able to keep their passive interest earnings or “profits” untaxed until they are repatriated back to the US just like Corporations currently do and have done for a long time under Republican Administrations as well as Democratic ones. Why didn’t that get extended to “mere mortals” as a natural trickle down?
The answer,… mere mortals did not have the lobby money to buy that loophole for themselves.
Bottomline, Money drives all tax legislation, and if you think they will extend a benefit that Corporations get by “buying their rates”, as a compassionate releif to us little persons, I think you are dreaming. I know you want to “hope” it is so, but I have seen no evidence that this has been the case in the past.
Maybe the Republicans will now somehow be “really different” than they have been in the past. But, when or if they come to power again, nothing I have seen gives me any comfort this is so. I fear more foreign wars of intervention, as the only Republican talking sense in that arena, Ron Paul, is laughed down in the debates while each other Republican tries to out do the other as the most belligerent about what they will do again Iran, North Korea, Afganistan, or you name the country.
Of course Obama has mostly followed Bush Administration policies when it comes to extending the “good” war in Afghanistan, and the pull out of Iraq was just following the Republican time table, so nothing to be claimed there.
We certainly have evidence that Republicans too know how to deficit spend, grow a government’s size and reach, add to tax complexity, pass unfunded mandates and launch wars on a credit card.
I am not saying I am lining up in support of the Dems, I am just discouraged that either of the two parties will make any difference at all when it comes to territorial tax system.
If some of you have not yet listened to the “This American Life” story on “Take the Money and Run for Office”, I would encourage you to do so. Money is the ruling power in Congress now, and Expats have no organized Money Lobby to sway things for us. I doubt the Corporations care one whit about whether or not a Territorial system is extended to individuals also. They aren’t going to waste one cent of their lobby efforts on Congressman saying, “Oh please also include individuals in this.”
I hate to be so cynical these days, but it is what it is.
Right now nothing is in the works to change the Money system, so party badge means nothing when it comes to ruling America. Money is everything. Lets face it, there is one party in America these days, the Corporate Party and the Dems and Rep battles are just an entertaining sideshow. Nothing about the current crop of Republicans leads me to believe there will be any fundamental changes to the role of Money in the political system should one of them come to power. And Obama has also started his SuperPac in the money arms race for office.
http://isaacbrocksociety.com/2012/04/03/take-the-money-and-run-for-office/
@Just me,
Thanks for your words of wisdom. I always look forward to reading your entries.
Cheers mate!
To Just Me from just Em …
I concur!
Thanks again, Just Me. Your wise words are a sobering reminder that the issues we face are far greater than traditional party politics will ever solve. Unfortunately, the same thing can be said for virtually all the issues that the U.S. faces today. The two-party system, the U.S. Constitution, the Bill of Rights and American democracy itself have become quaint anachronisms. The realpolitik of American life is indeed now dictated entirely by its oligarchy. The American Dream has finally reached its logical conclusion: the forfeiture of every single aspect of life to the blind, all-consuming imperative of money and profit.
so can the minnows join and become a superpac. If there are
45 million immigrants and expats and even if 30% want to join that is close to 13 million. each donates $20-30 bucks and we have a super pac with about 200-300 million funding. dont we? how do we mobilize?
@ desi
Think that will be enough to counter Mitt (poster-boy for real offshore tax-havens) Romney’s SuperPac?
@Expat4ever
I would be more readable if I learned how to spell relief, as in “compassionate relief to us little persons”. duh
Thanks for the Southern Cross tune. Can see it ever night from the deck. I live in the country so the stars shine brightly and remind me how insignificant all of these travails are, and not too be too soapy, as does this Carl Sagan video. Shulman kinda recedes into insignificance when viewed against this background.
http://youtu.be/p86BPM1GV8M
Anyway, that is how I keep my sanity when dealing with what dysfunctional governments and its bureaucrats throw at me. 🙂
Thanks again, Just Me – never saw that one before. Certainly puts things into perspective.
