Category: FBAR

The agony of US citizenship for US citizens living outside the US

cross-posted from renounceuscitizenship blog

The agony of US citizenship for US citizens living outside the US
 

[polldaddy poll=5910890]

 
U.S. citizens cry out in agony! But, the U.S. government Silence is Deafening .

The cries are getting louder and louder! Inside the U.S. only Taxpayer Advocate seems to be listening. Outside the United States, American Citizens Abroad continues to soldier on. In Canada, the home of (probably) the largest number of U.S. citizens (many of who are also Canadian citizens) the Government of Canada is listening. Finance Minister, Jim Flaherty, has been consistent in his position that FATCA is intrusive and unnecessary and the Canada will not collect FBAR penalties. He has been consistent with the sentiments expressed in his public letter of September 16, 2011. U.S. citizens in Canada are in a far better position than U.S. citizens in other countries. Furthermore, Mr. Flaherty has been responsive to citizen’s concerns, recognizing that Canadians are desperate for help. The evidence is building. to protect themselves from the U.S. government. Take the above poll which is from a previous post describing how renunciations of U.S. citizenship are soaring under Obama. Consider the following wisdom from a U.S. citizen living in France.

Homeland Americans do not love their “Domestic Abroad” and routinely characterize them as “traitorous Benedict Arnold’s.” Now these citizens abroad are in a complete panic now that they are aware of the U.S. tax and reporting requirements. They are facing the same compliance issues as U.S. immigrants and they are now encountering discrimination in their host countries (loss of local banking services, for example, or limited retirement investment opportunities or even being cut out of business deal by non-US partners) as a result of FATCA.

Many of them cannot easily return to the U.S. – if they did they would have to close their businesses or leave their jobs, get divorces from their foreign spouses and, in some cases, leave their minor children behind in the host country. Contrary to popular belief in the homeland, the vast majority of these people are not millionaires and run a real risk of arriving back home in the U.S. with limited assets, if not in a state of outright penury. On the other hand, they can no longer continue to reside in their host countries as U.S. citizens where they risk paying double taxes (U.S. taxes in addition to host country taxes) and must pay the increasing cost of compliance (international tax specialists to file the 1040 and a whole host of other forms demanded of overseas citizens who have built lives abroad and are permanent residents of their host countries). Even Nina Olsen, the IRS Taxpayer Advocate in the U.S., said in her 2011 report:

The complexity of international tax law, combined with the administrative burden placed
on these taxpayers, creates an environment where taxpayers who are trying their best to
comply simply cannot. For some, this means paying more U.S. tax than is legally required,
while others may be subject to steep civil and criminal penalties. For some U.S taxpayers
abroad, the tax requirements are so confusing and the compliance burden so great that they give up their U.S. citizenship.And that sums up quite nicely what is, in fact, happening. Those who are in the know and can afford it are mostly “complaining and complying” while those who cannot are renouncing U.S. citizenship. 2011 was a banner year for renunciations of U.S. citizenship. 2012 will be worse (see this and this excellent analysis over at Overseas Exile.)

http://thefranco-americanflophouse.blogspot.ca/2012/03/diaspora-tax-war-of-2012-stakeholder_27.html

In addition to the current Government of Canada, the Official Opposition of Canada (NDP) is taking the IRS assault on Canadian citizens very seriously. Individual MPs have made an effort to respond and educate. Individual MPs have organized public meetings. Interestingly, the newest NDP MP, Craig Scott is a law professor/human rights lawyer. Furthermore, he attended a public meeting about FATCA. He would be a great addition to the cause. Interestingly there has been very little support from the Liberal Party of Canada. Here is a letter from Bob Rae. Although the Green Party of Canada has only one seat in the House of Commons, their leader Elizabeth May (who was born in the U.S.) has expressed her support for Canadians.

As the FATCA implementation date comes closer and as we find ourselves in tax season, many U.S. citizens (whose only crime is to live outside the United States) are living in a state of desperation and agony. Some samples:

This man gives the word “prescient” real world application:

In closing, some “psychotherapy for U.S. citizens living outside the United States” – the Widsom of Moe Levine:

We are living in interesting times.

Did Mr. #FBAR really pay a surprise visit to Canada?

