ACA has written to Treasury and IRS officials recommending a proposal for a Comprehensive Compliance Program (actually an interim streamlined program) to Enable Tax Compliance by Americans Resident Overseas. You can read the letter here. This is part of the ongoing attempt by ACA to get attention in Congress, and it follows their harsh criticism of FBAR and OVDP abuse.
The key to the ACA proposal is that Americans resident overseas entering CCP will know exactly the amount due to the IRS, including the tax due, interest and penalty, if any. They will not fear that their life savings are at risk. They will not be treated as criminals and will come into compliance.
I hope I haven’t missed this letter being published somewhere else on IBS, but in light of these recent posts on IBS I have been ‘skimming’ this morning before I head out on the Pacific Crest Trail, I thought I would post it for greater visibility and discussion.
Tax lawyer Virginia La Torre Jecker interviews former #IRS attorney Bill Yate
Taxpayer advocate continues criticism of IRS execution of voluntary disclosure programs
#IRS abuse of Americans Abroad – The greater the effort! The greater the punishment!
and the recent article in Tax Notes…
The Personal Impact of Offshore Enforcement
Below are the ACA Conclusions
There are several reasons for initiating a genuine Comprehensive Compliance Program for overseas taxpayers. Much of the current non-filing among Americans abroad results from long standing insufficient outreach by the IRS and the fundamental impracticability of citizenship-based taxation.
FBAR was not even mentioned in the general instructions for overseas filers of 1040’s until very recently; the only mention of FBAR was a footnote on Schedule B.
Over the last four years, following the IRS’s 180 degree change in policy regarding quiet disclosures, the IRS’s threatening approach has created extreme anxiety and furor among the American community abroad.
The heavy FBAR penalties under the OVDP linked to overseas assets are considered confiscatory and unjust, particularly since Americans abroad need foreign bank accounts at their local banks for daily living and the FBAR is not even a tax form, but only an informational form.
It is all the more unjust in that most Americans abroad pay taxes to the country of residence, apply foreign tax credits for those taxes paid against the U.S. tax liability on their 1040 and/or apply the foreign earned income exclusion, and consequently owe little or no tax to the United States.
The resulting ill will creates significant hostility and noncompliance among a community normally well- disposed to U.S. laws and policies. Many Americans are simply dropping off the radar and live their lives with a non-U.S. passport.
CCP will greatly improve relations between the United States Government and the overseas citizens’ community.
Americans abroad already suffer major prejudice and discrimination under the combination of citizenship-based taxation and FATCA. Citizenship-based taxation leads to double filing, double taxation, taxation on phantom capital gains, taxation of contributions to pension funds and savings vehicles for retirement and overwhelming reporting requirements for self-employed entrepreneurs.
FATCA shuts off access to foreign financial institutions, overseas employment opportunities, and entrepreneurial activities. The combination is devastating for Americans abroad. Unfortunately, increasing numbers of Americans abroad are being forced by U.S. law to renounce their U.S. citizenship just to survive where they live.
ACA is working with Congress to encourage changes in the law so that Americans abroad can be competitive and enhance the presence of the United States’ products and services in the global economy. ACA has proposed residence-based taxation (RBT) as a long-term solution.
In the interim, ACA expects the help of the IRS to sustain the community of Americans abroad by adopting ACA’s proposal for a Comprehensive Compliance Program, implementation of which is within the authority of the Department of the Treasury and IRS.
Thank you for your consideration.
Sincerely yours,
Marylouise Serrato, Executive Director Director
Jackie Bugnion , Director
YogaGirl, Benedict and broken man on Halifax pier — predatory behaviour on part of the US is absolutely correct.
