A Series of Posts to Explain the Anger and Vehemence Fueling the anti-FATCA, anti-IGA & anti-CBT Movement
Streamlined, as inadequate as it is, would not have come to be were it not for the blood spilled by these in OVDI. https://t.co/lgEJ1RQYnS
— U.S. Citizen Abroad (@USCitizenAbroad) November 23, 2015
This post was written approximately 3 months after the mass hysteria (there simply is no other word for it) of late Fall 2011. Brock was less than a month old. We had only just started to gather information, starting at the ExpatForum. Renunciation was a very scary topic only slightly less than the terror of imagining losing everything due to FBAR penalties. IMHO, FBAR will prove to be the number one issue that fueled the expat movement, hands-down.
An excerpt from January 5, 2012 post from the renounceuscitizenship WordPress Blog
PART I: The Players
UPDATED Thursday November 26
The Taxpayers Part 2 – Those who ventured into OVDP/OVDI
First Part of Post (from yesterday) is HERE
Do the drudgery……do your own research
LCU’s……Life Credit Units
CCW……… Complain Comply & Warn
OVDP……..Overseas Voluntary Disclosure Program
DATCA… Domestic Account Tax compliance Act
GATCA….Global Account Tax Compliance Act
As usxcanada recently said, anyone who cannot guess right away who the above terms come from, needs to learn some Brock History!
After a much-earned vacation from years of FUBAR expat life, “Just_Me” (Marvin van Horn) may not be posting and tweeting much anymore but those of us who were lucky enough to have “known” him cannot help but smile. He was nothing short of a human dynamo, completely wound up in communicating our plight to everyone and anyone.I remember wondering if he ever slept; he would be online when I first got up in the morning and seemingly still there when I would get to bed in the wee hours of the next morning. He was omnipresent! It didn’t seem to matter whether he was in the U.S., sailing on his boat or at home in New Zealand. Marvin was the reason I learned Twitter. Marvin was the reason I joined LinkedIn groups. He taught me how to make a link. He was the reason many of us knew about the Taxpayer Advocate. He educated us about how horrible it was, to enter OVDP. Above all, he was a true example of what a real person is; he was not bitter in spite of an absolutely miserable experience; “took responsibility” for not being aware of filing; tried to do the “right thing” putting himself at great peril. He devoted himself to the “cause” and refused to let it ruin his life. I cannot recall ever hearing anyone having a bad thing to say about him.
To the best of my recollection, Marvin had been posting on Jack Townsend’s blog and when Peter read his comments, he invited him to become an author at Brock. For Marvin, the 2009 OVDP program was an 851- day process. I have taken excerpts from a couple of his posts to try and capture his story: OVDI drudgery for minnows and Letters to Shulman or a case sudy of OVDP communication attempts with the IRS
Rightfully or wrongly, I came to the conclusion that joining the OVDP was my only option. My logic was probably flawed, but it went like this…
Prior to the moment I heard about the IRS program on NPR during the family visit back to the Seattle area, I didn’t know that a FBAR existed or understand foreign income reporting requirements. Those considerations never enter your mind when you are sailing the Pacific in a small yacht, or gardening in NZ. Maybe that represented some due diligence failure on my part for not staying fully aware of all the complex tax rules and reporting requirements even for my simple existence. I had never visited the IRS.gov web site in my life.
From that moment in late September, 2009, until I submitted my letter in October 12th there was a very stressed and compressed journey. First I had to convince my wife this was something that we could not ignore and had to do. There was the scramble for knowledge. I had to search out attorneys, and CPAs for a cram course of discovery of what my obligations were. There were returns to amend, and the almost unfathomable foreign tax credit form 1116 to complete that the CPA couldn’t even do correctly. There was a long distance bank record compilation effort that was extremely difficult to do in the time frame I had. There was the embarrassment of your predicament which meant you didn’t want family and friends to know. Then came the very hard, emotional and lonely decision which ended with you walking into the Seattle IRS Criminal Investigation (CI) division offices feeling like a criminal. I did all that, because I had reluctantly came to the conclusion, that once I was aware of my failures and aware of the IRS program, I had knowledge and could not escape it.
I KNEW! Therefore, now, I had to do the right thing.
