This is a very good, comprehensive article. I also appreciate the focus on the personal costs for those who received bad advice and entered OVDI.
One thing which could have been added to show how unfair the IRS is being is a discussion of the streamlined procedures and how they were clearly not designed to alleviate the situation of anyone like Prof. Williams, who is already in OVDI. While his circumstances may be substantially similar to those who may benefit from these new procedures, he is still forced to be penalized on 8 years of non-compliance. His only option is to opt out into a black box process under threat of even greater penalties and a more in depth audit which will run up even more accounting costs.
This Whitely article is your typical Progressive/Liberal bilge water. Take this:
“In May 2011 Williams and his wife Linda realized that their status as
U.S. citizens requires them to file U.S. income tax returns.”
I call bullshit on this. They expect us to believe that the “68-year-old history professor“,
a US citizen, didn’t know that by not filing his US income taxes that
he was precisely one of these “tax cheats” that the author seems to so
despise? And history professors are part of the tax eating liberal
establishment in the first place. Once one of his beloved welfare
states treats him the way he would have them treat other “tax cheats”
the professor squeals like a pig. Those who live by the sword shall die
by the sword.
“only to find they owed no tax because Canada is a high-tax region. No one opens an account here to avoid U.S. tax.”
Noble Canada, where the welfare tit suckers would throw the entire
low tax world under the IRS bus as long as they get a special deal with
the IRS because “No one opens an account here to avoid U.S. tax“.
If only the rest of the world was as enlightened as Canada and would
just have income tax rates higher than the US then everything would be
hunky-dory. Funny how you never hear the Canadians here complain about
double taxation of dividends or through the death tax.
Can this person be blocked from this site? Please.
*ConfederateH
For one thing Confederate is there is no DEATH TAX in Canada and their is no double taxation of dividends in Canada either. Additionally if Obama has his way the top rate of income tax in Alberta(combined federal and provincial) will be lower than anywhere in the US. Perhaps you need to come to Calgary you might like it. In true fairness Canada is not perhaps as high tax the government like to make it out to be.
I believe if you go back and read the story the Professor believed since 1986 he was a sole Canadian citizen.
@ Arrow
Thank you for writing this article.It’s so very important that correct and thorough information is published.
This is a fantastic article covering all the issues at hand. Well done.
Excellent article. I’ve forwarded to all my friends and relatives in the US, with a comment that they might want to reflect on this article while mulling over who to vote for in November.
*In my opinion there are beneficial aspects to the FACTA regulations! The US likes to portray itself as the shining ‘beacon of hope;’ pretending to fight for freedom and justice on behalf of the rest of the world. Oh, how much more miserable this blue planet would be, if it were not for the benevolence of the United States. Never mind that these claims do not hold up to even the slightest scrutiny, they are being pumped out continuously by the mainstream media all over North America. FACTA has at least the potential to blow a big hole through this fairy tale.
Now ConfederateH, let’s not be so hard on good old professor Williams. He had no say so in obtaining at age 15 through a folly of his mother. He was also exposed to many years of government centric indoctrination before obtaining his professorship. They don’t talk about the implications of the citizenship based US tax system in polite company. The good professor was probably blinded by the ‘shining light’ on the hill and at least initially unaware of his obligation to file US tax returns. He now finds himself stuck in a big mess. Let’s pray for him and ask that the good Lord to have mercy. Uncle Sam will likely have none.
With respect to the notion in the article that all the havoc created by FACTA is an unintentional consequence of the noble goal to track down tax cheats, I have to say I don’t think so. I think the US government is quite aware that it is insolvent by conventional accounting standards, and is now ready, able and willing to shake down its tax life stock for as much money as possible. For that reason I do not believe in the efficacy of appeals through the mainstream media to turn this around. I believe FACTA will end when the world stops to use the US dollar as the world reverve currency. Will FACTA itself bring us closer to that point? Only time can tell.
As I wrote on another thread:
Very good article, Don Whiteley covered a lot of turf there! Like Maury, I’m still awaiting a response for our OVDI submission. I’ve corresponded with him a few times but had no idea he could have gotten a CLN and saved himself a lot of grief. Sad. Lesson be learned, get plenty of good advice before making any decision that puts you in the line of fire. READ ISAAC BROCK! Although it’s not legal advice, it may offer more information on the issue of citizenship based taxation than you’d get anywhere else and could at least better prepare you when seeking legal opinion. Don Whiteley’s reference to ‘jihad’ gave me a chuckle.
