Excerpted from AngloInfoBlog
Posted on September 21, 2017
by Virginia La Torre Jeker J.D.
My heart fell when I saw this tweet this morning, though I told myself it likely won’t affect any “minnows.” Haven’t we had more than our “fair share” of bad news? Will there never be an end to this perverse & persistent notion that #AmericansAbroad, #AccidentalAmericans et al are automatically guilty of tax evasion?
RS CID Chief: “Significant” International Tax Investigations Under Way
Updates on IRS "Offshore"https://t.co/3LqygkZfkx pic.twitter.com/TE1RohN6rz
— V. La Torre Jeker JD (@VLJeker) September 21, 2017
So the IRS is forming a new International Tax Enforcement Group in Washington DC.The group will be comprised of IRS personnel in DC as well as IRS agents from other IRS locations around the nation, personnel from the Justice Department’s Tax Division as well as international partners.
International partners? What does this mean? Presuming solicitor client privilege will rule out tax lawyers, will accountants be expected to “turn” on their clients? Or does it refer to further involvement of foreign tax agencies? Will privacy of taxpayer information simply disappear completely?
We know that the IRS has a tremendous volume of raw data about US taxpayers and their foreign financial assets. This has been obtained from various sources, including the Offshore Voluntary Disclosure Programs which, in one form or another, have now been running for 8 years. Since 2009 with the inception of the first IRS Offshore Voluntary Disclosure Program (OVDP), numerous taxpayers have provided detailed information to the IRS which has been steadily fed into its E –Trak System. More data was obtained via the Swiss Bank Non-prosecution Program, various whistleblowers and investigative journalist leaks, and more recently from data supplied by foreign governments and foreign financial institutions pursuant to the “Foreign Account Tax Compliance Act” (FATCA). It is planned that this new International Tax Enforcement Group will be more efficiently mining this data and Ford believes that this could result in tax investigations in “other countries” and “other jurisdictions” that have as yet, not been in the IRS criminal crosshairs.
Perhaps this is the “big” moment we’ve waited for from the beginning. A huge (re)action on the part of the IRS that will bring expats together in new ways to fight back? Will we finally see some financial support from people who can truly afford to do so? Civil disobedience? I have often wondered why any of us would worry about info gathered from the Swiss bank program, whistleblowers, the Panama Papers, etc. This would appear to apply only to those with far more money in foreign accounts than any of us have. And good gawd what other countries & jurisdictions ?
But the little nagging bit is the last item – from FATCA. No one save the IRS & the foreign tax agencies know what information has been turned over. And the banks have not adhered to the lower thresholds because the IGA’s allow them to do so. There will probably be many, many mistakes which will cost a lot of grief, time and money when no income tax is even owed.
Here’s the other little gem in the announcement:
One of the campaigns involves “OVDP Declines and Withdrawals”; its focus is on OVDP applicants who applied for pre-clearance into the program but were either denied access to OVDP or withdrew from the program of their own accord. They are now the subject of more intense IRS scrutiny for audit. I know of many frightened taxpayers often telling the same sad story – it usually went something like this — their tax return preparer (or other advisor) convinced them to enter OVDP. However, upon fully understanding the facts of their case, it was determined that entry into OVDP was a clear case of “overkill” and was unwarranted. Some of these individuals successfully withdrew from OVDP and obtained tax compliance perhaps through a penalty-free IRS Streamlined initiative. Now, these individuals may be targeted under this latest IRS “campaign”. How lovely!
This stinks. It has that same aroma of FAQ 35.
From form 14653 (required for Streamlined Foreign)
I acknowledge the possibility that amended income tax returns I am submitting under the Streamlined Domestic Offshore Procedures may report income for tax years beyond the three-year assessment limitations period under I.R.C. § 6501(a). Other assessment limitations periods in I.R.C. § 6501 may allow the Internal Revenue Service to assess and collect tax. If I seek a refund for any tax or interest paid for the omitted income that I am reporting on my amended income tax returns because I feel that my payments were made beyond the assessment limitations period, I understand that I will forfeit the favorable terms of the Streamlined Procedures.
I recognize that if the Internal Revenue Service receives or discovers evidence of willfulness, fraud, or criminal conduct, it may open an examination or investigation that could lead to civil fraud penalties, FBAR penalties, information return penalties, or even referral to Criminal Investigation.
If one has managed to obtain “reasonable cause” via the IRS Form 14653, (a very detailed 5 page form), filed Streamlined, paid applicable tax etc, why would having opted-out of OVDP automatically invite suspicion? This sounds a lot like this delightful little tidbit; according to the Taxpayer Advocate, the agency assumes individuals with offshore accounts are suspect of fraudulent activity. Or what about if one had already renounced, assuming there were no further issues with IRS and then comes this?
