@Mopsicktaxlaw update on #OVDP with comments on #americansabroad http://t.co/UF2KxmFI1d – Crucial to understand your #FATCA + #FBAR facts
— U.S. Citizen Abroad (@USCitizenAbroad) July 27, 2013
This is a must read for anybody considering cleaning up past problems. Anybody who is still thinking of entering OVDP should think long and hard. This thoughtful post ends with:
While FATCA creeps toward the starting gate, there appears to be scant progress on two fronts sorely in need of attention: (1) the plight of Americans abroad whose local bank is no more a “foreign financial institution” to them than the corner McDonalds is an English fish and chips joint to us, and (2) the hapless recent immigrant who was never told in citizenship class that as American taxpayers, they now had to register their worldwide assets with Uncle Sam in addition to report the income. The collateral damage of these two unintended FATCA consequences, particularly the former, account for the bulk of the internet chatter on this example of the gross tax injustice FATCA on Americans abroad.
The problem seems to be that of the five to seven million estimated Americans living abroad, few seem to vote. Add that to a Congress which for all practical purposes is frozen in place with no effective direction and leadership and the result is a broad based sense of frustration and disdain. Unfortunately there appears to be little hope any time soon of any attention to this problem.
It also includes a number of considerations of tactical interest to practitioners. For example in counselling clients he notes:
Today, many of the cases do not show the overt criminal conduct of concealed assets and income. Often, the challenge now is to analyze the facts sufficiently to see if there is any way to avoid the onerous, expensive and time consuming OVDI process while at the same time exercise due diligence and follow all the rules under Circular 230 and other standards by which tax practitioners are measured.
The focus on Circular 230 from the perspective of the lawyer remains. But, from the perspective of the client he writes:
The choice to enter the program must be made by the client and we often hear from potential clients that all they want to do is to just start filing prospectively and take their chances simply because they cannot afford the cost and time of the lengthy OVDI process. It is pretty clear that practitioners cannot simply advise a client to just go ahead and do that. That said, those that choose to disclose their off shore shenanigans by simply starting to file are relying on their perceived risk of criminal prosecution. They figure if the IRS had the choice to go criminally on someone who just started filing vs. someone who continues to do nothing, they will probably choose the latter.
The law requires taxpayers to file 1040s, FBARs and possibly other information returns. Seems to me that lawyers should advise, that at a minimum clients should file properly on a going forward basis. The question of what to do with the past is what requires the difficult decision making.
Finally, those with the good fortune to be in OVDP will find other anecdotes of interest. Ultimately Mr. Mopsick gives OVDP a law grade of C-. Mr. Mopsick deserves a considerably higher grade on his analysis.
Therein is the major dilemma for the ethical, morally concerned, but compromised U.S. Attorney…
Circular 230and other standards by which tax practitioners are measured.
Scott Michel of Caplin & Drysdale has written a commentary in Hong Kong Business specific to USP’s living in Hong Kong, and what he considers to be all the compliance options (including ‘going forward’).
“The crucial implications of FATCA for U.S. Citizens in Hong Kong” – See more at: http://hongkongbusiness.hk/financial-services/commentary/crucial-implications-fatca-us-citizens-in-hong-kong#sthash.NbVKxRj2.dpuf
@Mopsick update
Simply the use of the term “off shore shenanigans ” is enough for me to conclude – this does not apply to me. Nor to any other un-informed, formerly unaware USC/USP who has faithfully filed and paid tax in their country of residence.
The use of “shenanigans” is a big warning sign, according to the dictionary it means:
1. a devious trick used especially for an underhand purpose
2. a tricky or questionable practices or conduct —usually used in plural
I am so far happy that I followed the advice of the IRS telephone hotline advisors who told me to: file current year plus six years back, and 6 years of Fbars. Many hours of gathering information on wages, accounts etc. and lots of anxiety but in the long run perhaps I was lucky that there are no US tax professionals available where I live…once again thank you to the many helpful abnd caring Brockers who kept me focused
Sorry, didn’t see Deckard1138’s same post of article on another thread.
Speaking of Circular 230’s, the US tax information seminar I went to sponsored by BMO, had Trowbridge of the FCC giving handouts that included Circular 230 disclaimers, while telling the audience that they’re in the business of moving US person assets to the non-US spouses name-for what reason I can’t imagine. Cha-ching!
Smile! You got screwed by the offshore voluntary disclosure program
Since the days of the New Testament, tax collectors have been regarded as backstabbing, immoral low-lifes with no regard for fairness. One must wonder if the Offshore Voluntary Disclosure Program, with all of the American government’s incompetence, is a total sham.
The United States has more laws on the books than any other country in the world, and the most aggressive enforcement of many of them. Vietnam, where I’m at now, has amazingly lax enforcement compared to The Land of the Free. (Which one is the authoritarian, communist country again?)
The IRS voluntary disclosure program is yet another example that the US government has no mercy to anyone who misses the boat on so much as one law that they barely even make the existence of known.
