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!
SIN…that’s all that my wife is legally required to provide. And she does have a SIN. Tough Shit, CRA (sub-department of the IRS).
“(6) Every person or partnership who fails to provide on request their Social Insurance Number, their business number or their U.S. federal taxpayer identifying number to a person required under this Act or a regulation to make an information return requiring the number is liable to a penalty of $100 for each such failure, unless
(a) an application for the assignment of the number is made within 15 days (or, in the case of a U.S. federal taxpayer identifying number, 90 days) after the request was received; and
(b) the number is provided to the person who requested the number within 15 days after the person or partnership received it.”
So if the person fails either (a) or (b), they can be penalized.
If the person applied for a US federal taxpayer identifying number 10 days before the request was received from a person required to make an information return, and subsequently provides it to the person who requested the number within 15 days after the person received it, then the person complies with (b) but not (a), and therefore the person is liable to a penalty of $100.
So even if the person already applied for the number, they have to apply again within 15 days after the request was received.
My wife’s application for US Social Securiy Number was made 23 years ago (before the US invented Individual Taxpayer Identification Numbers) and has never been granted nor rejected. Her first 4 applications for US Individual Taxpayer Identification Number were rejected. How many Canadian penalties does she have to pay? She has never set foot in Canada, but extraterritorial application of law is not a stumbling block for Canada.
Even the US Court of Appeals for the Federal Circuit didn’t call HER frivolous for failing to fabricate a US number before the IRS finally granted one; the court called ME frivolous for failing to fabricate one for her. Hey Canada, you’re missing your chance.
“It’s not clear to me in what context a US tax number is being required here – it might have nothing to do with FATCA or CRS.”
It pretty clearly doesn’t have anything to do with CRS. After all, it doesn’t name all the foreign countries who signed on to CRS.
But did it predate FATCA? It could be related to QI. Oh s*it. The IRS informed me of my ITIN around 8 years after TD Waterhouse closed my account, and I didn’t know I was supposed to inform TD Waterhouse of my ITIN. And that’s for a tax year which hasn’t been closed off yet — the IRS alleged a penalty was owing, US Tax Court ordered the IRS not to collect the alleged penalty, thirteen months later the IRS partially collected the alleged penalty, and two years after that the IRS revealed that the IRS deleted records of partially collecting the alleged penalty, so where did the money go? So, hmm, did the IRS give the money to CRA to pay a Canadian penalty that I didn’t even know about?
“liable to a penalty of $100 for each such failure”
How is this cmputer?
Bank: Give me your TIN.
Ordinary Citizen: No.
B: (That’s $100) Give me your TIN.
B: ($200.) Give me yo TIN.
B: ($300.) ~~~~
Or will the ask every two weeks, monthly, yearly, once every blue moon?
Or is it just once per document requiring it?
Is the fine applied only for cetain documents of for all?
“It’s not clear to me in what context a US tax number is being required here – it might have nothing to do with FATCA or CRS.”
A webpage at https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/financial-slips-summaries/part-xviii-information-return-international-exchange-information-on-financial-accounts.html shows that the context is indeed FATCA/CRS. Following the “Penalties and Interest” link on that page takes you to https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/financial-slips-summaries/part-xviii-information-return-international-exchange-information-on-financial-accounts/penalties-interest.html where the penalties information is set out.
But the penalty described here is about failing to provide a TIN. There’s clearly some kind of penalty also for providing false information, as can be seen from the “Taxpayer Relief Provisions” (https://www.canada.ca/content/dam/cra-arc/migration/cra-arc/E/pub/tp/ic07-1/ic07-1r1-17e.pdf).
Possibly somewhere else in Canadian tax legislation there’s a general prohibition against providing false information, and the penalty structure for doing so would apply to false information provided in an AEOI context the same as in any other context.
I would think so.
Liars are generally not happy about being lied to, thus governments generally punish lying severely.
“Liars are generally not happy about being lied to, thus governments generally punish lying severely.”
Governments and courts punish honesty.
When the IRS coerced me to commit perjury, I complied, and the IRS accepted the perjured returns. I informed courts of my compliance in filing perjured returns, and courts did not care.
IRS employees and US Department of Justice employees filed perjured declarations (signed under penalty of perjury under 28 USC 1746), I proved perjuries, and courts did not care.