So, what was the choice given my knowledge? To me, None! I had to enter the OVDP. My big mistake was assuming that the IRS would realize that I was a Minnow and not subject me to the harsh 20% penalties. I naively thought my appeals to Shulman would result in logic and reason prevailing. They would do the right thing, and not treat me as a Whale. How wrong I was!!
In the end, it was the “discretion” implications of FAQ 35 that finally got me some relief with the much appreciated help of the TAS. It took 26 months from entry in the OVDP to 906 closing agreement signatures. Without the TAS, I was fish fertilizer!
Current Situation: After a long distance drawn out process, via mail and phone calls to and from New Zealand (no email allowed), I am now in the 20 day countdown (12 days left) to decide to “Opt Out”, or be thrown out of the OVDP into an “irrevocable” program of great uncertainty.My current 906 settlement statement calls for an OVDP penalty of ~$172,000 (plus interest and 20% accuracy penalties on our amended returns) for a tax failure of <$21,000 over a 6 year period. The taxes have been paid in full with interest and penalty.
We were not the target client of the OVDP program, as we have repeatedly pointed out. We were not deliberately moving ill-gotten gains or unreported income to foreign accounts for the purpose of hiding funds in secret Swiss UBS like accounts out of reach of the IRS.
Instead we were just simple expats and immigrants who are not financially sophisticated and weren’t aware of the rules. I understand the IRS position, that arguably, we should have been. That is your world. You are the technocrats that live your lives immersed in rules and regs at IRS.gov. We do not. We were living plain vanilla non extravagant lives in semi-retirement in New Zealand, which is not exactly a banking haven for tax cheats as there are no bank secrecy laws. We were negligent, maybe, but not criminal and never heard of a FBAR prior to September 2009.
Now setting aside any technical or legalese considerations of willful vs non willful, or reasonable cause vs just plain negligence, does the amount of $172,000 seem like a reasonable penalty for a tax failure less than $21,000 that was voluntarily disclosed and paid? Really?
The reason my OVDP penalty seems extreme as compared to the tax errors is technical. The rules of the program allowed (actually required) the “Technical Adviser”, who has no discretion, to include my retirement home, where I am living, in the highest gross aggregate calculation! Why? Because it generated some non substantive holiday rental income in 2003, 2004, 2005, so it is included. If there had been no income, it was not included. There are no de minimis rules, or intent of ownership. If there is $1 of income, it is included. End of Story! Black and white! No Discretion!!
In the current 2009 OVDP program, the IRS created penalties totally divorced from the tax or compliance failure. It is just a uniform 20% of the high aggregate account balances and some assets. That is why we now find ourselves subject to a non discretionary penalty for a tax failure of < $21K over 6 years as compared to, say, Tim Geithner’s tax failure of >$42K. His penalty – nothing. Ours – $172K. I hate to bring in this example, but what is wrong with this picture?
To their credit, my examiner and her manager spent a lot of time trying to determine if they could remove my house value from the penalty structure because they wanted to be reasonable on penalty application. But they were over ruled by the “Technical Adviser.” No discretion allowed!
Also, she advised that I should calculate FBAR penalties outside the OVDP as per the IRM based upon each account having a FBAR penalty. Would they double count? First she says, of course not, and then after a conversation with her “Technical Adviser”, she calls back to say, yes they will double count accounts. What?!
So, if the same money is in two different accounts in the same year, I am to calculate two FBAR penalties. Example. If my $10,000 CD rolled over to a new CD during a year, it would have to be counted twice as $20,000 in the high aggregate because technically two accounts apply when the new CD with new suffix is issued. Go figure.
After I mailed my letter to Shulman, and with 11 days left to “Opt Out” or be “kicked out” decision , on June 30th, I emailed the TAS offices of Nina Olson. 24 hours later I received a call back setting up a conference call. Also on the 30th, I finally got a hold of Victoria Gally and she arranged for a conference call on July 5th. The TAS joined in, and that was the beginning of the end of my ordeal. Below is the correspondence that followed.
August 5th, 2011 Below is a copy of the TAS FAQ35 appeal made by the TAS on my behalf to the IRS Examiner. After the TAS issued a Tax Advocacy Order (TAO) shortly after July 11th, my examiner suddenly found some discretion, and offered to lower my penalty from $172K to $115K . The Advocate Case Officer did not think that was good enough, and it was their opinion that the maximum penalty should be $25K as probably the best deal they could get out of the IRS examination department. It was their decision to counter the $115K with a $25K offer.