@Conf H and @All,
We are all saying, those who came to Canada in the same era, we believed we and our children were only Canadian citizens. It was the understanding of the time. Many of us were told when we took Canadian citizenship that we were effectively relinquishing our US citizenship. It is regretful that Professor Williams did not pursue claiming his relinquishment when he took out Canadian citizenship — we see that many are successfully now claiming relinquishment and receiving their Certificates of Loss of Nationality. Professor Williams, of course, by entering OVDI did away with any rights he may have had to do so.
Let’s put blame where it belongs — it is for the lack of US communication regarding their US-based citizenship changes in law to those outside the US — and US Citizenship-based taxation PERIOD. This tax issue (there being little or no actual taxes owed) was ignored by the US for decades, similar to the border crossings on Canadian passports when our Canadian passports showed a US birthplace. It is now that the US is searching for remedies to their grave ecnomic problem. In their thinking, one brilliant way to add to the coffers is to place draconian penalties on those who left the US boundaries — none (or very, very, very few) I’d venture to say for tax evasion purposes!
Note: Professor Williams is a history professor, not a tax law professor. We didn’t think it encumbent on any of us to follow US tax law.
Here is the second UNANSWERED letter from Professor Williams to President Obama, the first also unanswered (am I surprised?) by the US Ambassador to Canada, David Jacobson:
November 4, 2011
The Honorable Barack Obama
President, the United States of America
The White House
1600 Pennsylvania Avenue N W
Washington, D C 20500, U S A
Dear Mr. Obama,
re taxation without representation, the IRS, the OVDI, and US citizenship
This letter is a follow-up to my earlier correspondence of September 6, 2011, in which I wrote you in your capacity as my elected representative.
May I briefly remind you of my situation. I have been a resident of Canada since 1973 and a naturalized citizen of Canada since 1986. Although I do not believe that I am a US citizen any longer, according to current practices in the United States the US government still claims me as such.
As I outlined earlier I have not voted in a US election since moving to Canada in 1973. In fact, I have no legal or residential qualifications to vote in any municipal, county, or state election, nor am I am able to choose a Representative or Senator to the US Congress. If I am considered a US citizen, it appears I am without elected representation.
There is, fortunately, one election in which I am eligible to vote: the Presidential election. This means, Mr. President, that as one of your constituents you are my only elected representative. Consequently, I am turning to you for assistance.
I earlier raised three issues for which I sought your assistance.
1. The first issue concerns the obligation of US citizens, regardless of residence, to file US federal income tax returns reporting worldwide income. Many of the thousands of us living in Canada have not filed these returns because we either did not know we had to file them or because we have become citizens of another country. We have not attempted to avoid our taxation responsibilities. We pay a goodly sum each year to the Canadian government.
In recent months, however, the Internal Revenue Service has decided that undisclosed non-US financial accounts are a priority. The IRS has announced stiff penalties for all those considered US citizens who have not filed income tax returns or disclosed their Canadian accounts through the Foreign Bank Account Report (FBAR). Please note: the stiff penalties are not for any current or back taxes owed. They are simply penalties for not filing returns or the FBAR. Is this a fair way to deal with law abiding, hard working, honest people?
2. The second issue concerns our children. According to current US legislation, where one or both parents are considered US citizens, their children, although born outside the United States, automatically receive US citizenship. These children too are subject to the provisions that they must file US tax returns and disclose “foreign” assets through the FBAR. If not filed, they also suffer the consequences of the IRS penalties.
Yet these children are Canadian. They were born, raised, and educated in Canada. They have never lived or worked in the United States. They make no claim on the United States and receive none of its benefits. They have no affiliation with its government or its officials. In many cases they have never set foot south of the border. Why then are they subject to US taxes and disclosures, and the substantial IRS penalties for non-filing and non-disclosure?
3. The third issue is our exposure to the US Estate Tax. Upon my death, since the US considers me a citizen, my children will be subject to the US Estate Tax as well as any taxes levied by the Canadian government. This means that my children will be taxed twice on the same assets, in many cases assets which are clearly Canadian and have no link whatsoever to the United States.
In my letter of September 6, 2011, I specifically asked you, as my elected representative, to assist me and intercede with the appropriate parties to:
1) waive the significant penalties for not filing tax returns and the FBAR;
2) waive the requirement that our children file US tax returns and disclose their Canadian accounts and assets; and
3) eliminate or modify the US estate tax to avoid the double taxation associated with US and Canadian estate taxes.
The purpose of this letter is to ask you the status of my requests. I am especially anxious because there are deadlines approaching. For example, the IRS Offshore Voluntary Disclosure Initiative (OVDI) has a deadline of November 30, 2011. (The OVDI is a program whereby accepted individuals, who have not filed tax returns or completed the FBAR, can avoid the risk of criminal prosecution; they must, however, disclose all their interests in non-US accounts and pay a stiff penalty of 5 or 25% of one year’s assets.)