With FATCA, this should not be something “in practice.” We’ve had “in practice” all these years with the US turning their blind eye toward filing of US tax returns from abroad when it was known no taxes would be owed to them, for not educating about the “Foreign” Bank Account Report to either US Persons Abroad or to new immigrants to the US or for allowing crossing of their border with other than a US passport. Whatever law there is whether in practice or in reality should be bullet-proof for what we have to prove to our “foreign” financial institutions and should be fair for all, especially all “Accidental Americans” whether they were born in Canada (or another country) to US parent( s) or to Canadian (or other country) parents while in the US for a short period of time. There should be a choice, an option to claim US citizenship! There should be common sense. There should not be entrapment into unjust US citizenship-based taxation, even when there would be no taxes owed to the US. The administration of a US citizenship from abroad (unless that is what the person wants in order to one day return to the US) is insane. Repeating such practices over and over is indeed the definition of insanity.
@BADger
Would you help us badger the Canadian government? Please see here:
https://isaacbrocksociety.ca/2013/07/01/its-budget-submission-time-in-canada-again/
@ badger
Please! See bubblebustin above. 🙂
@USCitizenAbroad
I had a feeling this one would not sit well with some readers here, and I appreciate your extensive comments. You are very good with the arguments, and I understand the sleepless nights.
Upon reflection, I look at this proposal as a message to the IRS, “Put up or shut up”. Of course ACA would not characterize it that way. LOL
Setting aside the merits of the RBT vs CBT arguments for a minute, Ex Commissioner “I Am Not Responsible For Anything” Shulman, said the OVDP was all about improving compliance.
Well, we all know that is a distortion of the reality, and this is the ACA’s attempt to show expose this for what we all know it really is, a penalty collection exercise.
ACA is essentially saying, “if you want really want ‘compliance’ of your Citizens living abroad, here is the way to do it.” They are trying to do this from inside the fence, working the advocacy process by building on the Congressional relationships and access they have gained over 30 years. That is why they opened a DC office.
Their position papers now get read by at least Staffers of Congressman, they get a hearing, and that is more than my letters or comments do.
ACA has been successful in getting Congressional attention on RBT via the Tax Reform effort. (The jury is still out whether or not that will be successful. It is an uphill road.) They have followed on the heels of the IRS scandals to build on the media attention to vociferously point out the abuse of Taxpayers abroad via the IRS OVD programs.
They are now following up again, and are essentially saying, “Now that have our RBT proposal on the table, and while you dither on your tax reform efforts, in the interim, here is something you can do, if you want real compliance out of your CBT chattel. Here is the way to do it using existing regulatory authority without an act of Congress.”
It is it a good strategy, well you will have to be the judge. It is not the perfect solution. It is a gambit to keep attention on ACA issues while they have some of Congressional ears. Now, while I can quibble around the edges on the approach, I do think it advances the cause of RBT, because, frankly, the IRS is going to ignore it. Their intransigence further makes the case for RBT. Meanwhile your position that long term Americans should renouncing citizenship continues to strengthen even though many may NOT take the advice.
You have to accept, that there are many stepford wives, I think you called them, in the American diaspora, who will put up with a lot of regulatory complexity and penalty threats from an oppressive government to maintain U.S. Citizenship because for whatever reason they still see value in maintaining their membership in the Tax, Form, Penalty and Surveillance Club. Maybe they like being able to fly home, enter America to see family without hassle, and shop at Walmart, who knows, but you can never underestimate the willingness of some to endure oppression even when logically it doesn’t seem that they should.
Bottomline, some of those Americans abroad represented by PiedPiper 2, think CBT no big deal, and FATCA will not hurt them one Iota. They still want to be compliant. ACA is telling the IRS how to better accomplish the much touted compliance effort, if that is really the goal.
PS @Chris…
I know this frustrates you that ACA doesn’t speak for immigrants, but their charter is an advocacy for Citizens living abroad, and so they can’t dilute their voice to include every group that is also harmed by the OVDP. They do mention it in private, but they can’t put out something in public that is contrary to their core mission. Why other immigrant groups haven’t come together in advocacy to minimize OVDP is amazing to me.
.
