By Patricia Hurtado & Christie Smythe – Feb 20, 2013 2:40 AM GMT+0100
A U.S. judge ordered five unidentified taxpayers to turn over information about their foreign bank accounts to a federal grand jury, rejecting arguments that they are shielded by the U.S. Bank Secrecy Act or a constitutional right against self-incrimination.
U.S. District Judge William Pauley in Manhattan said today that a federal grand jury in 2010 began investigating “whether each of the five subjects had a financial interest in foreign bank accounts that they failed to disclose to the Internal Revenue Service.”
In a victory for the government, Pauley said individuals can’t assert a constitutional right against self-incrimination and refuse to disclose bank records to a U.S grand jury.
I hope that the Grand Jury recognizes that Americans living abroad have local bank accounts where they live, not “foreign bank accounts”, unless they have a bank account in the US, which would then be a “foreign bank account”. The Grand Jury should understand that an American who does not live in America does not live in America, unlike stateside Americans who may bank in other nations. The difference is great and needs to be considered. Tossing all Americans into the same bucket in regards to local bank accounts can create a lot of confusion and misconduct when seeking a problem that doesn’t exist.
Not surprised, and this issue will not be settled until it gets to the Supreme Court. That will get it media attention…
This was the recent decision in the 5th circuit as reported on Jacks blog…
Fifth Circuit Falls in Line and Holds Required Records Trumps Fifth Amendment in Offshore Bank Case
I doubt that the Supreme Court would step up to the issue in the absence of a conflict but that obviously could happen any time with a “public“ figure getting caught.
Since I have sunk my teeth into this subject I always took offense with this “offshore“ definition of my banking business. For us expats,dual nationals or former greencardholders the US is “offshore“ , leftover checking accounts in the US are “offshore“ . For us to have local bank accounts where we live and work is the most normal practical thing in the world because we moved our “circle of life“ away from the US 🙂 For me this is nothing short of McCarthyism and paranoia from the IRS combined with greed.
Yup! You have to remember America plays a game with a grand final, called a “World Series” that is only made up of teams from American shores! Myopic is their vision of the world.
@just me and others… maybe someone can enlighten me why no one has sued the IRS yet directly over negligence with regards to FBAR compliance and oversight ?
What happened to the principle of duties and responsibilities of taxpayers on the one hand and the IRS on the other ? Who are you trying to fool here when a IRS tax examiner reviews for > 10 years someone`s 1040s who is living and working outside the US and makes > $150,000 but their “overpaid“ CPA has either checked or not the “famous“ box within Schedule B. Yes ,interest was always reported for this so called “offshore“ checking account where every single month for over a decade his salary was paid into but never was there a form TD F 90-22.1 filed. In the normal business world this nice IRS tax examiner would get fired because he is not doing his job according to his “bosses“ compliance manual.
How can the IRS expect compliance when even their own employees are not aware of the “rules“ or anybody holds them (IRS) accountable for their shortcomings. All they do is they hide behind the excuse that by signing the return it is 100% up to the taxpayer and the taxpayer only to vouche for the credibility of the 1040 return and of course that you have to send the FBAR to Detroit (Treasury).
just one thing to add here….. in the country I am currently living and working I prepare the taxes myself and believe me in the beginning I made a bunch of errors – some in my favour some even against me but always came the return back corrected both ways – no fines , no penalties or nasty letters reminding me maybe I should use a CPA in the future 🙂
This always reminds me that all of this tax stuff does not always need to be a frustrating experience.
@Mike, even if the tax preparer doesn’t want to prepare FBARs, he or she should at least warn and explain to the client about the need to file them in addition to the 1040.
@monalisa ….exactly, but I do not want to stop there because the IRS has nothing to do with our “private“ letter of engagement with a CPA – my problem is that the IRS and commissioner Steven T. Miller wants us to believe that this tax preparing business is a one-sided affair.
If you check http://www.irs.gov/uac/Compliance-&-Enforcement I do not find anything that describes their duties regarding full compliance and sharing information about known practices . We all know by now that FBAR is a compliance weapon a.k.a. revenue enhancer or call it OVDI extortion for minnows but I find this very strange that a government agency is permitted to enforce a statue on us the taxpayer regarding FBAR`s which exist since 1970 when nobody has anything legal up their sleeves regarding their duties . When expats provide 1040s were explicitly the IRS tax examiner sees the need to file an FBAR regardless if interest was reported or not but fails to do so – this is wrong and not just by the taxpayer.
When it comes to the IRS and FBAR you should remember that the FBAR is under Title 31 and Taxes under Title 26. The IRS is now the administration/enforcement mechanism FBAR.
This may explain by NOT excuse the fact that many U.S. citizens abroad in their efforts to be tax compliant:
1. Filed returns making it very clear that the taxpayer had foreign accounts;
2. Checked off no on schedule B or did not check off anything.
3. Were never told by anyone (including professional tax professionals) that filing an FBAR was a legal requirement.
The problems started with Shulman. Basically the whole situation is so unfair and idiotic that it is impossible to take seriously anymore. But that I mean:
1. This is the way the U.S. is.
2. Accept it or renounce.
It’s really that simple. The truly painful thing this that the realization that when it comes to “Form Nation” the rest of the world is right. Those U.S. citizens abroad who continued to be loyal/patriotic Americans have been duped. The rest of the world is right.
Interesting thing is that the American people are fundamentally good and just. The government is anything but.
The best investment that any young person could make in their future is to renounce at the earliest opportunity. It is simply impossible to be in compliance with all their laws.
Here is Jack Townsends coverage of the subject of this thread
Required Records Subpoenas Enforced (2/20/13)
@USCitizenabroad- I agree completely with what you say with regards to young people renouncing as early as is possible. I even said that same thing on this blog last year. However no sooner had I posted that recommendation than I got taken out to the woodshed for trying to tell young and easily influenced young people what they should do on this important issue.
The trick is to renounce before you turn 18 1/2 because if you do it before then you will not have to file any U.S. tax returns.