August 23rd, 2011. I wrote a letter to my examiner and sent a check for $25K, which was the negotiated settlement between the TAS and her office on August 18th. Given the stress and the high level of penalties that I was staring at, $172, I was so relieved that I felt that this was the best deal I was going to get, thus it was probably reasonable and fair, given the IRS FBAR environment and mindset. As time as passed, I now think I left too much money on the table. It wasn’t fair, but in the end, mine was a business decision to bring the nightmare to an end.
….There is something intimidating about the whole process that makes you feel guilty, even when you know you are not. My approach through out the process was to keep it from becoming personal and stay away from acrimony that might add to my problems.
After 851 days, from entering the OVDP in 2009, I was informed by the TAS officer today, that the IRS has issued a refund check to clear all reconciliation items from the OVDP examination. Tomorrow they are mailing me a check for ~$3000 dollars which includes roughly $250 of interest for overpaid taxes. (actually received two treasury checks yesterday for $3925.01 which was more than I expected.
“Re: Doing US tax returns wrong. It doesn’t matter, nobody at the IRS understands their tax code, either.”
It is true that the IRS, US Department of Justice, and US courts don’t understand the US tax code.
“Norman, weren’t you the one who said that it was far more important for US returns to be “processable” rather than be correct?”
The IRS wrote that, and ordered me to comply. All I did was report it in this forum.
Moodys is his firm which means that he paid himself–if indirectly. That they did it wrong, as confirmed by Tricia, causes Schadenfreude, at least in moi.
Interesting article about Israel’s FATCA implementation delay to allow proper debate in their Parliament rather than using stealth.
US Treasury opens offices in the Middle East to enable FATCA.
“US Treasury opens offices in the Middle East to enable FATCA.”
I guess that proves that it’s all about penalties. They closed all their offices outside the US that used to try to provide some semblance of assistance to people who tried to comply, and then they even closed their web based operation that used to sometimes provide some semblance of assistance to people outside the US who tried to comply, so they don’t really want compliance. They want people to fail in the manners that they can figure out, so they can enforce penalties.
As I noted on another recent thread at IBS, in 2007, the IRS assisted a subsection of US taxable persons living abroad to clear up their misunderstandings of their filings, and underpaid their taxes, etc.
See what efforts the IRS went to to assist those working at foreign embassies who misunderstood their filings and underpaid their fair share of US taxes, and note that they did NOT demand that they enter some kind of punitive OVDI type program:
IR-2007-67 March 22, 2007
IRS Further Extends Deadline for Settlement
Offered To Certain Foreign Embassy Staff
WASHINGTON – The Internal Revenue Service is providing a further extension, until June 30, 2007, of the deadline for current and former U.S.-based employees of foreign embassies, consular offices and missions and international organizations to participate in a one-time settlement initiative to resolve outstanding tax matters related to their employment.
Following requests from several embassies, the date is again being extended to make certain those wishing to participate in the initiative have the opportunity to do so.
The offer is open to employees of those organizations who are U.S. citizens, green-card holders and foreign employees who have tax obligations. Accredited diplomatic personnel are generally exempt from income taxes on their wages under the Internal Revenue Code and international treaties or agreements.
The IRS estimates that as many as half of these employees subject to U.S. tax fail to report their wages, claim deductions they are not entitled to, incorrectly establish SEP/IRA retirement plans, fail to pay self-employment tax or fail to file tax returns.
To participate, employees must submit amended or original tax returns for tax years 2004 and 2005 that properly reflect their income and expenses. Participants in the settlement will not be required to provide tax year 2003 returns, which was previously part of the settlement eligibility requirement. In addition, participants with erroneously established SEP/IRA plans will not be required to distribute amounts contributed to these SEP/IRAs for tax years prior to the 2004 tax year. This change follows discussions with embassies and provides consistency with the income tax portion of the settlement initiative.
IRS will remove the 2003 tax year issues from the settlement elections previously received from taxpayers.