 

cross-posted from citizenshipsolutions

The FBAR Chronicles continue …
 
FBAR 101

First, A Public Service Announcement – Mr. FBAR Get’s A New Filing Due Date

This is one more of my posts about Mr. FBAR. Mr. FBAR is a mean, nasty vicious thug who has no place in any civilized society.

Thomas Jefferson once said:

Were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter.

My thoughts are that:

Were it left to me to decide whether we should have FBAR without outlaws, or outlaws without FBAR, I should not hesitate a moment to prefer the latter.

Unfortunately, Mr. FBAR has become the new symbol of American citizenship. Furthermore, Mr. FBAR disproportionately affects the local bank accounts of Americans abroad – becoming (in effect) a form of “domestic terrorism” against U.S. citizens living outside the United States.

Mr. FBAR As Applied To The Canada U.S. Dual Citizen …

As reported by CBC news, Global News in Canada, The Isaac Brock Society and various Facebook groups. a U.S. Canada dual citizen (Jeffrey P. Pomerantz – the Defendant) has been sued in Washington State, by the U.S. Department Justice, to collect FBAR penalties for the years 2007, 2008, and 2009. It appears that at the present time, the Defendant lives in Vancouver, Canada.

The actual “Complaint” filed in the Court which summarizes and explains the Government’s allegations is found here. (If you have read this far, you should pause and read the Complaint.)

The facts are horrendous. Basically the Defendant was assessed significant FBAR penalties which increased through interest charges to the point where they had grown to approximately $800,000 U.S. dollars (approximately 1,100,000 million Canadian dollars) by the time the law suit was commenced in 2016. FBAR penalties are frightening, draconian and are really a form of Civll Forfeiture. One comment, as reported on the Isaac Brock Society put it:

On a practical note, there is one commenter in particular, Kathy “Powell”, who could use upticks on the CBC article for her efforts to set things straight … if anyone here has CBC commenting privileges. (I gave mine up when “real names” were required.)

As for Jeffrey Pomerantz who is truly living “a friggin’ nightmare”, there’s just too little information to create a clear picture of his situation. I won’t judge him as others at CBC are doing. I’m just shaking my head at how those without a clue keep tossing in misinfoturds to muddy the waters even more. What is crystal clear to me is that the villain in this scene is the IRS/DOJ and even if Jeffrey Pomerantz is guilty of something he doesn’t deserve to be completely impoverished for it.

The complaint filed by the Department of Justice is here and should be read by all bloggers and other commenters. At first blush one gets the impression that this case is primarily about the IRS assessing an FBAR penalty on a Canadian citizen resident in Canada and that the penalty was based on unreported Canadian bank accounts. This interpretation reinforces the fear (real and legitimate) that the IRS might attempt to attempt to confiscate the wealth of Canadian citizens resident in Canada through civil forfeiture FBAR penalties. I do NOT believe that this is a fair reading of the Department of Justice Compliant. (The situation is bad enough without expanding it’s reach. There is no need to accelerate the “fear mongering”.)

This case is more like a Homelander with unreported bank accounts in Switzerland …

Here is why.

Please note that this story is based on FBAR violations for the tax years of 2007, 2008 and 2009. Based on the Department of Justice complaint, we see the exploration of the following factual allegations.

Factual allegations:

A. Was The Defendant a U.S. Resident Or A Canadian Resident During The Years In Question?

Although it is unclear, it appears likely that the Defendant was a both a U.S. citizen and a U.S. resident during all or some of the years of 2007, 2008 and 2009. The CBC article includes:

While the Justice Department’s complaint says Pomerantz lived in the United States during all three years, documents prepared by Pomerantz’s side found in the court file say he and his wife, a Canadian-Norwegian dual citizen, only lived in California for part of 2008 and 2009 before moving back to Canada.

Assuming that he was a U.S. citizen residing in the United States, his case (presumably) would have been viewed as that of a Homelander with offshore accounts.

B. Where Were The Offshore Accounts That Were The Basis For The FBAR Penalties?

RBC (Royal Bank Of Canada Accounts):

The Department of Justice complaint (paragraphs 12 and 13) describes the existence of RBC accounts which were opened “prior to or during 2007”. A reading of the brief suggests that the RBC accounts were NOT counted towards the FBAR penalties. The RBC accounts were in the name of a Vancouver, Canada based company. Although not conclusive, this suggests the the Department of Justice did NOT target those specific RBC accounts located in Canada.