Since I wrote you in September there are a number of public and private statements which offer hope, but no firm resolution. Here are three of those statements of which I am aware.
A. As you probably know the Canadian Minister of Finance, Jim Flaherty, has expressed concerns directly to the US government about the threat of stiff penalties faced by thousands of Canadian residents and citizens simply for failing to file a return. As Mr. Flaherty pointed out, it has become a frightening prospect for many, causing unnecessary stress and fear among law abiding, honest, hardworking individuals. Minister Flaherty has requested the US government to show flexibility and leniency.
Has the US government responded to those requests?
B. The US Ambassador to Canada, David Jacobson, has publicly acknowledged these anxieties and fears on the part of the thousands who live in Canada. He has stated that there is sympathy from the head of the IRS and that something will be done. Meanwhile, Mr. Jacobson says to “sit tight” and wait for more positive news.
When does the “sit tight” end and the positive news begin?
C. I spoke recently with an IRS official in Austin, Texas; I understand he works specifically with the OVDI. After I explained my situation he said that he could not give any specific advice because everything is in a “holding pattern.” His general advise, however, is to “sit tight” and wait and see what will happen. He pointed out that the issues are clearly something that will be dealt with at a much higher level than the tax authorities; he mentioned the State Department and negotiations between the US and Canadian governments.
I asked this official specifically about children of supposed US citizens. Where were they in this turmoil? He said that under current US law they too must file and act in accordance with existing provisions. But then he added that the issue of children is something else that has to be decided at a higher level.
When will the “holding pattern” end? What is the status of the decisions made at a higher level? Are there active discussions between the US and Canadian governments which will lead soon to an announcement? What is the status of our children?
In conclusion, I would like to repeat my comments from September 6. I retain great respect for the United States but the manner in which these issues have been presented are alarming. I (we) can not “sit tight” for ever, especially since a November 30 deadline for applying under the OVDI is fast approaching. I call upon you again to act as my elected representative. Please intervene on my behalf, and on behalf of the hundreds of thousands of others caught in this web of uncertainty and unwarranted financial punishment.
Yours sincerely,
Maurice Williams
cc. David Jacobson, US Ambassador to Canada
It may be a good idea have a thread devoted to experiences with immigration lawyers, especially the very helpful ones. I know Schubert suggested some names recently but I haven’t found the comment yet.
I mention this because had Professor Williams seen a reputable and knowledgeable immigration lawyer before being wrongly advised to enter into OVDI, life would be much better.
I also mention this because during this past week I was trying to track down names of immigration lawyers in the Maritimes who could assist with relinquishment for someone I know. However, each lawyer I contacted referred me back to the the same lawyer I have personally consulted. I was looking for some other names as an alternative.
@All
The issue here is NOT what Professor Williams knew, ought to have known, imagined or ought to have imagined.
The issue is the treatment of the US government of US citizens abroad in general, and in the case of Professor Williams the morality of the OVDI program. We should not lose sight of this. Even if (as Confederate H suggests) Professor Williams were an out and out tax cheat, he is entitled to a legal presumption of innocence. If he is a US citizen (which is highly questionable – and he should explore this) he is entitled to political representation.
What the US is doing is the following:
The US is offering no political representation to its citizens abroad. The IRS created the OVDI program, which is a voluntary program and they marketed it as being the law. As part of marketing OVDI, they cultivated the belief that OVDI was the law – that people had to participate and that any attempts to file back taxes and FBAR would be regarded as a “quiet disclosure”, and those who made quiet disclosures, if discovered would be treated as “willful tax evaders”. This is the message that the IRS, along with our good friends the “cross border unprofessionals” cultivated. Now, I want to point out that what the IRS was really saying is this:
If you obey the the law by filing tax returns and if you obey the law by filing FBARs we are going to destroy you. You are going to do what we say – i.e. you are going to enter OVDI because contrary to what you might think – we, the IRS are the law. Don’t you pay any attention to the law made by ConGross. And furthermore, just to be clear, by entering OVDI, you are going to plead guilty to your omissions and throw yourself to the mercy of the IRS – yes the same group who invented OVDI. Don’t you bother raising any of that “reasonable cause” crap. You live outside the US. You have a bank account outside the US. Therefore, you are simply “UnAmerican”. We have lots of laws in this country. In fact we have so many, that we guarantee you that we will be able to find more ways to fine you. So, you just better be happy that we are only going to wipe you out financially.
As I have said many times, and will continue to say:
The IRS is the number one obstacle to tax compliance for US citizens abroad. Hell, US citizens abroad think they can’t even come into compliance without the permission of the IRS. As Mr. Mopsick has noted on one of his wonderful blog posts (http://mopsicktaxlaw.blogspot.ca/2012/05/compliance-dilemma-for-americans-abroad.html) it is difficult to know how to come into compliance.