IRS encourages those affected taxpayers to act quickly so to avoid a future audit process that could prove costly. Foreign embassy, consular office or international organization employees who fail to come forward may be subject to IRS audits and penalties which could cover more than just three years.
I noted that scarcely 2 years later, Timmy TurboTaxCheat Geithner was rewarded for his own underpayment and underreporting of his US taxes and that of his domestic employee by being made Secretary of the Treasury – his failings in compliance attributed as understandable and non-willful.
Of course, he failed to give the 6-7 million deemed US taxable citizenserfs outside the US any of the same understanding, and beat them about the head with blanket insults and threats, and willfully misled many into the abusive OVD programs.
Funny how some US taxpayers ‘abroad’ got understanding and accommodation in 2007, but the default position in 2009 and after was that we were all guilty before the fact.
I will never forget.
typo resulted in erroneous icon change.
I will never forget Timmy Turbo Tax Cheat Geithner’s absolution of his tax and filing failures – rewarded with waiving of all penalties, and confirmation as Treasury Secretary.
Geithner Questioned on Tax Returns
By JACKIE CALMES
Published: January 13, 2009
“See what efforts the IRS went to to assist those working at foreign embassies who misunderstood their filings and underpaid their fair share of US taxes”
That was helping people who were living and working in the US, who were working at other countries’ embassies in the US. That didn’t help anyone who was living outside the US.
For example the IRS office at the US embassy in Tokyo had already been closed by then, and the IRS office at the US consulate in Toronto had already been closed earlier. But enforcement to collect penalties, well sure of course, open those offices everywhere.
“I noted that scarcely 2 years later, Timmy TurboTaxCheat Geithner was rewarded for his own underpayment and underreporting of his US taxes and that of his domestic employee by being made Secretary of the Treasury”
Well sure, more recent news is that the IRS rehired lawbreakers that the IRS had previously fired.
Nice piece about Marvin van Horn.
I sure do miss his commentary and great words of wisdom.
I cannot take credit for MVH. It was suggested to me that I recruit Marvin van Horn to write for Isaac Brock Society–by a very knowledgeable person who said that Just Me knew more about OVDP than anyone alive. I grateful that he accepted my importunities to join us.
After yesterday’s mention of Just_Me / Marvin, I wondered if he had made it on his Pacific Crest Trail hike this summer. So I googled it, and yes, it looks like he made it. Saw his name on a list for 2015 PCT. That is an amazing feat.
Glad to hear that Just Me is out there maximizing his LCUs on something he loves. I learned so much from him here at IBS, about OVD, FATCA, FBARs, CBT, etc. and he never lost patience with explaining what he had learned with newbies. His posts helped me so much, and he was always a source of wise advice and information here. What he so generously shared with all of us gave me significant tools and support in extracting myself from the lengthy, deep and painful morass of involuntary UStaxableserfdom over the last 4 years.
I owe Just Me a debt of gratitude.
Bless you Just Me!
Consider the TIGTA report findings below in light of the IRS rationale for FATCA and its obsessive threats and persecution of those outside the US, particularly since 2009 – whose only ‘risk’ indicator is having been born in the US or of US parents rather than economic relationship with the US. Consider also the TIGTA report in light of the asinine strategy of OVD and Streamlined and resulting pressure for those abroad to renounce as the only recourse for relief – escpecially as applied to the population of Canadians with a US burden (already more likely to be paying higher Canadian taxes) and similar individuals around the globe.
“Tuesday, November 24, 2015
TIGTA: IRS Should Shift Definition Of Rich From $200k to $600k For Audits
By Paul Caron
The Treasury Inspector General for Tax Administration has released Improvements Are Needed in Resource Allocation and Management Controls for Audits of High-Income Taxpayers (2015-30-078):
Given the IRS’s goal of providing higher audit coverage to high-income taxpayers and its reduced operating budget, it is that much more important that the IRS selects audits that have the highest compliance impact. However, it is not clear that the IRS audits the most productive high-income taxpayer cases or that it has a clear rationale for the inventory balance it has established among taxpayers at different TPI levels…..”
Some of us low income filers (with $0.00 of US tax) need audits too. The IRS refuses because an audit would prove that their allegation of fraud was based on corrupt alterations of IRS records.
I will never forget or forgive Canadian collusion with the FATCAnatics.