More importantly, it’s a lesson to those who think the principles and methods of tax collection today are so much more civilized than the days of roving thieves like Simon Affleck. They aren’t. I pity anyone who trusts the IRS to treat them right in it’s voluntary disclosure program. You might as well walk up to a cop and confess to a brutal crime.
Interesting quote from the article (last sentence in particular): “The choice to enter the program must be made by the client and we often hear from potential clients that all they want to do is to just start filing prospectively and take their chances simply because they cannot afford the cost and time of the lengthy OVDI process. It is pretty clear that practitioners cannot simply advise a client to just go ahead and do that.”
Curious how many agree.
@Michael Miller
So this is to say that practitioners cannot represent the best interest of their clients, does it not?
@Michael Miller…
See this comment by Scott Michael… http://bit.ly/12spASA
-Complying going forward. Simply beginning now to file the proper returns and forms now does nothing to clean up the past, but in an appropriately benign case, it may be a viable approach. –
Or this…
– Engaging in a non-program disclosure, whereby the taxpayer files delinquent or amended tax returns, FBARs and other forms and pays tax and interest without formally entering OVDI. The IRS is hostile to this practice and is on the lookout for such filings, but it remains an option for some taxpayers whose cases exhibit no evidence of fraudulent activity.
@Just Me, I agree with Scott completely. He knows what he’s talking about … and he’s a good guy also.
@ bubblebustin, I don’t understand why Steven Mopsick says that (although I’ve asked him about similar statements on numerous occasions and never received a reply that I found satisfactory). And, yes, if you really believe that you, as a lawyer, cannot fully advise your clients as to all legally permissible options, then it would seem you’re unable to serve their best interests. Representing a client and refusing (for whatever reason) to advise as to all of his or her legally permissible options should never be a consideration. I’ve made this point before, and I believe it quite strongly.
@Michael Miller, it seems that a lot of lawyers are scared to be in violation of Circular 230, if they advise a go forward, when the message from the IRS is OVDI and no quiet disclosures, as they risk suspension or disbarment. Some don’t even advise quiet disclosures, even in benign cases.
@Chris
The law requires that people file 1040s, relevant information returns and FBARS in some cases. Those who file those things are simply complying with the law. The law does NOT require OVDI. Therefore it makes no sense to say that one must enter OVDI/OVDP. The V in OVDP stands for voluntary. The IRS is there to administer the law of the land and not to change it. It seems to me that a lawyer should advise compliance with the law.
@USCitizenAbroad, the V in OVD is just another example of the IRS disingenuous doublespeak definition of ‘voluntary’. For example; what of a minnow who enters OVDI (involuntarily – only due to the deliberate campaign of intimidation and threats promulgated by the IRS that anything other than OVDI was forbidden) but is ‘asked’ on opting out to ‘voluntarily’ sign an FBAR waiver for FBARs that had already been filed with the IRS, but because of the protracted and endemic delays inherent in processing all the OVDI submissions, and particularly opt outs, was facing their ‘request’ that the minnow sign away their rights under the FBAR statute of limitations for a year that was about to expire. The minnow should never have been in OVDI, didn’t belong there, had a good chance at FBAR penalty relief with reasonable cause and nonwilfulness or wouldn’t have opted out, but had to decide whether to be considered ‘non-cooperative’ by the very people who also held all the power to impose penalties or not. The FBAR waiver letter says that it is ‘voluntary’, but also ‘reminds’ the minnow that they have agreed to ‘cooperate’ as a condition of the OVDI program.
What part of that sounds like it is truly VOLUNTARY?
There was some small discussion of this type of ‘voluntary’ FBAR waiver on Jack Townsend’s blog and elsewhere.
@USCitizen
Bravo! I have never thought of that, We should make this a motto.
“The law does NOT require OVDI.” or “The LAW does not require OVDI.”
USCitizenAbroad,
Seems OVDI may be a similar process to something else the IRS took upon themselves to change:
http://defendingthetruth.com/current-events/26701-real-irs-scandal-print.html
What kinds of people might be studying the financial data of expats?
Agents with criminal records? Geez……….
With the US’s incarceration rates, eventually everyone will have a criminal record.
I take issue with Mr. Mopsick’s comments regarding forward compliance. According to other lawyers there is no obligation to fix the past, and particularly when it comes to FBARs it is the nonfiling by the June 30 deadline that constitutes the violation, regardless of whether the FBAR is filed one day later, one year later, or not at all.
Regarding FATCA and Americans abroad, one of the many important points is that it involves starting to report current information (there is no reporting of past years’ information.) Thus I suspect many will simply reduce their total account balances to under $10K and use their savings to buy a home (or in minnow cases, keep some cash under the mattress) so they won’t care about their small account being reported. Needless to say, anyone doing so right now would still need to file an FBAR by 6/30/2014 reporting accounts held in 2013 if the aggregate was over $10K any time in 2013.
Mattress sales have skyrocketed in the last 3 years. Same with gold and real estate. Anything necessary to destroy visible wealth