Yes, ACA has done a marvelous job of getting our issues at the forefront as if late. Then if course there’s been a groundswell of opposition in support of ACA’s issues. Wouldn’t it be nice if awareness got to the point where lawmakers argued over which route wiuld be the best way to deliver lasting relief to us?
http://americansabroad.org/issues/taxation/aca-keeps-focus-residence-based-taxation/
ACA keeps the pressure on Residency-based taxation (RBT) and re-submits comments to the Ways & Means/Senate Finance COmmittee’s website (https://taxreform.gov/). ACA’s proposal sites our recommendation for RBT and also ACA’s proposal for a Comprehensive Compliance Program (CCP) that allows Americans overseas to become tax compliant without being hit by onerous penalties and criminal prosecution for oversight in filing errors.” Read the submission here
@Just Me
I agree that the likely IRS response to the ACA’s CCP proposal is no response but what if they just implement it? They could then say “We’ve solved the problem. We’ve given you what you asked for now stop complaining”.
@Johnson…
I can almost guarantee you that they won’t do that. They have been stonewalling Nina Olson for years, what makes you think they will be different with ACA? Do you think they will suddenly have an epiphany of enlightenment, that says, “Yes, that is a better way to help our Citizens around the world be compliant!” Not these guys, imho. The message is for the members of Congress that they copied. That is the audience, not the deaf leadership at the IRS, even though that is who it is addressed.
However, if they did do that, it would make life easier for those abroad who do want to be compliant, again, for whatever reason, but now ignore, hide, or enter these disastrous programs. I grant you, that might NOT be very many of the readers here, but I have learned to be modest in what I assume about those that are just living their lives and not following these issues as closely as you and I.
This is a long comment, but it’s the opinion I wanted to have in black and white. So, here it is, the reply I got today from Sylvia D. Johnson, Ottawa, Canada US Embassy. And, I do really appreciate all she has offered. She could have chosen to ignore me as have so many others. Thanks, Ms. Johnson from many of us here.
Calgary, thanks much for looking into the issue of citizenship for kids born abroad.
Now I wonder – what will happen if our kids want to work or study in the US? If it is determined that they are US citizens, could fines or taxes be levied against them? If they need to renounce, how long would this process take before they could get their visa?
It sounds as though these children can only live in the US as citizens. What if someone entitled to US citizenship wants to work temporarily, or go to school in the US without claiming US citizenship thereby by subjecting themselves a life of US tax reporting? No can do!
bubblebustin and aaa123,
So many questions for the tainted.
Once we have renounced or relinquished US citizenship or “never claimed” US citizenship when born outside of the USA, why can we not be treated as any other citizen of the countries we live in, outside the US?
I guess, too, what about regular snowbird types versus relinquished or renounced US citizenship snowbirds? Would their money not be as good in the US as any other Canadian or other country citizens’ money? (Not, that I wish to be a snowbird in the US, but some might wish that.)
Just why should there be a difference?
@Just Me, leadership at the IRS just changed. Let’s hope that change will come with it.
Plus they have some reputation to repair. Wait. I forgot. It was all repaired after 30 days.
This abuse has been reported to the ways and means. Maybe the republicans will bring it to light to try to further damage the administration. I wonder why they haven’t done it yet.
@Chris
Speaking of new leadership at the IRS, “Acting IRS Commissioner Daniel Werfel downplayed the notion that extra funding could help fix the agency’s problems, as many defenders of the IRS have insisted in recent weeks.”
http://www.washingtonpost.com/blogs/post-politics/wp/2013/06/03/irs-hearing-live-updates/#liveblog-entry-44351
Yet in an email to me yesterday from Bill Yates formerly from the Office of Associate Chief Counsel (International), Internal Revenue Service (clearly a defender of the IRS-or at least what the IRS used to be), he wrote: “I think that the IRS is way underfunded and, in addition, has many other problems that I will not put in print. (You didn’t ask about IRS funding, but your email gave me an opportunity to tell the truth about IRS funding.) Why do you think it is taking IRS so long to get back to you?”
https://isaacbrocksociety.ca/2013/07/23/tax-lawyer-virginia-la-torre-jecker-interviews-former-irs-attorney-bill-yates/comment-page-2/#comment-450678
Diametrically opposing views from two supposed experts. Is throwing money at the IRS an investment, or is it just throwing good money after bad? Personally, I’d like to see the IRS gone altogether as it’s turned into a paper bombing, revenue sucking black hole that no longer serves the people.