Prof. Williams was the victim (like almost every other US citizen abroad who entered OVDI – @Lisa included) of the IRS and the “cross-border unprofessionals”.
US citizenship abroad is a nightmare that won’t go away. In September of 2001, President Bush said that:
“Freedom was attacked by a faceless coward.”
Question: How do you like freedom now?
@Hazy2
Why do you think it is an immigration lawyer that you need? Does the person need advice on whether there is US citizenship to relinquish?
@ renounce
The person I am referring was/is a U.S. citizen, does not have a clear cut situation, and is unwilling to trust advice given on the net about relinquishment. This person does not want to have their circumstances posted So be it.
*@ ALL – This is a reckless article and is riddled with blatent (and dangerous) misstatements of law and fact. BC Business Online should be ashamed.
*Roy Berg
Not to necessarily disagree but what are the areas that are incorrect. Is it FATCA related or OVDI related?
*Quite a sweeping generalization from Mr. Berg. Care to elaborate?
Rereading the article, I see some of what Roy Berg is objecting to. The article states that the requirement for Americans to file taxes has only been around for a few decades and that it has only recently been enforced. What is being described is the FBAR filing requirement. The tax filing requirement has been around a lot longer than a few decades and has always been vigorously enforced – when the non-filing was discovered.
Additionally, the OVDI program was targeted at non-filers of the FBAR. The tens of thousands of dollars of fines mentioned are due to the FBAR penalties, not tax failure to file penalties. With the amount of tax owed by Maury Williams, the failure to file penalties will not amount to tens of thousands of dollars. They are a percentage of the tax owed each year.
There is also no formula for calculating the highest balance for the FBAR form. It is the highest balance in each account, period.
I am also not sure if the claims about the small credit unions being exempt from FATCA are correct, but I did not read closely there.
Nevertheless, I still feel the article can be recommended because it covers so many of the issues that have impacted Americans abroad. I think the description of the Williams case is poignant and worth a lot.
*Lisa I think you don’t understand the OVDI at all. It wasn’t targeted at at non-filers of FBARs. It was targeted at non filers of US taxes. Most non filers in Canada were unaware of the need to file. Some were led into OVDI when they clearly had better options.
The fines in OVDI are in lieu of the threat of prosecution and as a kind of 1 size fits all penalty. Prosecution was always unlikely for people like Prof. Williams but he was led into OVDI.
The OVDI penalty could be 5%, 12.5% or 25% of the greatest total of “foreign ” accounts.
Problem is they get to decide who pays 5% and who pays 25%. This uncertainty is too great to contemplate and is one reason OVDI was totally inappropriate for non-criminals.
*@ALL – The article is a shameful example of yellow journalism that sensationalizes, distorts, exaggerates, and exploits the emotions of those individuals who have very real concerns and very real US tax issues. I certainly hope that anyone who reads the article will seek learned advice before acting on anything they read (i guess that goes for most things though).
I started to track the erroneous matters and became disgusted and stopped. Here are some of the high-level problems though:
The author states that the subject of the article (Mr. Williams) could have avoided filing if he had obtained a Certificate of Loss of Nationality, but then abandons that position and states that the only way to bring unfiled returns up do date is to file them.
The US citizenship issues are wildly misstated.
The article equates receipt of a Certificate of Loss of Nationality with termination of US tax filing obligations – which is erroneous, misleading, and dangerous.
The provisions of FATCA are misstated.
Minister Flaherity is misquoted.
The author finally loses a semblence of journalistic objectivity when he uses the term “tax jihad,” (though it is rather pithy).
Atrocious journalism. I hope BC Business has the fortitude to suplement the article with an errata sheet, which would likely be longer than the article itself.
@cornwalliscal – As an OVDI victim, I think I understand OVDI pretty well. Note that OVDI in the beginning was often referred to as an FBAR amnesty, although it was never intended as an amnesty program.
You are correct in that it was targeted at those who did not pay their taxes on their foreign accounts. As many big fish US resident tax evaders were already filing taxes, but not declaring earnings in their accounts in tax havens, the FBAR became a technical way to allow prosecution and to allow serious fines to be levied.
OVDI offers, as you said, the chance to avoid criminal prosecution AND “in lieu of” penalties, which are definitely cheaper than possible FBAR penalties for those with criminal risk. Due to its one size fits all nature, people who did not have any criminal risk were herded into the program and also told that the OVDI deal was better than having to pay the FBAR penalties. Read the OVDI FAQs and you will see the emphasis is on what a great deal the OVDI penalties are compared to what one would have to pay in FBAR penalties outside of the program.
