I have been in contact with a victim of the current IRS OVDI who is living in Europe. I have been asked to share some details of this person’s situation plus a copy of a recent letter that has been received from President Obama. This was written in response to a letter sent to the White House petitioning for redress of the current IRS OVDI program for minnows.
As a preface to that letter, what follows is an Executive Summary of the situation I am writing about. I have been asked to share this, while maintaining anoymity which I am respecting.
Personal Profile:
Dual national resident outside of US ~25 years.
Lives in a high tax European country.
No family or friends left in the US.
No contacts with Americans in country of residence.
6 days spent in US in last 6 years – transit only.
Only ties left to the US are emotional – from a childhood spent there.
Filing taxes faithfully for all the time out of the US thinking they were done correctly.
Posterchild for Nina Olson’s statement in the 2011 Taxpayer Advocate Report to Congress: “The complexity of international tax law, combined with the administrative burden placed on these taxpayers, creates an environment where taxpayers who are trying their best to comply simply cannot.”
Quote:
‘I filed my taxes faithfully in both the US and my country of residence for all those years. Never had any problems with either country until I realized I may have made an omission in the US taxes and failed to file the required FBARs. I wanted to correct it and pay any taxes if owed. I did not think I owed anything. Taxes owed to the U.S, over 8 years, were de minimis. I was even entitled to some refunds that I never got because I had no clue about them.”
OVDI Participant:
Joined upon advice from a U.S. tax practitioner as the ‘only option’ when client sought advice about FBAR compliance problem. Has already been charged big fees to produce nicely bound documents to send to the IRS. Attorney now wants client to sign the 906 when it arrives. The advice being given is to just pay the OVDI penalty which, after practitioner fees, doubles the compliance cost. Estimated fees for attorney to handle the Opt Out would be as much or more than the current OVDI penalty.
Reason petitioner is sharing this information:
“I want to contribute to the effort to raise awareness of the unjustness of the treatment in OVDI. We should not go it alone. There are many of us who have been affected, and we can contribute our voices to help each other. The Isaac Brock Society and Jack Townsend blogs have been important information sources that have helped me to realize that there are others like me out there. If other people had not been public about their suffering and experience, I would probably still be thinking I was the only person in the world who had made a paperwork foot fault. I would still be thinking I deserved to be indebted to the IRS for the rest of my life for that failure.
Thank you for what you all have contributed to help me see that I am not alone. “
Reasons petitioner wrote Obama:
Wanted to highlight to President Obama the suffering that OVDI was causing normal people, and point out the need for a better way of handling “minnows” to make compliance easier.
“I was gullible in that I still believe that the ‘little people’ can make a difference. I believe that politicians might listen even if you are not a Big campaign contributor. I believe in mutual respect between government and citizens. I don’t want my belief to turn into a past tense.”
What was expected from Obama:
“I wanted some recognition that there are U.S. citizens overseas. I was looking for some statement of what President Obama was going to do to address the issue of innocent overseas citizens who had entered OVDI and were being treated as criminals.”
What was received from Obama:
This is the letter. You are welcome to click on the link below and read it yourself. What you think?
How was the letter perceived by petitioner?
“Honestly, I did not expect anything more than some standard response, but this response makes me feel worse than if he had not answered at all. At least I still had some hope when I did not receive an answer. What I got was a bland, previously composed political statement. It does not address any of the concerns I expressed.”
My (Just Me) Opinion:
This appears to be a 100% re-election campaign statement. It is nothing more than “principles”, with no specifics and only vague promises. Even the first two lines are crafted to apply to anyone writing about any “tax” issue. In my opinion, some staff person looked at the letter and then selected from the menu of pre-programmed form letters prepared for the campaign. I would bet, that every response sent out from Obama on any issue from now until Election Day will be framed around a campaign issue. I would further wager, that this is SOP in the White House for both parties. Very disappointing, but sadly not unexpected!