Swiss Bank Accounts In The Name Of A Turks And Caicos Corporation

The Department of Justice pleading (paragraphs 8 to 10) allege the Defendant opened:

  • five swiss bank accounts in the name of a Turks and Caicos Island Corporation;
  • that the Turks and Caicos Corporation performed no active business but was opened for the sole purpose of holding the Defendant’s investments (paragraph 7); and
  • that the income from the accounts was NOT reported on the 2007 – 2009 tax returns (paragraphs 22, 36 and 44).

In other words, the FBAR penalties should be seen as penalties imposed on Swiss bank accounts (sounds horrible) which were located outside the Defendant’s country of residence (in a tax haven).

The Two CIBC “PERSONAL CHECKING” Accounts Opened Prior To 2001

Paragraph 5 of the Government’s Complaint describes two CIBC accounts that:

  • were opened prior to 2001
  • remained open during the years of 2007, 2008 and 2009
  • were not reported on an FBAR.

(Because they were “checking accounts” it is unlikely that they generated taxable income.)

Although we can (I think) assume that these accounts were located in Canada, the compliant does not specifically state this.

Nevertheless, my impression is that:

  • although the CIBC accounts were included in the group of accounts that were part of the FBAR penalty base (see paragraphs 17, 31 and 41);
  • the FBAR penalties were motivated by the Swiss bank accounts opened for the benefit of the Turks and Caicos Corporation.

To summarize …

Nobody deserves the treatment that this defendant was subjected to. It is however, wrong to interpret this case as the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents. There is enough FBAR hysteria already! This case should be seen as the IRS attempting to impose an FBAR penalty based on the unreported offshore Swiss accounts that were for the use of an offshore (Turks and Caicos) corporation used to hold personal investment assets.

Although FBAR penalties are (in general) unconscionable, unfair, draconian and a form of civil forfeiture):

this case should NOT be interpreted that the IRS attempting to impose FBAR penalties on the Canadian bank accounts of Canadian residents.

This post has been based largely on the Department of Justice complaint as filed in the Court.

John Richardson

What do you Think of the Penalties in These Three Cases of Unreported FBARs ?

 
Ty Warner

Ty Warner
Ty Warner, founder/owner of the Beanie Babies line, was sentenced in July 2015 for tax evasion.The panel of three U.S. District Court judges gave him 2 years of probation and 500 hours of community service. The sentencing guidelines ranged from 46 months up to a maximum of 57 months. He agreed to pay back taxes and interest of $16 million as well as a $53.5 million penalty (the full FBAR penalty of 50% of the balance of the highest account-$107,000,000). According to Melissa Harris (author of this article that appeared in the Chicago Tribune, July 15, 2015) Warner’s sentence was “a punishment that reduces evading millions in taxes to a speeding ticket,” and that the sentence “flies in the face of both reason and justice”.

Warner had an estimated net worth of $2.5 billion, and was the 209th richest American.   According to Janet Novak of Forbes:

He admitted that around Jan. 31, 1996, he flew to Zurich and deposited about $80 million at UBS AG, instructing that no account statements be sent to him in the U.S., and that he kept the account secret until November 2007. During that period he failed to report at least $24.4 million in interest income on the account to the Internal Revenue Service, evading at least $5.6 million in taxes. He also failed to file with the Treasury the required annual “FBAR” report on his foreign accounts

What beggars belief is that Mr. Warner never provided any explanation for:

  • why he opened the account
  • the origin of the funds
  • audits of his books & records show the funds did not come from his company
  • his personal domestic accounts showed no signs of the origin of the funds

In fact the evidence suggested that the funds may have been pre-tax payments of some sort. To this day, the extent of his willful tax evasion is in reality, unknown.

So why did Mr. Warner get off so lightly? Was it because his lawyer Mark Matthews used the Olenicoff Defense?
Was it because his creation, the Beanie Babies line of stuffed toys, was just too cute for anyone to believe he was guilty of such evasion?

Peter Henning a Wayne State University Law School Professor and co-author of ‘Securities Crimes ”said in an interview, “I don’t want to say anything goes,….Clearly you can’t consider race or wealth. But you are looking at character. That is something judges can take into account. The question is how much should it weigh into the decision?”

This is where Mr. Warner hit the jackpot. He received 70 letters of support from friends, employees and recipients of his charity, actions which had nothing to do with the charges and only someone with money could do.