The attorney who I blame for pushing me into VD/OVDI clearly told me that I had no material risk of prosecution, but that a VD program would be the only way to deal with any potential FBAR fines as there was no negotiation on them outside of the program. This was the position that the IRS was taking at that time.
*Roy Berg
1. At least in my opinion there was way too much overemphasis on OVDI given I don’t think anyone anymore is really suggesting people in the situation of the individual interviewed should enter the program. The real conflict seems to be between do nothing, “quiet disclosure”, or use the new program announced at the beggining of September. The fact the new guidelines announced at the beginning of September however inadequate were not mentioned I do feel was a huge disservice.
2. I think it is a legitimate open question whether those entitled to back dated CLN at least pre 2004 or pre 1994 have any filing obligations still. Having recently seen a draft of Form 8854 for 2012 there does not appear as if there is going to be any plain English instructions on this any time soon. Some practioners such as Michael Miller seem to be pretty adamant there is no filing obiligation for pre 2004 back dated CLNers and claim to have officials from the government that agree. In fact the only evidence I can find otherwise was a 1995 JCT report discussing the then administration’s “proposed” exit tax law which in fact was not the one used by Congress the next year. Along this lines there is nothing I can see in Title 31 BSA that someone who is no longer a citizen but has not notified the State Department still has an obligation to file FBAR>
3. In terms of FATCA. I don’t see any evidence that the financial institutions interviewed were misquoted.
4. Flaherty’s Statements: Perhaps fuller context should be given but I don’t Flaherty was quoted as saying things he has not. Flaherty has been pretty critical of FATCA and has made some rather strong statements on Assistance in Collection that perhaps(as you have pointed out) were not made with full discussions with the US. I think the article does point out that there continue to be discussion between Ottawa and Washington on all of these issues.
5. No discussion on PFIC, self employment, “Canadian” registered accounts i.e. RRSP, TFSA, RDSP, capital gains treatment of primary residence, etc. All of these are and continue to be important unresolved issues.
*To further your point below:
3. The article equates receipt of a Certificate of Loss of Nationality with termination of US tax filing obligations – which is erroneous, misleading, and dangerous.
I totally agree in the case of someone renouncing right now or committing a relinquishment act post 2004 or post 1994 has the obligation to file form 8854 at the usual filing deadline(i.e. next year) and realistically has to have accurate filings for the previous five years(unless they want to pay the exit tax a non covered expatriate). However, at least in my mind I have not seen overwhelming conclusive evidence either way as to what the situation would be for someone giving notice of a relinquishment act back in 1986 lets say to the State Department in the present.
@Tim
Thanks for the reference to what Michael Miller stated on this site.And as you mentioned he did speak to someone at the IRS, who in turn, spoke to her supervisor on this matter. Of course, we should not forget the comments of Steven Mopsick on this site. He was fairly adament that those of us who ‘relinquished’ decades ago, would be foolish to start filing tax returns.
*With respect to Mr. Berg’s advice to seek learned council, perhaps one should also remember Warren Buffett’s advice- ” Don’t ask a barber if you need a haircut”
This is a very good, comprehensive article. I also appreciate the focus on the personal costs for those who received bad advice and entered OVDI.
One thing which could have been added to show how unfair the IRS is being is a discussion of the streamlined procedures and how they were clearly not designed to alleviate the situation of anyone like Prof. Williams, who is already in OVDI. While his circumstances may be substantially similar to those who may benefit from these new procedures, he is still forced to be penalized on 8 years of non-compliance. His only option is to opt out into a black box process under threat of even greater penalties and a more in depth audit which will run up even more accounting costs.
This Whitely article is your typical Progressive/Liberal bilge water. Take this:
“In May 2011 Williams and his wife Linda realized that their status as
U.S. citizens requires them to file U.S. income tax returns.”
I call bullshit on this. They expect us to believe that the “68-year-old history professor“,
a US citizen, didn’t know that by not filing his US income taxes that
he was precisely one of these “tax cheats” that the author seems to so
despise? And history professors are part of the tax eating liberal
establishment in the first place. Once one of his beloved welfare
states treats him the way he would have them treat other “tax cheats”
the professor squeals like a pig. Those who live by the sword shall die
by the sword.
“only to find they owed no tax because Canada is a high-tax region. No one opens an account here to avoid U.S. tax.”
Noble Canada, where the welfare tit suckers would throw the entire
low tax world under the IRS bus as long as they get a special deal with
the IRS because “No one opens an account here to avoid U.S. tax“.