A Request:
If anyone else has written President Obama (or even a Congress person) and got an answer back that was as unsatisfactory as this one, I would ask you to share it here. I think the reality is, all we are going to see is campaign related responses from now until November, rather than anything that indicates that a petitioner’s pleas were heard. I hope there are some examples that prove me wrong. 🙂
@monalisa1776 – I’m going to eventually trade some US stocks but I’m going to open an account in the UK under my wife’s name (she’s UK only) and screw all this IRS paperwork. I’ll do all the trades online and the IRS does not know the wiser. There’s no benefit using a FATCA fund in the UK, because you’re going to have to top up the difference for the HMRC anyways. You save the extra paperwork and still get the UK capital gains tax free allowance via your spouse. I’m not getting into the game where the US wants to split between short term and long term rates and doesn’t give you a tax free allowance. It’s much simplier to trade through my wife, if I make less than £10,600 gain I pay zero anything over it’s between 18-28% depending on your income – nice and simple. I’d rather pay the HMRC a bit extra and deny the IRS anything and avoid all their intrusive forms.
What galls me more than anything is filling in paperwork to prove you owe nothing or a few bucks. I’m probably going to become a non-filer again as my US links are sparse these days.
Living abroad over 20 years has made me realise the US is not the only game in town and I don’t like its treatment of ex-pats. I’m sorry my family doesn’t go back that far in the US being generation 1 on one side and generation 2 on the other.
My ancestors didn’t come to the US for their descendents to be treated like lepers if they wanted to leave the US for your original homeland. Yes I sound American but the “old” countries were alive and well on both sides of the family when I was growing up.
The US has to grow up and start accepting the people traffic goes in both directions these days. Acceptance is what will help the US maintain it’s world position not by acting like some pimp trying to squeeze a possible buck out of his working girls.
The US would get better more dedicated people back in return from living abroad rather than making ex-pats resentful about the US and bad mouthing the country because a few millionaires decided they had enough of the US tax system.
US millionaires will always avoid paying their share whoever runs Congress – and they will go to any tength to cut down their US tax bill it’s all been and it’ll always be. Making middle class ex-pats suffer for the actions of a few won’t work either – it’s up the the homelanders.
@Calgary 411, I’ve also been in email contact with Maury, actually since last fall after I read his first letter to the POTUS in the paper. He’s one of the people I spoke of knowing on Brock that I mentioned in my story. He passed on the term: FBAR: F*cked By American Revenooers to me, lol! Did you send him a link to this subject post with your recent communication?
@John, I’ve considered moving my assets into my husband’s name (UK-only) but would still face annual limits due to US gift taxes to non-resident-alien spouses. I also have to hedge my risks by keeping assets in my name because he is 15 years older and has already suffered a stroke. He was pensioned off on medical grounds from his local government job at merely 50.
Obviously, if he were to experience a debilitating stroke and need to go into a nursing home, all his savings and assets would be frozen and used to finance his longterm care on all amounts above around 23,000 pounds and on partial amounts above 12,000 quid.
So it’s all been agreed that in our particular situation it’s safer to keep our assets split equally in separate names.
As for my US compliant account here, it’s actually mostly in an ISA so would only be taxed on US capital gains. As I understand it, dividends are taxed by HMRC at 10% when you’re a lower rate tax payer but taxed by IRS at 15% from 2013 so will probably have to pay the difference to the IRS.
@bubblebustin,
Yes, I did send Professor Williams a link to this thread. His experience, his advocacy, his passion against the injustice, including what is expected of our “Accidental American” children who have no connection at all to the US would be an asset to the conversation here.
I am glad there is some, but disappointed there is not enough, action from our governments to carry on conversation with us (with notable exceptions). Today I go to place my vote for the leader of the Canadian province I live in. Is it unreasonable to expect accountability? All the politicking and promises to represent their constituents, then many issues they campaign on are placed on a back burner.
President Obama or those who profess to speak for him at The White House pay the expats no heed. How can we not be disappointed, sceptical, outraged? We must not let it ride.
@Steve Mopsick,
Thanks also for recent additions regarding FATCA, 8938, etc.on your blog — http://mopsicktaxlaw.blogspot.ca/.
Also, How To Report Foreign Real Estate Held In A So-Called Foreign “Trust”. How many people outside the US will this affect and give important information?
