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.
and the recent article in Tax Notes…
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.
Marylouise Serrato, Executive Director Director
Jackie Bugnion , Director