If only the rest of the world was as enlightened as Canada and would
just have income tax rates higher than the US then everything would be
hunky-dory. Funny how you never hear the Canadians here complain about
double taxation of dividends or through the death tax.
Can this person be blocked from this site? Please.
*ConfederateH
For one thing Confederate is there is no DEATH TAX in Canada and their is no double taxation of dividends in Canada either. Additionally if Obama has his way the top rate of income tax in Alberta(combined federal and provincial) will be lower than anywhere in the US. Perhaps you need to come to Calgary you might like it. In true fairness Canada is not perhaps as high tax the government like to make it out to be.
I believe if you go back and read the story the Professor believed since 1986 he was a sole Canadian citizen.
@ Arrow
Thank you for writing this article.It’s so very important that correct and thorough information is published.
This is a fantastic article covering all the issues at hand. Well done.
Excellent article. I’ve forwarded to all my friends and relatives in the US, with a comment that they might want to reflect on this article while mulling over who to vote for in November.
*In my opinion there are beneficial aspects to the FACTA regulations! The US likes to portray itself as the shining ‘beacon of hope;’ pretending to fight for freedom and justice on behalf of the rest of the world. Oh, how much more miserable this blue planet would be, if it were not for the benevolence of the United States. Never mind that these claims do not hold up to even the slightest scrutiny, they are being pumped out continuously by the mainstream media all over North America. FACTA has at least the potential to blow a big hole through this fairy tale.
Now ConfederateH, let’s not be so hard on good old professor Williams. He had no say so in obtaining at age 15 through a folly of his mother. He was also exposed to many years of government centric indoctrination before obtaining his professorship. They don’t talk about the implications of the citizenship based US tax system in polite company. The good professor was probably blinded by the ‘shining light’ on the hill and at least initially unaware of his obligation to file US tax returns. He now finds himself stuck in a big mess. Let’s pray for him and ask that the good Lord to have mercy. Uncle Sam will likely have none.
With respect to the notion in the article that all the havoc created by FACTA is an unintentional consequence of the noble goal to track down tax cheats, I have to say I don’t think so. I think the US government is quite aware that it is insolvent by conventional accounting standards, and is now ready, able and willing to shake down its tax life stock for as much money as possible. For that reason I do not believe in the efficacy of appeals through the mainstream media to turn this around. I believe FACTA will end when the world stops to use the US dollar as the world reverve currency. Will FACTA itself bring us closer to that point? Only time can tell.
As I wrote on another thread:
Very good article, Don Whiteley covered a lot of turf there! Like Maury, I’m still awaiting a response for our OVDI submission. I’ve corresponded with him a few times but had no idea he could have gotten a CLN and saved himself a lot of grief. Sad. Lesson be learned, get plenty of good advice before making any decision that puts you in the line of fire. READ ISAAC BROCK! Although it’s not legal advice, it may offer more information on the issue of citizenship based taxation than you’d get anywhere else and could at least better prepare you when seeking legal opinion. Don Whiteley’s reference to ‘jihad’ gave me a chuckle.
@Conf H and @All,
We are all saying, those who came to Canada in the same era, we believed we and our children were only Canadian citizens. It was the understanding of the time. Many of us were told when we took Canadian citizenship that we were effectively relinquishing our US citizenship. It is regretful that Professor Williams did not pursue claiming his relinquishment when he took out Canadian citizenship — we see that many are successfully now claiming relinquishment and receiving their Certificates of Loss of Nationality. Professor Williams, of course, by entering OVDI did away with any rights he may have had to do so.
Let’s put blame where it belongs — it is for the lack of US communication regarding their US-based citizenship changes in law to those outside the US — and US Citizenship-based taxation PERIOD. This tax issue (there being little or no actual taxes owed) was ignored by the US for decades, similar to the border crossings on Canadian passports when our Canadian passports showed a US birthplace. It is now that the US is searching for remedies to their grave ecnomic problem. In their thinking, one brilliant way to add to the coffers is to place draconian penalties on those who left the US boundaries — none (or very, very, very few) I’d venture to say for tax evasion purposes!
Note: Professor Williams is a history professor, not a tax law professor. We didn’t think it encumbent on any of us to follow US tax law.
Here is the second UNANSWERED letter from Professor Williams to President Obama, the first also unanswered (am I surprised?) by the US Ambassador to Canada, David Jacobson:
It may be a good idea have a thread devoted to experiences with immigration lawyers, especially the very helpful ones. I know Schubert suggested some names recently but I haven’t found the comment yet.
I mention this because had Professor Williams seen a reputable and knowledgeable immigration lawyer before being wrongly advised to enter into OVDI, life would be much better.