I filed a motion for leave to tell the truth and a court denied my motion. The court ordered that I should sign declarations under penalty of perjury under 28 USC 1746, but denied me leave to make the declarations truthful.
“Regarding the Dutch video… I watched that last year, at some point. The most depressing thing about it was the compliance and resignation with which these Dutch citizens simply accepted their fate, ground through the paperwork and paid huge sums to accountants and the US government. So law-abiding!”
If they wanted to get back in their bank accounts, they needed to provide their TIN. I’m presuming that they admitted to their US personhood, probably with no idea of what was coming as a result. Again, it’s the innocents getting screwed here, the bad guys are still laughing, the wise ones still ducking.
The most depressing thing about that situation for me is when the reporter tried to get answers from the Dutch government as to why Dutch resident citizens where being harassed for taxes by the USA, the Dutch reporter was told to ask the IRS.
That sickens me to the stomach. Spineless fecking politicians.
I guess governments all over the world have decided that they cannot protect these people and that the situation will eventually resolve itself when their are no more Americans abroad, at least none that will admit to it.
As to banking US checks/cheques – I have a few here that (idiotically) were sent to me due to share sales that were sent electronically but had an odd bit left over. I think they total about $350.
They are pinned to my notice board, they will never be cashed as they risk giving me “US indicia” followed by a mystery banking lock out with no reason given.
I’m putting it down to US arrogance that they would even think I could cash a $30 American check/cheque in Belgium, but perhaps I’m taking that too far.
The provision for the $500 fine is described at https://www.fin.gc.ca/drleg-apl/2016/bia-leb-1016-l-eng.asp
But again this applies only to failure to provide a TIN, not to false information.
Moderators please give my e-mail address to Mike and I’ll help him if he wants.
“(2) A person required to make an information return referred to in subsection (1) shall not knowingly use, communicate or allow to be communicated, otherwise than as required or authorized under this Act or a regulation, the TIN without the written consent of the reportable person.”
Is there any penalty for violating that part of the law?
Also, when a person required to make an information return obeys that part of the law, but the recipient of the information return communicates the TIN without written consent (e.g. IRS and US Department of Justice did so), is there any penalty? Is there even a prohibition?
“being lied to” is the key. The court ordered you to lie but not to lie to the court. Court does not handle the returns they forced you to lie on.
““(2) A person required to make an information return referred to in subsection (1) shall not knowingly use, communicate or allow to be communicated, otherwise than as required or authorized under this Act or a regulation, the TIN without the written consent of the reportable person.”
Is there any penalty for violating that part of the law?”
That may be included just to comply with the fragments of data protection rights still available to US citizens, such as (perhaps) a purely theoretical right not to have their SSN hijacked by anyone other than a tax agency.
“If they wanted to get back in their bank accounts, they needed to provide their TIN”
So, they had their accounts frozen I take it.
The Dutch gov. official’s response seems to be the common one from just about any country.
Ironically, when I tried to explain FATCA to an aquaintance who is a USC and who works for the US Embassy in Japan, he got angry and shouted “This is Japan, US law has no juristiction here!” That was two years ago. Wonder what he thinks now….
Back to an earlier point, bank fraud.
I understood bank fraud to be, in part, similar to mail fraud. Mail fraud is not defrauding the postal service, it is defrauding someone else via the postal service. Bank fraud not similar?
On Quora right now is a chap called Mike Brown who claims everything I have told him about the treatment of US citizens abroad is a nonsense, there are no double taxes and that the description of the reporting as an annual warrantless search with the person being required to prove their innocence is completely wrong, and that I’m ignorant.
I do hope he pops along for a chat.
[sarcasm]My bank can relax.[/sarcasm]
Sent your email address to Mike as requested.
Regarding the Dutch, they could have provided TINs to unlock their bank accounts, and stopped there. (Apparently a few hyper-paranoid Swiss banks are requiring “proof” that their US-person customers are actually tax compliant, otherwise most would be happy with the number for FATCA reporting.) So for the Dutch victims, the approach should have been obtain the TIN or SSN, show it to the bank, and any further correspondence from the US government goes directly into the recycling bin. (Though for safety’s sake I’d at least look into the collection provisions in the tax treaty.)