So, here is a little reality check from the Senate leadership about possibilities for Tax Reform, and the ACA RBT… It is hard to pin any hope on RBT with leadership like this in the Senate.
Reid: “I’m not going to be involved in this. I’m not on the committee. I’m not going to do it. I’m not even going to consider it,” Reid told reporters.
I’d say let’s lock these jokers in a room and water board and force feed them until they do their job. (I’d like the USG to prove that I’m advocating the torture of US lawmakers)
Hatch on tax reform:
“You can’t just ignore it, especially if it has a broad appeal to the public at large,”
whereas Reid says drop dead to US taxpayers according to the WSJ: ‘We need tax reform,” said Harry Reid on Thursday, by which he meant we don’t need tax reform.”
http://online.wsj.com/article/SB10001424127887323610704578628342110778254.html
@Benedict Arnold be me
A belated thanks for your comment:
Much appreciated.
Some of Lubick’s (1998) suggestions to increase compliance:
“…such efforts should include: analysis of local information sources, such as local financial news media and DOS and Department of Labor data, to identify employers of U.S. citizens, organizations with U.S. citizenship membership and education resources used by U.S. citizens or dependents, to aid in targeting education and compliance projects; identification of local tax practitioners used by U.S. citizens to provide such practitioners with the resources and education necessary to improve compliance with U.S. tax laws; identification of local media outlets accessed by U.S. citizens and development of specialized media releases to educate U.S. citizens…outreach and informational seminars…”
Lubick justifies US citizen-based taxation:
“This broad application of U.S. taxing power to U.S. citizens is justified in part by the fact that citizens enjoy important benefits of citizenship even while residing abroad. See Cook v. Tait, 265
U.S. 47 (1924).”
But does admit that “some” might be hurt:
“Consideration should also be given to modifying the basis for U.S. taxation of individuals. As discussed in part IV, supra, the current definition of individuals subject to U.S. taxation may be subject to manipulation by tax-motivated expatriates, on the one hand, and may, on the other hand, include some individuals who for reasons of administrative efficiency and fundamental fairness should be excluded”
@Just Me.
Another disgusting one:
Tax reform proposals to be secret for 50 years
http://money.cnn.com/2013/07/25/pf/taxes/tax-reform/index.html?iid=HP_River
Senators don’t even have the guts to stand for their proposals. Simply disgusting. Another reason why they probably won’t do anything for a while.
@Chris…
Yea, I saw that and posted it somewhere. No guts and no transparency for them. It does it get disgusting.
@calgary411
@children born abroad
Thanks for posting the information re children born abroad and USC automatic versus right to claim it (but not activated before issuance of passport). That is one bit of relief – however it does complicate matters if a child would have to travel to the US on a US passport if they had the right to claim USC. Common sense would mean, no they don’t have to apply for a US passport to travel to the US if they have have another nationality and valid passport. Otherwise: just imagine the mess that would ensue if every country insisted that all persons having the right to claim citizenship had to apply for that country’s passport before entering the country! For pesons of European heritage that might mean having to get 4-5 passports just to go on holiday since many EU countries recognise claims to citizenship based on descent several generations back – Italy, Ireland, Spain and others would have massive population increases – hope they never implement that idea 😉
@allou
“…. – hope they never implement that idea”
or the idea of Citizenship Based Taxation either. 😯
What a mess that would be!
@Uncle Tell
I was thinking the same thing…one country is more than enough!
@Uncle Tell
When folks start proposing the idea of CBT for other countries, I always send them Andy Sundbergs post…. It would be a ‘friggin’ nightmare for the world.
https://isaacbrocksociety.ca/2012/02/16/what-is-the-systemic-risk-to-the-worlds-economy/
@Tim made some good observations about the ACA plan that he shared with ACA leadership. With the permission of ACA, I will post his observations and the reply…
Tim wrote..