I just want to throw in my two cents’ worth that, as always, Steven Mospick’s suggestions above are eminently sensible and arguably are the only way of getting any kind of constructive attention from Washington on the issues mentioned. His excellent advice about how to write letters to politicians applies in any country to any issue, and is something I need to print out and keep remembering, as I tend to go on at greater length than is tactically or strategically sensible in some of my letters.
Personally I am skeptical you’ll ever get any constructive attention from the Obama administration or the current US Congress (and BTW for the very brief portion of my adult life that I actually was a US citizen living in the US, I was a Democrat and never a Republican). However I’d be delighted to be proved wrong. I’m just not holding my breath.
My personal hope and focus is that we keep pressure on our own politicians and governments in Canada to protect all Canadian citizens frpm outrageous and unjustifiable extraterritorial money-grabs by foreign governments no matter who they are. As someone who isn’t a US citizen and is a Canadian, I think that’s a better use of my own time and energy. But I agree, those who are US citizens, and wish to remain so, need to be strategic about how to fight the mess their bone-headed, pathetic excuse for a government has created. Steven’s approach makes sense to me, and I can’t think of a better one.
@All I’ve copied this paragraph here as it seems to be the most popular thread. Because of the structure of this website, threads disappear and great info. can be lost.
From SJM April 23 1;20 AM IRS OVDI thread
I think this should be engraved at the top. It is the clearest piece of wisdom in a long time. Most of us minnows and even small fish have nothing to fear. If we have few or no ties to the US we don’t need to do a thing.
Steven Mopsick makes common sense. I would add other ex-pats and accidental Americans to the canadians in this scenario.
@Chester, I suspect Steven Mopsick is correct. I would imagine that as long as someone is filing honest returns that they’re unlikely to be harassed by the IRS. I have been biting my nails for thirteen months but my accountant has pointed out quite sensibly that as my past mistakes were unintentional and that I went to them first and corrected things and paid what I owed, that that will probably be the end of the matter.
The IRS already made some minor readjustments which were paid for so that will probably be the most I will hear concerning the amended returns…all my assets are now over in the UK and will be honestly reported on FBAR and 8938 so there shouldn’t be any further issues with them.
It will just be a case of having to pay out for an accountant and a small amount of double taxation on dividends and future capital gains. To my mind, there shouldn’t be any need to renounce over it. Might have been different if I were a multi-millionaire with huge assets still stateside.
I do understand though why people abroad resent this citizenship-based taxation, especially for accidental Americans who’ve never set foot in America but who might have had an American parent, for instance. Also immigrant minnows who didn’t understand about FBAR who would by lower lying fruit than expats like myself with no assets in America any longer that the IRS could easily levy.
I would imagine the IRS’s priorities will still be resident US persons hiding money offshore followed by immigrants, then very wealthy expats. After all, if they’re going to do an extensive audit overseas, they’re going to want to get as much money for their effort so it would be more efficient for them to pursue whales.
It’s just such as shame though that so many benign players unwittingly entered into the OVDP/OVDI programmes and thus created so many complications and extra professional costs.
@Schubert, All,
Re:
It should be brought to the light of day through media attention that this is yet another example of US expats being ignored / lack of representation.
Why again are we supposed to be jumping through these asinine hoops for little or no gain to the US coffers?
Steven Mopsick’s recommendation for further correspondence to Obama / White House, follow-up if no good response again and again and then reporting on on evasive non-response from Obama / The White House is strategy for Isaac Brock.
Would reporting this issue as a Systemic problem on the TAS web site help, if enough people were to do it?
http://www.irs.gov/advocate/article/0,,id=103729,00.html
Excellent idea.
and they take it seriously – unlike Obama and most of the elected officials.
That letter from the White House is a bullshit response that does not address the issues. “Obama” does not address the subject matter (life-destroying FBAR fines). Some idiot staffer wrote this letter. This Obama response violates the 1st amendment (right to petition the authorities to redress greivances). Did Obama sign this personally or was it a pure form-letter? What a disgrace. I demand Obama’s resignation.