Utterly spineless on the part of the Dutch government and banks, though.
Regarding the $100 and $500 fines in the Canadian law, it’s very unclear to me how they would be assessed, by whom they would be collected, and so forth. Certainly the banks wouldn’t be demanding payment.
I suspect that after whichever committee wrote the first draft of the CRS legislation, someone said “what if the customer refuses to cooperate?” So with a collective shrug they added a nominal fine to be used as a vague and general threat. (Not unlike the $500 perjury fine with on the US passport application, which I’ve always maintained was a pretty good deal, $50 per year for a ten-year passport is considerably cheaper than paying someone to file your tax returns.)
I tend to the view that most of us rack up about $10,000 in theoretical fines every day by breaking traffic laws, innocently failing to report certain things on our tax returns, falling afoul of unknown rules or otherwise living normal lives in a complex bureaucratic society.
So this discovery isn’t costing me any sleep either.
“Regarding the $100 and $500 fines in the Canadian law, it’s very unclear to me how they would be assessed, by whom they would be collected, and so forth. Certainly the banks wouldn’t be demanding payment.”
In any event, trying to fine a taxpayer for not providing a TIN for a reportable account could open up a whole can of worms on the question of “what is a reportable account?” I seriously wish my government would make that mistake.
“So this discovery isn’t costing me any sleep either.”
The fines referred to in the links I posted are for refusing to answer, not for answering falsely. I didn’t find anything on that. It might just be covered by a more general prohibition somewhere (e.g. thou shalt not lie to the tax man).
Indeed, that was my question: if the $500 fine is for failure to provide a TIN, I would assume that applies to someone who indicates US (or other foreign) tax residency then refuses to provide the tax number.
What happens then to someone who does not indicate US tax residency but is later, through other indicia, deemed by the bank to be a US person?
It’s an unlikely scenario, given that banks do not have place-of-birth information, and other indicia like a US address can be easily explained away: “Yes I lived in the US for a few years. I was on a student visa. No, I didn’t keep the paperwork or my old passport. No, I never had a US Social Security Number.” (Or “I was born in the US, but my father was a diplomat and I was not entitled to US citizenship.”)
Should it ever come to this, my defence will be that I have no idea what “US tax residency” means, so I left that section blank.
“Indeed, that was my question: if the $500 fine is for failure to provide a TIN, I would assume that applies to someone who indicates US (or other foreign) tax residency then refuses to provide the tax number.”
Apparently it applies to anyone with US indicia (e.g. US birthplace) if the bank chooses not to apply the “cure”. So my bank considers my account reportable even though I’m not tax-resident in the US.
“What happens then to someone who does not indicate US tax residency but is later, through other indicia, deemed by the bank to be a US person?”
I suspect all any bank cares about is not getting marked non-compliant.
“It’s an unlikely scenario, given that banks do not have place-of-birth information,”
In my country they do. Good for Canada if Canadian banks don’t have to collect that detail.
It’s very useful that our banks never collected place of birth data, and still accept a drivers licence rather than a passport as photo identification. (Where are you again, assuming that’s something you disclose?)
I’m curious about a German account I have, which was opened with a Canadian passport showing US birthplace. Currently it’s well under any FATCA or CRS reporting limits so likely not even being looked at. I don’t recall whether I gave place of birth on the application form; certainly I would only have listed Canadian citizenship. The passport was brought to the post office for verification (it’s an online bank) but I’m not sure they did anything beyond look at it, I don’t recall any scans or photocopies being made. Earlier in the year they started the CRS process, wanting either a change of address (to Canada in our case) or proof of registration (we’re just using a friend’s apartment as our mailing address) but we’ve ignored it with no ill effect.
I don’t think CRS has any thresholds. FATCA does, but they’re optional.
An article at https://www.lexology.com/library/detail.aspx?g=29358440-9e4d-4a56-9136-c73c457185b0 has some comments on Canada’s penalty:
The fact is, it’s almost impossible for the actual victims – the taxpayers – to even find out what the law requires them to do. No tax agency anywhere seems to have made any effort to inform the people it most concerns. That suggests to me that none of them are going to be enthusiastic about trying to enforce these penalties.