U.S. District Judge Charles Kocoras (of the panel) based his sentence on:

…..a reading of 70 letters, Kocoras found that “Mr. Warner’s private acts of kindness, generosity and benevolence” were “overwhelming,” with many occurring before he was under investigation and, in Kocoras’ words, motivated by “the purest of intentions.” Most were done “quietly and privately.” The judge concluded: “Never have I had a defendant in any case — white-collar crime or otherwise — demonstrate the level of humanity and concern for the welfare of others as has Mr. Warner.”

So a man guilty of many years of tax evasion, who did not even account for the origin of the account nor any records of it, received an incredibly light sentence based upon support from his family, friends and beneficiaries of his kindness. Where is the law here?
 

*******

Dan Horsky
horskyThe second case is that of retired university business professor Dan Horsky. He amassed a $220 million dollar fortune, hidden in secret foreign accounts. He was a citizen of the United States as well as Israel and the United Kingdom. He spent thirty years teaching at the University of Rochester in Rochester, New York.

According to the Justice Department report:

One investment in a business referred to as Company A, however, succeeded spectacularly. In 2000, Horsky transferred his investments into a nominee account in the name of “Horsky Holdings” at an offshore bank in Zurich, Switzerland (the “Swiss Bank”) to conceal his financial transactions and accounts from the IRS and the U.S. Treasury Department.

In 2008, Horsky received approximately $80 million in proceeds from selling Company A’s stock. Horsky filed a fraudulent 2008 tax return that underreported his income by more than $40 million and disclosed only approximately $7 million of his gain from the sale. The Swiss Bank opened multiple accounts for Horsky to assist him in concealing his assets: including one small account for which Horsky admitted that he was a U.S. citizen and resident and another much larger account for which he claimed he was an Israeli citizen and resident. Horsky took some of his gains from selling Company A’s stock and invested in Company B’s stock. By 2015, Horsky’s offshore holdings hidden from the IRS exceeded $220 million.

Horsky willfully filed fraudulent federal income tax returns that failed to report his income from, and beneficial interest in and control over, his foreign financial accounts. In addition, Horsky failed to file Reports of Foreign Bank and Financial Accounts (FBARs) up and through 2011, and also filed fraudulent 2012 and 2013 FBARs. In total, in a 15-year tax evasion scheme, Horsky evaded more than $18 million in income and gift tax liabilities.

Professor Horsky’s willfulness was more involved than simply failing to report income. In 2011, He had another individual gain signature authority over the Zurich accounts. Horsky provided instructions to this individual. Then this individual was to relinquish his U.S. citizenship. In 2014, this operson filed a false 8854, did not disclose his net worth or his foreign assets and he falsely certified five years of compliance with all tax obligations.

Mr. Horskey’s sentence consisted of:

  • seven months in prison
  • one year of supervised release
  • fine of $250,000
  • $100 million penalty
  • over $13 million in taxes owed

    •  
    Again, the prison sentence was far below the maximum of five years. I guess committing an intensely willful crime which included outright fraud (and no letters attesting to his character), Professor Horsky failed to even receive one year of prison.

    An interesting observation of Eric Rasmussen at thetaxprof site : (Scroll down to “comments”)

    Interesting settlement. He’s paying just $13 million of the $18 million in taxes he owes, but $100 million more in penalties? Is this a whistleblower case? The IRS used to say the whistleblower gets a percentage only of the taxes recovered not the criminal violation penalties. They lost a big case on that in Tax Court. Is the idea going to reappear here?

    *******

    Milo & Lois Kentera

    NB: all printscreens in the Kentera account are from the Complaint filed August 13, 2016

    A more complete account of the Kentera’s situation is here
     
    The third case is that of Milo and Lois Kentera. This is much closer to the “minnow” level of FBAR “violation.” Even though this is not an expat case as the Kenteras live in the US, I am sure we all can identify with them.

    Milo Kentera was a pharmacist and inherited a Swiss bank account when his father died in 1984. At this time, the account was under $10,000 USD and remained so for twenty years. During that time, Milo added his wife Lois (a homemaker) to the account. Starting in 1984, he always advised his tax advisors/accountants of the account and he reported it on 1040 Schedule B. So far so good.