To cheer u, IRS Lost Yesterday on #Willful #FBAR penalty https://t.co/UCYgaq9YLM Will try to blog on this soon
— V. La Torre Jeker JD (@VLJeker) September 21, 2017
Bedrosian v United States of America, Department of the Treasury & the IRS
US District Court for the Eastern District of Pennsylvania
September 20, 2017
Mr. Bedrosian was seeking a refund of $9,757.89 paid when he was found to be “willful”in failing to report a 2nd Swiss account on his 2007 FBAR; the government counterclaimed for the entire amount of the penalty of $1,007,345.48. !!!
The Court had posed 2 questions to the parties:
- 1) Does any precedent exist for finding willfulness based on conduct similar to Bedrosian
- 2) Did the government sustain its burden of proof regarding the calculation of the penalty amount
I won’t try to summarize the court’s discussion of all the factors it weighed to determine (non) willfulness. Frankly, I never can follow all the ins-and-outs of the legal process. The court concluded:
“Although we apply the lower, civil standard of willfulness here, we nevertheless do not see Bedrosian’s as the sort of conduct intended by Congress or the IRS to constitute a willful violation. Because we find the government failed to meet its burden as to the requirement of willfulness, we decline to engage in an analysis concerning the calculation of the penalty amount.”
In addition, the court ruled that the $9,757.89 was illegally extracted from Bedrosian and that the government owes him that sum.
After the recent depressing cases of Pomerantz and Dewees, this ruling does indeed, give one reason to smile. The IRS can be beat!
“It’ll probably never get noticed”
A big comfort, that. NOT.
“There in lies the rub. One can not say it csn not happen when there are many to whom it can happen, depending on their circumstances.”
For some it’s safer to comply – for instance if they have US assets. Those who’ve never filed, don’t need the passport or the citizenship, and don’t have US assets/income, should think very carefully indeed before filing.
“It depends on circumstances leads Homelandes to not care a wit as none live under any of the various sets of circumstances we live under.”
Of course most people living in America neither know nor care about US citizens living elsewhere. Why should they!
“why the constant drum beat of “Renounce before it’s too late.”
“Renounce to solve the banking access problem” is the drumbeat I’m familiar with.
“Why should they!”
IF ( yes, big if) they truely care about the rule of law, then they should care. If they care about individual rights, as they say they do, they should care.
But back to the circumstances, it is highly discomforting to keep reading here of all places that things are different than they are for me and others in similar circumstances.
Beyond that, there is the constant argument to not plan for the future (only the present matters) from one side of the mouth while the other side of the mouth says “renounce and rejoice” because of what might happen in the future to an individual who doesn’t.
Not for you, maybe, but for me and the ostrich and 7.1 million others, it is – especially those of who’ve never filed.
Renouncing without coming into compliance does not solve the banking issue. You need a CLN to solve that and even that is losing its get out of jail status. Recent posts from a French woman born in the US tells how even with the CLN she is having difficulty banking in France and she is a citizen of France since birth.
The there is the, well probably one of several, completely ignored part of this equation, the requirements of the nations in which we live to gain citizenship. But I fear this is gett too far off track.
HOWEVER, this banking isdue MUST be taken care of BEFORE one is locked out of their bank unless they have the massive amount of cash needed to live off of until they can renounce etc, etc etc stuffed in their mattress. Again that same “only the present matrers” from one side while the other shouts “renounce and rejoice” before it’s too late.
weird
“IF ( yes, big if) they truely care about the rule of law, then they should care. If they care about individual rights, as they say they do, they should care.”
Why fret about what US residents care about?
“But back to the circumstances, it is highly discomforting to keep reading here of all places that things are different than they are for me and others in similar circumstances.”
Why? Some have options (such as not filing) which may not be practical for others in different circumstances.
“Beyond that, there is the constant argument to not plan for the future (only the present matters) from one side of the mouth while the other side of the mouth says “renounce and rejoice” because of what might happen in the future to an individual who doesn’t.”
What mouth?
“Why fret about what US residents care about?”
The can vote in US elections.
“Why? Some have options (such as not filing) which may not be practical for others in different circumstances.”
Gotta renew that passport at some point.
“What mouth.”
The collective mouth shared by this community.
“Renouncing without coming into compliance does not solve the banking issue. You need a CLN to solve that”
Yes, a CLN solves most banking access issues. The CLN is obtained by renouncing. (And please note, I’m not advocating wholesale renunciation. Not everyone wants to renounce or can renounce. )
I agree a CLN may not solve all issues. It depends on the individual bank’s policies.