Consider the US extraterritorial demands for even children to file an online FBAR and then consider it again with awareness of the now CRA enforced and Ministry of Finance enabled FATCA IGA Canadian treatment of Canadian citizens’ and residents’ personal and financial information in light of the criticism leveled by a previous Canadian Privacy Commissioner (Chantal Bernier) of Canada’s domestic FINTRAC regime in 2013;
…”Officials say Canadians have no way of knowing if they have erroneously landed in this database of suspected terrorists and money launderers — and, by law, files cannot be erased for at least 10 years.
In an interview with CBC News, Chantal Bernier, deputy privacy commissioner, said the current situation is unacceptable.
“Essentially, FINTRAC receives and keeps information about innocent transactions, about Canadians who have absolutely no guilt, no reason to be in a database that is characterized by … suspicion of illegal activities,” she said.
“The mere inclusion in the database without justification is a violation of the right to privacy.”
Michael Vonn of the B.C. Civil Liberties Association said it is impossible to know what the implications might be for individuals flagged in a government database as “suspicious.”
“When individuals suddenly find themselves of interest to say Canada Border Services, or the Canada Revenue Agency … we don’t know how much of this leads back to FINTRAC.””….
Not only will I never forget what happened in 2011, I will NEVER forget that somehow our current Privacy Commissioner, the Harper CONs, and potentially our current Liberal government – unless we hear otherwise and they act to nullify the FATCA IGA, essentially do to those of US birthplace and/or parentage what they are not allowed to do, or are roundly criticized for doing under domestic Canadian laws related to money laundering and terror funding.
FATCA is called the “Son of FBAR”. Its creators envisioned that it should be used for broader purposes than only US taxation ( http://bsmlegal.com/PDFs/CarlLevin.pdf http://www.taxanalysts.com/www/features.nsf/Articles/7FE9806866554F5985257A5500712E6D?OpenDocument http://maplesandbox.ca/2013/carl-levin-fatca-for-law-enforcement-national-security/ ) Yet, our current Privacy Commissioner is silent on the FATCA IGA regime in which a foreign power extracts domestic personal and financial information from Canadian citizens and legal residents and keeps it ‘offshore’ for an unlimited term, and shares it without limitation, without notice and without recourse.
Therrien has criticized the FINTRAC rules in terms of over collection that would entrap innocent law abiding Canadians, yet he has not criticized the FATCA IGA which collects based solely on the basis of “US indicia” including national origin, US birthplace, parentage, etc.;
Ex. “….The goal is to make sure only suspicious transactions are investigated, and not people who have done nothing wrong.”…
and the BCCLA says:
“….As the Privacy Commissioner has just stated in his submission to the Senate Committee on National Security and Defence, Bill C-51 would make available to 17 federal departments and agencies, including FINTRAC, the RCMP, CSIS, CSEC and the CRA, potentially all the personal information that any department may hold on Canadians. All the 17 federal departments would be in a position to receive information about any or all Canadians’ interactions with government in what would be an unprecedented blurring of the mandate of the 17 different institutions..”
Here’s a really sad incident reported on CTV Ottawa referring to general anti-americanism that I’ve been watching all these years….until I became more affected by this crap and hence lost sympathy. I doubt my comments will pass moderation; they are mild, but just “off topic.”
I personally wouldn’t put my name forward as this family did, knowing what I know today. Anyone, feel free to set them straight in the comments section.
‘This girl said (to me) she would skate up to Americans, slap them,’ Addison recalls, ‘and with her hand, she made gun gestures and shooting sounds.’
Fight terrorism by becoming a terrorist, right?
Meanwhile, the US isn’t the only country that put its own citizens in concentration camps due to their ancestry. Canada did the same. First Nations can tell you what Canada’s been doing for 200 years. Canada’s a terrorist country, so the new budding terrorists should attack themselves too.
I know many Christians who are only Christian on Sunday’s.
Maybe the animosity has more to do with conditioning, than the fact that the girl is American.
Religious children are meaner than their secular counterparts, study finds:
I read Just Me’s posts of the federaltaxcrimes blog, and he inspired me to not cave in to the IRS. I was strongly considering opt out then ended up successfully transitioning into the domestic streamline program. I consider him the Rosa Parks of OVDI.