    In 2005, the account gained enough to be over the FBAR filing threshold. However, the accountant did not prepare or file an FBAR. In 2007, Milo received $257,112 (a portion of the sale of his parents’ property in Montenegro; his siblings received the other $371,536). He put this money into the Swiss account. A second accountant did not ask if any interest was earned on the account so that was omitted and again, no FBAR was filed. In 2010, yet another accountant failed to prepare or file an FBAR even though he/she included the interest and the account on Schedule B.

     
    balance of Kentera account
     
    Mr. Kentera came forward on his own, having heard of the OVDI on the radio.
     
    come forward on own Kentera
     
    By then the “2011 IRS Reign of FBAR Terror was going full throttle. Toward the deadline of the program, the Kenteras entered the 2011 OVDI program. They filed six years of FBARs for 2005-2010 (inclusive) and amended their returns to include the interest income from the account. The following printscreens show the amounts of money involved in terms of omitted tax income, balance of the account etc.
     
    changes income fbar kentera
     
    Nearly two years later, in August 2013, the IRS assessed a miscellaneous penalty of $90,092. The Kenteras then chose to opt out of OVDI. The agent who had their case then advised that they should receive non-willful FBAR penalties, which were as follows:

      Lois Kentera:

    • $500 for 2006;
    • $2,500 per year for 2007, 2008, 2009, and 2010,
    • for a total penalty of $10,500;

     

      Milo Kentera:

    • $500 for 2006;
    • $10,000 per year for 2007, 2008, 2009, and 2010,
    • for a total penalty of $40,500.

     
    The Kenteras were understandably upset and did not want to accept this fine of $60,000 either as they felt they had reasonable cause. Virginia la Torre Jeker defines what is involved in establishing reasonable cause when one has relied upon a tax adviser:

    “…various cases have noted that the taxpayer must prove three elements. First, the adviser must be a competent professional with sufficient expertise (for example, you cannot rely on an insurance agent for tax advice); second, the taxpayer must provide necessary and accurate information to the adviser; and finally, the taxpayer must rely in good faith on the adviser’s judgment.

    The Kenteras then filed a complaint in District Court alleging that the IRS had incorrectly calculated their penalties.
    The end result was unchanged; they still had to pay the penalties.

    It would appear obvious from the get go that the Kenteras did not belong in the OVDI program. However, “quiet disclosures”* were discouraged and Streamlined was not yet available (began Sept 1, 2012); the FactStatement 2011-13 came out during the first week of December. The Kenteras were put in a program they did not belong in; they clearly satisfied the three conditions for “reasonable cause” and most of all, they are an example of “those that are hurt the worst are the ones who try to come into compliance.”

    **it was not entirely clear at that time whether a “quiet disclosure” was simply filing going forward OR filing amended returns (presumably changed by FBAR accounts’ earnings). In any event, while the IRS insisted people enter the programs, there is no law that indicates one must do so.

    *******

    These three cases present some interesting observations about the treatment of those who had not filed FBARs.

    First of all, the first and second cases are Homelanders who had very large offshore accounts. Both took very deliberate steps to conceal the accounts. Mr. Holsky even went so far as to include fraudulent attempts as to ownership and citizenship of the person with signing authority for the account. Neither of them came forward on their own. Neither were able to enter the “amnesty” program, yet Mr. Warner received no jail time and Mr. Horsky received less than a year. The amounts of money involved for both are staggering to those of us who will never have anywhere near that kind of money.I can’t really evaluate their impact but I’d be willing to bet, that in proportion to their total wealth, both were able to absorb the loss without a major change in their style of living.

    In contrast, the Kenteras, also Homelanders, had a very modest account which they inherited. They always advised their accountants of its existence. Three professionals in the tax compliance community failed to prepare or file FBAR even though two of them did report the interest and existence of the account on Schedule B. They received very bad (I would say criminal) advice and went into OVDI coming out with an original penalty assessment of $90,092. So they opt out and the IRS agent then gives then a non-willful penalty totalling $60,000.

    Was it really necessary for Mr. Kentera to receive the maximum non-willful penalty for 4 years? It seems their honesty in pointing out the existence of the account counted for nothing. The fact remains that their situation clearly QUALIFIES FOR REASONABLE CAUSE. Yet the intent of Mr. Warner and even more so for Mr. Holsky, was clearly to conceal yet neither of them received anywhere near the maximum penalty; they did not come forward on their own and could not take part in the amnesty program.