See that’s the problem, I, and I believe many others, can not renounce.
But to renounce, one needs to be in compliance, therefore, to get a CLN, one must be in compliance.
They’re not going to vote to repeal FATCA. They vote for senators/representatives, very few of whom would even bother to read a bill about FATCA.
Commenters on a blog don’t have a collective mouth or a single point of view.
“See that’s the problem, I, and I believe many others, can not renounce.”
You have my sympathy.
“But to renounce, one needs to be in compliance, therefore, to get a CLN, one must be in compliance.”
No, you don’t need to comply with US tax law in order to renounce US citizenship.
Most people cannot renounce, cannot comply, and just live in hope.
Why fret about what US residents care about?”
The can vote in US elections.
They’re not going to vote to repeal FATCA. They vote for senators/representatives, very few of whom would even bother to read a bill about FATCA.
“What mouth.”
The collective mouth shared by this community.
Commenters on a blog don’t have a collective mouth or a single point of view.
True on both points, but if FATCA is not repealed, then what are the options for people in my situation. Due of starvation after our last bank account is closed?
While bloggers do not have a collective mouth, this forum is about a narrow topic. Excluding trolls and the like, those fighting to free ourselves from this mess, one would think, would have a much more collective voice. Learly we do not.
My point however, remains much intact. These issues are dynamic, focusing on where they are today will mean one can not be prepared for where they will be tomorrow.
“No, you don’t need to comply with US tax law in order to renounce US citizenship.”
That may be, but in order to solve my situation, I must renounce “cleanly”. I do not recall the exact detail, only that upon reading a similar statement my hopes soared only to be dashed when upon further research I learned that I must do so “cleanly”. Perhaps it was the exit tax…can’t recall for sure.
@Mike,
I’m with you there.
@JapanT
Forgery is an option. A fake CLN requires junior-grade Photoshop skills, though may be of little practical use if you don’t have another citizenship.
Look at it this way. For US non-residents, if you’re rich enough go be an IRS target, you’re probably rich enough to buy another passport and protect yourself. If you’re too poor to be a target (anyone earning below the FEIE) you are by definition safe. And compliance could even be profitable thanks to child tax credits.
Ask yourself, why would they assess FBAR fines against a foreign resident who couldn’t afford to pay them, with very limited collection tools? Very poor ROI.
“It’ll probably never get noticed”
‘A big comfort, that. NOT.’
“Not for you, maybe, but for me and the ostrich and 7.1 million others, it is – especially those of who’ve never filed.”
Because those 7.1 million have no US indicia in their passports.
“But to renounce, one needs to be in compliance, therefore, to get a CLN, one must be in compliance.”
No, you don’t need to comply with anything to renounce.
After renouncing, if you want to avoid the problems of being a covered expatriate, you have to come into compliance before the deadline for Form 8854. But if you become a covered expatriate, your CLN remains valid.
“A fake CLN requires junior-grade Photoshop skills”
Someone posted a while ago about a bank in Hong Kong where you can download a form for CLN and you don’t need Photoshop.
“For US non-residents, if you’re rich enough go be an IRS target, you’re probably rich enough to buy another passport and protect yourself.”
Wrong. Even though my wife owns a house (which I don’t), she isn’t rich enough to buy another passport. But wait, she already has another passport, from the country where she was born. That didn’t stop the IRS from targeting her.
“If you’re too poor to be a target (anyone earning below the FEIE) you are by definition safe.”
By coincidence a few days ago an IRS lawyer told my wife that the IRS stopped targeting her. However, the new IRS transcript still deleted credits which had formerly been transferred in by offset from other years, i.e. where did the money go. So even when the IRS stops targeting a pauper, the IRS doesn’t stop stealing from a pauper.
“Ask yourself, why would they assess FBAR fines against a foreign resident who couldn’t afford to pay them, with very limited collection tools? Very poor ROI.”
Very high ROI, actually. You pick an easy target and utterly destroy it. Those who are rich enough see what you did to an innocent and out of fear of getting the sane treatment, turn them selves in begging for mercy.
““But to renounce, one needs to be in compliance, therefore, to get a CLN, one must be in compliance.”
No, you don’t need to comply with anything to renounce.
After renouncing, if you want to avoid the problems of being a covered expatriate, you have to come into compliance before the deadline for Form 8854. But if you become a covered expatriate, your CLN remains valid.”
I would be covered expat by virtue of not being in compliance. As I said earlier, there is a hang up, can not recall exactly. May be on the Japanese side, again do not remember. All I can recall right now is that if not “cleanly” done promlems remain.
Forgety is a crime. I am not (yet) a criminal and prefer to keep it that way.