A couple of thoughts on the new ACA proposal and yes I understand it is a “political” proposal.
http://americansabroad.org/files/7513/7452/3519/Final_Letter_to_Treasury-IRS_July_19_2013_copy.pdf
1. The current “Streamlined” program is pretty bad and needs to go.
2. There needs to be some discussion of those who previously committed “relinquishment” act short of obtaining a CLN(pre 1995) and wish to remain non US citizens(Like our very own Lynne) yet some parts of US law(such as FATCA due diligence) consider them retroactively to have had their tax citizenship restored as of 1995.
3. Some “US Persons” overseas have been elected to non US political office and for non US political reasons might feel very strongly against coming into compliance especially if they have not actively sought ties with the US . For example Canadian MP’s Elizabeth May, Diane Ablonczy, and Bruce Hyer have made public statements that they are “only” Canadian citizens(and only hold CDN passports) and will make no effort to come into compliance with US tax law. In the case of May she actually had a meeting with US Ambassador Jacobson where her personal situation was discussed and Jacobson did not make any effort to get May personally into compliance instead stating US law was “uncertain” in her particular circumstance.(May like our own Lynne is a relinquisher without CLN from the 1970s).
4. Canada is a much different situation than Europe . Most Americans who came to Canada over the years went “native” much more in Europe . Plus there is a lot of them. There are five to seven million non filers two million of which could be in Canada . Canada has only 33 million people 19 million of which vote so the 2 million non filers in Canada could make up a considerable chunk of all Canadians. The risk for the IRS is Canadian non filer might instead decide to use their political “pull” to damage CRA IRS relations, interfere with FATCA implementation etc. More active IRS involvement in Canada might be welcomed by certain but by others could be seen as a violation of Canadian sovereignty.
5. The IRS has very few actual hammers to collect civil penalties on non residents. At some level they should be happy with whatever they get voluntarily as US tax treaty assistance in collection provisions are quite minimal.
6. Because of comment #5 I have always felt the IRS feels the need to keep criminal penalties in reserve(like nuclear weapons) because they are so weak on the civil side in international collection. Of course going “criminal” is very high risk for the IRS.
7. The ACA proposal would probably cut non filers in half. The other half though are the real militants(I know Lynne doesn’t like military language) who have very minimal if any ties to the US, have another citizenship, and see themselves as politically active in their countries of residence.. There is also the “naked” CLN issue of people just renouncing without filing including people obtaining back dated CLN’s. Again these are the people if current US policy continues will try to damage to FATCA and their country of residences relations with the IRS.
Just a couple of random thoughts and yes I understand the context of the proposal. I guess I am just of the feeling that the ACA would be a huge improvement I have a hard time seeing its success rate above 50%.
Jackie Bugnion replied…
I’m back on line after ten frustrating days of not being able to send message.
Tim, thanks for your comments on the ACA proposed CCP addressed to Treasury and IRS. You are certainly right that there will remain individuals who decided not to come forth. With FATCA coming into force, they will have to have eliminated any any trace of a US connection and will probably have to lie to their bankers overseas. In Europe bank account forms now require one to answer the questions: “Are you an American citizens or green-card holder? Were you born in the U.S. ? Do you have a parent who is American? Etc”. These questions cover the first page of a UBS account opening form. In going through accounts already opened, the bankers are required to look for any US connections.
The ACA proposed CCP would be helpful in itself. But if we can ever get that AND RBT passed, CCP would allow Americans to come forth, then adopt RBT and remain “open Americans”. Basically, if RBT is ever going to work, there has to a way for Americans overseas to come into compliance.
ACA recently sent to the joint website of the Senate Finance Committee and the Ways and Means Committee, “http://taxreform.gov”, additional thinking on the ACA RBT proposal submitted in March. For your convenience, below are the links for both the March RBT and the July comments.
This recent comments pointed out the urgency of adopting RBT and put forth the major concerns related to the transition phase for Americans already resident overseas.
http://americansabroad.org/files/6513/6370/3681/finalsubrbtmarch2013.pdf
http://americansabroad.org/files/7913/7467/5734/July_2013_ACA_submission_to_taxreform_website_-_July_2013_copy.pdf
Best,
Jackie