@Just Me — the nature of my anti-Obama comments are not intended to be partisan, as I am a supporter of neither party, Republican or Democrat, which are only relevant in terms of how their policies affect everyone in the world. But I will never be voting in another US election because I am no longer a US citizen.
In any case, thanks for your extended comment. I agree with the pessimism. I do think that Ron Paul is the only one making sense. I have only the view that Romney may be less evil to expats than Obama has already proven himself to be; but of course, such a theory remains untested.
@Petros
I take your point especially after reading Obama’s promises to Americans Abroad. He certainly has forgotten them. I will keep that in mind if a Republican makes similar promises. However, I doubt we will hear any, as generally speaking Reps are more vested in the Exceptionalism myth, and therefore think the U.S. citizenship/passport is so exceptionally valuable that it can (it must) be taxed around the world. The cost of ownership is worth it!! That idea is being put to the test north of the border, and being shown NOT to be true at some level, but probably not enough to register in the feeble myopic “real American” mind which closely identifies with Republicans.
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@ all…
This should amuse and move you!
The Nation’s Top Taxman Shares His Workout Playlist
http://www.npr.org/2012/04/16/150640347/the-nations-top-taxman-shares-his-workout-playlist
Just a followup. @
Innocente alerted us to this new Reuters story
IRS leader’s exit worries officials amid tax uncertainty(Reuters) – The chief of the Internal Revenue Service is expected to step down soon and some former officials of the tax-collecting agency expressed concern on Thursday about what that means for major tax policy issues in the coming months.
Doug Shulman, who became IRS commissioner in 2008 under President George W. Bush, has said he is not interested in another five-year term. His term ends in November.
More on Schulman Step-Down:
Looks like he could join the Devo comeback tour.
His other grand accomplishment was to put all kinds of regulations on private taxpreparers, while at the same time subsidizing untrained volunteers in the AARP to do that same tax preparation.
Well, but of course, I had to weigh in with my comment, not that it will matter… I am sure Shulman subscribes to Accounting Today, and waits breathless for my editorial … 🙂
I put my $0.02 in, not anything terribly original but felt should say something:
Mr. Shulman’s suppposed victory over tax evaders (some 33,000 taxpayers and over $4.2bn collected) is a fraudulent claim. How many of these were innocent Americans abroad and immigrants in the homeland who were unaware of FBAR? FBAR fines and penalties are not taxes, nor are these taxpayers the ones who are purposely evading taxes. Shame on Congress, the IRS and Mr Shulman for carrying out this charade. As others have stated,this is responsible for the large number of Americans renouncing and someday, this will come back to haunt Mr. Shulman. Is this really something to be proud of?
Other components of his legacy? The bait and switch of OVDP 2009/FAQ 35. His refusal to respond to Nina Olson’s rare Taxpayer Advocate Directive speaks volumes. Banks in Europe regularly closing USC accounts and refusing to open new ones. Privacy laws of other countries trampled on. Just great.
Good riddance Mr. Shulman.
Posted by: nobledreamer | October 11, 2012 3:23 PM
Will Steven Miller be gone once a new Commissioner is appointed?
@Nobledreamer, Great Post!!
@saddened123
Thanks!
@Nobledreamer…
I kind of doubt it. He seems a career type to me.
Douglas Shulman “Worst Commissioner Ever”
http://rothcpa.com/tag/worst-commissioner-ever/
‘Meanwhile, Commissioner Shulman has spent his time terrifying innocent Americans who have foot-faulted their obscure information reporting responsibilities and imposing a useless but expensive preparer regulation regime. Way to go, Commissioner.’
Good one bubblebustin! Here’s another piece of staggering evidence that Shuman’s legacy is not as sweet as roses:
http://www.accountingtoday.com/news/IRS-delays-processing-NOL-net-operating-loss-cases-tigta-64314-1.html
There’s absolutely no excuse for IRS wasting so much money because they simply cannot get it done in 45 days. THEY should be the ones penalized; no doubt those millions belong to the taxpayers of the US. Grrrrrr