I also mention this because during this past week I was trying to track down names of immigration lawyers in the Maritimes who could assist with relinquishment for someone I know. However, each lawyer I contacted referred me back to the the same lawyer I have personally consulted. I was looking for some other names as an alternative.
@All
The issue here is NOT what Professor Williams knew, ought to have known, imagined or ought to have imagined.
The issue is the treatment of the US government of US citizens abroad in general, and in the case of Professor Williams the morality of the OVDI program. We should not lose sight of this. Even if (as Confederate H suggests) Professor Williams were an out and out tax cheat, he is entitled to a legal presumption of innocence. If he is a US citizen (which is highly questionable – and he should explore this) he is entitled to political representation.
What the US is doing is the following:
The US is offering no political representation to its citizens abroad. The IRS created the OVDI program, which is a voluntary program and they marketed it as being the law. As part of marketing OVDI, they cultivated the belief that OVDI was the law – that people had to participate and that any attempts to file back taxes and FBAR would be regarded as a “quiet disclosure”, and those who made quiet disclosures, if discovered would be treated as “willful tax evaders”. This is the message that the IRS, along with our good friends the “cross border unprofessionals” cultivated. Now, I want to point out that what the IRS was really saying is this:
If you obey the the law by filing tax returns and if you obey the law by filing FBARs we are going to destroy you. You are going to do what we say – i.e. you are going to enter OVDI because contrary to what you might think – we, the IRS are the law. Don’t you pay any attention to the law made by ConGross. And furthermore, just to be clear, by entering OVDI, you are going to plead guilty to your omissions and throw yourself to the mercy of the IRS – yes the same group who invented OVDI. Don’t you bother raising any of that “reasonable cause” crap. You live outside the US. You have a bank account outside the US. Therefore, you are simply “UnAmerican”. We have lots of laws in this country. In fact we have so many, that we guarantee you that we will be able to find more ways to fine you. So, you just better be happy that we are only going to wipe you out financially.
As I have said many times, and will continue to say:
The IRS is the number one obstacle to tax compliance for US citizens abroad. Hell, US citizens abroad think they can’t even come into compliance without the permission of the IRS. As Mr. Mopsick has noted on one of his wonderful blog posts (http://mopsicktaxlaw.blogspot.ca/2012/05/compliance-dilemma-for-americans-abroad.html) it is difficult to know how to come into compliance.
Prof. Williams was the victim (like almost every other US citizen abroad who entered OVDI – @Lisa included) of the IRS and the “cross-border unprofessionals”.
US citizenship abroad is a nightmare that won’t go away. In September of 2001, President Bush said that:
“Freedom was attacked by a faceless coward.”
Question: How do you like freedom now?
@Hazy2
Why do you think it is an immigration lawyer that you need? Does the person need advice on whether there is US citizenship to relinquish?
@ renounce
The person I am referring was/is a U.S. citizen, does not have a clear cut situation, and is unwilling to trust advice given on the net about relinquishment. This person does not want to have their circumstances posted So be it.
*@ ALL – This is a reckless article and is riddled with blatent (and dangerous) misstatements of law and fact. BC Business Online should be ashamed.
*Roy Berg
Not to necessarily disagree but what are the areas that are incorrect. Is it FATCA related or OVDI related?
*Quite a sweeping generalization from Mr. Berg. Care to elaborate?
Rereading the article, I see some of what Roy Berg is objecting to. The article states that the requirement for Americans to file taxes has only been around for a few decades and that it has only recently been enforced. What is being described is the FBAR filing requirement. The tax filing requirement has been around a lot longer than a few decades and has always been vigorously enforced – when the non-filing was discovered.
Additionally, the OVDI program was targeted at non-filers of the FBAR. The tens of thousands of dollars of fines mentioned are due to the FBAR penalties, not tax failure to file penalties. With the amount of tax owed by Maury Williams, the failure to file penalties will not amount to tens of thousands of dollars. They are a percentage of the tax owed each year.
There is also no formula for calculating the highest balance for the FBAR form. It is the highest balance in each account, period.
I am also not sure if the claims about the small credit unions being exempt from FATCA are correct, but I did not read closely there.
Nevertheless, I still feel the article can be recommended because it covers so many of the issues that have impacted Americans abroad. I think the description of the Williams case is poignant and worth a lot.
*Lisa I think you don’t understand the OVDI at all. It wasn’t targeted at at non-filers of FBARs. It was targeted at non filers of US taxes. Most non filers in Canada were unaware of the need to file. Some were led into OVDI when they clearly had better options.
The fines in OVDI are in lieu of the threat of prosecution and as a kind of 1 size fits all penalty. Prosecution was always unlikely for people like Prof. Williams but he was led into OVDI.
The OVDI penalty could be 5%, 12.5% or 25% of the greatest total of “foreign ” accounts.