This person should let go of his/her own attorney and then opt out of OVDI on his/her own. It may be frustrating and a longer process, but with this fact pattern it sounds like the best thing to do financially.
I came to the conclusion: nobody knows how to handle FBARS, I hate to think this but it looks to me like a trap. You see, Americans Abroad have a Earned Income Exclusion and Tax Credits. So, they have nothing to hide, If they don´t declare some earnings is more for fear of the paper work than anything else. But the IRS started the FBARs issue in total silence, Let me repeat TOTAL SILENCE. And then when we started finding out about it we already were “criminal”s and had to pay enormous penalties. This is where they thought the money was.and perhaps is. And the penalties for amendments in the returns are higher than for other Americans. I can just imagine – without becoming paranoid – smart MBAs in the Treasury Department creating this trap to collect money of inocent and honest people.The TAS knows this. This in my evaluation is very unfair if not a criminal..
@Thatisme, your suspicions confirmed by “MaryLouise Serrato, Executive Director of ACA and co-signatory of the letter to Shulman, explained, “By imposing large penalties for a simple filing omission, the IRS has adopted a camouflaged policy of taxing assets of Americans abroad through penalties.”
https://irstargetsexpats.wordpress.com/category/irs-offshore-voluntary-disclosure-initiative/
When the government comes up with rules that make everyone a criminal, it is the government that is the real criminal.
@omg,I love this quote attributed to Thomas Jefferson. It’s always worth repeating: “When governments fear the people, there is liberty. When the people fear the government, there is tyranny.”
None of their hair brained ideas are going to generate enough revenues to keep the government afloat. Sooner or later the US government will have to fall to it’s knees and switch to a territorial tax system which is the only hope they have of attracting companies back to the US.
bubblebustin So I am not paranoid. It is hard to believe that the US government would do this to trap its citizens and take money from them. They must be desperate. Incredible.
Petros, or whoever can do site maintenance –
You could move my FBAR post above to another thread – it’s too long perhaps for this one. It just seemed connected in my mind, because of the discussion of penalties collected in lieu of the zero tax owed. If this information about the flaws of FBARs is on the IRS site (not the Taxpayer Advocate’s), dated December 2011, have they have come to some (albeit small) realization of the FBAR problems? On the other hand, no further announcements or adjustments have been made to make the FBAR reporting any easier. The February 2012 GAO report “Reporting Foreign Accounts to IRS
Extent of Duplication Not Currently Known, but Requirements Can Be Clarified”
GAO-12-403, Feb 28, 2012 http://www.gao.gov/products/GAO-12-403
amply demonstrates their awareness of the now even more difficult FATCA/FBAR reporting confusion, duplication and layered penalty structures – and its being implemented in spite of their knowledge that filers will now have even more of a challenge to comply accurately. The GAO report was prepared at the direction of Congress. So, perhaps it is willful penalty revenue collecting, or part of what they deem ‘acceptable collateral damage’ – with gravy.
In any case, they are not doing anything to assist filers with the pitfalls, or to remove the obstacles to compliance. Basically, the onus is all shifted to the individual to make workable the impossible.
@badger…
Done! Good to have the link reference. I will go read it there. Thanks..
Just a follow up to our intrepid petitioner who persistently keeps writing to Obama hoping for a better response. This is the 3rd response they have now gotten, and you can see the form and tone has change a bit, but there doesn’t seem to be any recognition of the issue that Obama has been called upon to address. Realistically, this is probably the best we can expect.
@JustMe, that letter would be very topical on the thread with the comments re the DemocratsAbroad/Joe Green e-mail http://isaacbrocksociety.ca/2012/07/07/the-best-thing-joe-green-and-democrats-abroad-could-do-is-encourage-all-democrats-to-vote-for-romney/.
It just underscores that Obama and the White House don’t have any intention of even acknowledging, much less addressing our concerns.
Cowardly dodging of the issue.
Obviously, we’re ‘fellow citizens’ only when it is convenient, to offset the domestic debt, through confiscatory penalties and potentially double taxation on our legal post-tax savings held and registered where we live and work, but not ‘fellow citizens’ when it comes to being heard by the President. President of only some of ‘the people’.
@Badger
good point…