    In the past (scroll down to “Statistics on Minnows in the OVDP”) we have seen demonstrations that the least wealthy pay the highest percentage of penalties, the comparison of the three cases cannot fail to boil your blood and make the average person seriously consider not becoming compliant due to obvious treatment of “minnows” as nothing short of appalling. Why does the IRS continually fail to see this? Is it really a surprise that 7 out of 8 million #Americansabroad have yet to become compliant in spite of Streamlined?
     
    Comparison Chart
     




     

Now’s the Time – Here’s What They Promised – Let’s Hold Them to It

UPDATE SUNDAY NOVEMBER 13, 2016

REINCE PRIEBUS CHOSEN TO BE PE TRUMP’S CHIEF OF STAFF

EXCERPTS:

WASHINGTON — President-elect Donald J. Trump on Sunday chose Reince Priebus, the chairman of the Republican National Committee and a loyal campaign adviser, to be his White House chief of staff, turning to a Washington insider whose friendship with the House speaker, Paul D. Ryan, could help secure early legislative victories.

But as chief of staff, Mr. Priebus will be the one who has several hundred White House staff members reporting to him. He will be the primary gatekeeper for Mr. Trump and the person most responsible for steering the president’s agenda through Congress. That role will be especially critical for Mr. Trump, who has never served in government and has few connections to important political figures.

As Mr. Trump denounced the Republican primary process as rigged and, on occasion, threatened to quit the party and run on his own, Mr. Priebus remained neutral. And when Mr. Trump secured the nomination, Mr. Priebus stood by his side.

Mr. Priebus worked with Mr. Trump on the nuts and bolts of presidential politics, trying to smooth his rough edges and staying in close contact as a bare-bones campaign prepared to go up against the Clinton machine.


PRESS RELEASE VIA MR. PRIEBUS JULY 2015

RNC PR NO FATCA

**********

I found myself wondering just what it is expats will want to focus on now, that the Republicans have the Presidency, and control of the House and the Senate. As Stephen Kish pointed out, this could change in two years (well, really just a bit more than a year as once the campaiging for the interim elections in 2018 start, we will likely have lost our chance to get this done quickly. What we do in the next year is critical to dumping FATCA and CBT.

I started thinking about what they promised and have gone through the Platform. I am going to list the main things I found that relate to our issues; if anyone finds more, please post. I also have two documents that focus specifically on FATCA and RBT as well as the link to Republicans Overseas Resolutions posted long ago on their FB site. It would be helpful if others want to isolate points and phrases to focus on in communications to the Republicans.

People may. may not want to coordinate efforts but I assume there will be letters written, emails sent and so on. You may remember that Congressman Mark Meadows (R NC) introduced H.R. 5935 seeking to have an oversight hearing on FATCA repeal. Once we know the date of the hearings and who will sit on the committee, we would start there I presume. And then follow the movement of what occurs……Calls for witnesses were posted on the Isaac Brock Society indicating interested parties should contact Keith Redmond by email at FATCA_Testimonials@outlook.com

*****

THE REPUBLICAN PLATFORM
excerpts from sections related to our issues

RESTORING THE AMERICAN DREAM

Fair and Simple Taxes for Growth p 1

The current tax code is rightly the object of both anger and mockery. Its length is exceeded only by its complexity. We must start anew. That will be an enormous undertaking and, if it is to succeed, it must command the attention and approval of the American people………….. We will welcome all to this enterprise — to discuss, debate, challenge, and amend — so that together we can restore economic growth for the American people and, even more important, renew their faith in the future

NB:This is their promise to listen.
 
Our Tax Principles p 2
To ensure that past abuses will not be repeated, we assert these fundamental principles. We oppose retroactive taxation. We condemn attempts by activist judges at any level of government to seize the power of the purse from the people’s elected representatives by ordering higher taxes. We oppose tax policies that deliberately divide Americans or promote class warfare.

NB:This would deal with the bizarre idea that 877A is retroactive.
 
To guard against hypertaxation of the American people in any restructuring of the federal tax system, any value added tax or national sales tax must be tied to the simultaneous repeal of the Sixteenth Amendment, which established the federal income tax.

NB:This would eliminate the whole need for filing in terms of taxes as value added or national sales tax will not affect Americans abroad in any significant way.
 
A Competitive America p 2
American businesses now face the world’s highest corporate tax rates. That’s like putting lead shoes on your cross-country team. It reduces companies’ ability to compete overseas, encourages them to move abroad, lessens their investment, cripples job creation here at home, lowers American wages, and fosters the avoidance of tax liability — without actually increasing tax revenues. A more damaging policy is hard to imagine.