Problem is they get to decide who pays 5% and who pays 25%. This uncertainty is too great to contemplate and is one reason OVDI was totally inappropriate for non-criminals.
*@ALL – The article is a shameful example of yellow journalism that sensationalizes, distorts, exaggerates, and exploits the emotions of those individuals who have very real concerns and very real US tax issues. I certainly hope that anyone who reads the article will seek learned advice before acting on anything they read (i guess that goes for most things though).
I started to track the erroneous matters and became disgusted and stopped. Here are some of the high-level problems though:
Atrocious journalism. I hope BC Business has the fortitude to suplement the article with an errata sheet, which would likely be longer than the article itself.
@cornwalliscal – As an OVDI victim, I think I understand OVDI pretty well. Note that OVDI in the beginning was often referred to as an FBAR amnesty, although it was never intended as an amnesty program.
You are correct in that it was targeted at those who did not pay their taxes on their foreign accounts. As many big fish US resident tax evaders were already filing taxes, but not declaring earnings in their accounts in tax havens, the FBAR became a technical way to allow prosecution and to allow serious fines to be levied.
OVDI offers, as you said, the chance to avoid criminal prosecution AND “in lieu of” penalties, which are definitely cheaper than possible FBAR penalties for those with criminal risk. Due to its one size fits all nature, people who did not have any criminal risk were herded into the program and also told that the OVDI deal was better than having to pay the FBAR penalties. Read the OVDI FAQs and you will see the emphasis is on what a great deal the OVDI penalties are compared to what one would have to pay in FBAR penalties outside of the program.
The attorney who I blame for pushing me into VD/OVDI clearly told me that I had no material risk of prosecution, but that a VD program would be the only way to deal with any potential FBAR fines as there was no negotiation on them outside of the program. This was the position that the IRS was taking at that time.
*Roy Berg
1. At least in my opinion there was way too much overemphasis on OVDI given I don’t think anyone anymore is really suggesting people in the situation of the individual interviewed should enter the program. The real conflict seems to be between do nothing, “quiet disclosure”, or use the new program announced at the beggining of September. The fact the new guidelines announced at the beginning of September however inadequate were not mentioned I do feel was a huge disservice.
2. I think it is a legitimate open question whether those entitled to back dated CLN at least pre 2004 or pre 1994 have any filing obligations still. Having recently seen a draft of Form 8854 for 2012 there does not appear as if there is going to be any plain English instructions on this any time soon. Some practioners such as Michael Miller seem to be pretty adamant there is no filing obiligation for pre 2004 back dated CLNers and claim to have officials from the government that agree. In fact the only evidence I can find otherwise was a 1995 JCT report discussing the then administration’s “proposed” exit tax law which in fact was not the one used by Congress the next year. Along this lines there is nothing I can see in Title 31 BSA that someone who is no longer a citizen but has not notified the State Department still has an obligation to file FBAR>
3. In terms of FATCA. I don’t see any evidence that the financial institutions interviewed were misquoted.
4. Flaherty’s Statements: Perhaps fuller context should be given but I don’t Flaherty was quoted as saying things he has not. Flaherty has been pretty critical of FATCA and has made some rather strong statements on Assistance in Collection that perhaps(as you have pointed out) were not made with full discussions with the US. I think the article does point out that there continue to be discussion between Ottawa and Washington on all of these issues.
5. No discussion on PFIC, self employment, “Canadian” registered accounts i.e. RRSP, TFSA, RDSP, capital gains treatment of primary residence, etc. All of these are and continue to be important unresolved issues.
*To further your point below:
3. The article equates receipt of a Certificate of Loss of Nationality with termination of US tax filing obligations – which is erroneous, misleading, and dangerous.
I totally agree in the case of someone renouncing right now or committing a relinquishment act post 2004 or post 1994 has the obligation to file form 8854 at the usual filing deadline(i.e. next year) and realistically has to have accurate filings for the previous five years(unless they want to pay the exit tax a non covered expatriate). However, at least in my mind I have not seen overwhelming conclusive evidence either way as to what the situation would be for someone giving notice of a relinquishment act back in 1986 lets say to the State Department in the present.
@Tim
Thanks for the reference to what Michael Miller stated on this site.And as you mentioned he did speak to someone at the IRS, who in turn, spoke to her supervisor on this matter. Of course, we should not forget the comments of Steven Mopsick on this site. He was fairly adament that those of us who ‘relinquished’ decades ago, would be foolish to start filing tax returns.
*With respect to Mr. Berg’s advice to seek learned council, perhaps one should also remember Warren Buffett’s advice- ” Don’t ask a barber if you need a haircut”