NB:Please see an excellent paper by Roger Conklin which outlines how CBT directly affects Trade.(via The Revenue Act of 1962 & The Tax Reform Act of 1976; the U.S. has never recorded a trade surplus since 1975).

 

We endorse the recommendation of the National Commission on Fiscal Responsibility and Reform, as well as the current Administration’s Export Council, to switch to a territorial system of taxation so that profits earned and taxed abroad may be repatriated for job-creating investment here at home. We believe American companies should be headquartered in America. We should reduce barriers to accomplishing that goal. A Winning Trade Policy International trade is crucial for all sectors of America’s economy. Massive trade deficits are not. We envision a worldwide multilateral agreement among nations committed to the principles of open markets, what has been called a “Reagan Economic Zone,” in which free trade will truly be fair trade for all concerned.

NB:Trade is important to Trump. He needs to know how CBT affects it. If they offer territorial taxation to corporations,they can offer RBT to Americans abroad.
 
A REBIRTH OF CONSTITUTIONAL GOVERNMENT

The Fourth Amendment: Liberty and Privacy p 13

The Foreign Account Tax Compliance Act (FATCA) and the Foreign Bank and Asset Reporting Requirements result in government’s warrantless seizure of personal financial information without reasonable suspicion or probable cause. Americans overseas should enjoy the same rights as Americans residing in the United States, whose private financial information is not subject to disclosure to the government except as to interest earned. The requirement for all banks around the world to provide detailed information to the IRS about American account holders outside the United States has resulted in banks refusing service to them. Thus, FATCA not only allows “unreasonable search and seizures” but also threatens the ability of overseas Americans to lead normal lives. We call for its repeal and for a change to residency-based taxation for U.S. citizens overseas.

NB: This needs no comment. Other than it might be pointed out that many of the accounts reported on FBAR and 8938, are registered government plans. Some even include government grants which are taxed. The idea that these can be used for money laundering or terrorism is simply absurd.
 

GOVERNMENT REFORM

Reforming the Treaty System p 26

We intend to restore the treaty system specified by the Constitution: The president negotiates agreements, submits them to the Senate, with ratification requiring two-thirds of the senators present and voting. This was good enough for George Washington but is too restrictive for the current chief executive, who presumes to bind this country to bilateral and multilateral agreements of his devising. His media admirers portray his personal commitments — whether on climate change, Iranian weapons, or other matters — as done deals. They are not, and a new Republican executive will work with the Congress to re-establish constitutional order in America’s foreign relations. All international executive agreements and political arrangements entered into by the current Administration must be deemed null and void as mere expressions of the current president’s preferences. Those which are in the national interest but would traditionally have been made by treaty must be abrogated, renegotiated as treaties, and transmitted to the Senate for its advice and consent as required by the Constitution. The United States will withdraw from all agreements and arrangements failing those standards.

NB: Bye bye IGAs

Please see Professor Allison Christians excellent paper The Dubious Legal Pedigree of IGAs (and Why it Matters)

 
Internal Revenue Service p 27

We also support making the federal tax code so simple and easy to understand that the IRS becomes obsolete and can be abolished.

NB: Bye bye OVDP, Streamlined, threats of penalties etc
 
************

Here are three more direct sources of the Republican positions. I will probably do the same with these as above. But the more the merrier!

Resolution Supporting Residence Based Taxation

Resolution toRepeal the Foreign AccountTaxCompliance Act

A proposed RNC Resolution titled — Resolution to Repeal the Foreign Account Tax Compliance Act (FATCA) compiled by Republicans Overseas.

 

Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montreal Monday December 5, 2016

A very special meeting for “U.S. Born People” or those who are otherwise “U.S. Persons” !(Naturalized U.S. citizens or Green Card holders)

Joining John Richardson will be Andrew Grossman

Discussing the “hot topic” of U.S. citizenship (including its liabilities in a FATCA and FBAR world)

In addition to focusing on the problems faced by those who agree they are U.S. citizens (to be a citizen or not to be a citizen …), this seminar will include consideration of …

     

  • Why the US cannot automatically restore your citizenship without your consent

    •  

  • The advantages of not making use of benefits of U.S. citizenship

    •  

  • Why the U.S. cannot force those born abroad to accept U.S. citizenship

    •  

  • Dominant Nationality & FATCA

    •  

  • About the revenue rule: How is it affected by the Canada U.S. Tax Treaty? Is the Revenue Rule on the way out?

    •  

  • Can the IRS place a lien on my assets even though I live in Canada?

The idea for this meeting grew out of Andy’s participation on a post at the Isaac Brock Society (Andy05).

“If anyone wants to follow up on issues I have raised, I will be in Montréal Dec. 1-3 & 5-6 and in Stanstead QC Dec. 3-5 and would be glad to meet for coffee and exchange views. I do not seek and scarcely ever accept clients but like to exchange views as an academic lawyer with a view to nationality law, cross-border tax and conflict of laws. French or English ok.”
Continue reading “Solving U.S. Citizenship Problems-with special guest Andrew Grossman Montreal Monday December 5, 2016”

Dual Citizens of Sweden, France, Netherlands, Denmark & Canada take note! Your Country WILL NOT Collect for the U.S.

Last week in my email was a link to an article by Michael J DeBlis (unable to determine whether it was the father or the son). It runs in my memory that prior to the launch of the Tax Connections website, the younger Michael had started a blog that was specifically about expatriate issues and many of us joined and took part. He seemed particularly sympathetic and supportive of our plight and one who I would never have labelled a “condor.” And this post is in no way meant to be demeaning.

Imagine my surprise to read this:

Consider the following example. Pierre is a dual citizen of the U.S. and Canada who presently resides in Montreal. He has fastidiously filed U.S. and Canadian tax returns for the last ten years. Following an audit of his 2012 U.S. tax return, the IRS determined that there was a $ 20,000 deficiency and mailed him a notice of deficiency. Pierre timely filed a protest but Appeals found in favor of the IRS. Having failed to file a petition with the tax court, that deficiency soon became a $ 20,000 assessment.

The IRS now seeks to collect on its claim by imposing a tax lien on real estate owned by Pierre in Canada. Essentially, what the U.S. government is attempting to do is cajole collection officials from the Canadian Revenue Agency (Agence du revenue du Canada) to do its dirty work for it: namely, to collect Pierre’s unpaid U.S. taxes by enforcing an IRS tax lien on property located within Canada.

As incredible as this might sound, reliance upon a foreign taxing authority for assistance in collecting a tax judgment against a citizen of the requesting country is entirely permissible under the terms of the U.S.-Canadian Treaty. Of course, such a request must be accompanied by documents firmly establishing that the taxes have been finally determined.[ix]

Therefore, the Canadian Revenue Agency would have no choice but to enforce the lien and to collect the unpaid taxes. But what if Pierre filed a motion in a Canadian court to have the tax lien imposed by the Canadian Revenue Agency, at the behest of the IRS, set aside? Not surprisingly, the court would refuse Pierre’s request on the grounds that the imposition of the tax lien was proper under the terms of the treaty.

The reason for my surprise was that it is a well-known fact not only in Canada, but among expats in general, that Canadians are lucky because Canada will not collect tax for the U.S. on people who were Canadian citizens at the time the tax was incurred. Nor will the CRA collect FBAR penalties as they are not a tax, falling under Title 31 of the U.S.C. Most of us had become aware of that when our-then Finance Minister, the late Jim Flaherty had stated unequivocably that Canada would not collect for the U.S. under these two circumstances. So I decided to post a comment.

Patricia Moon
2016-10-26 18:51:10
Thanks for this article, particularly for outlining the limits of what can/cannot be done with regard to the border. While the officers can be bullies, along with knowing very clearly, the limits of the Reed Amendment, this is good information to have. Canada and Denmark both have provisions that state they will not collect for that US citizens/persons that are also, their own citizens. In the case of the US-CDN Treaty: Article XXVIA 8) No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that: a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in which the taxpayer was a citizen of the requested state …………. So the CRA would not collect for the US in Pierre’s case, since he is dual and a citizen of Canada. While the boundaries for the revenue rule may be fading, it is still alive and one which the late Finance Minister, Jim Flaherty, reiterated many times while voicing his shock that the US would expect FATCA to be implemented in Canada. It is very clear that FBAR penalties, which are not part of Title 26 and therefore not covered under the Treaty, also would not be collected by the Canada Revenue Agency. The Canadian courts have refused to enforce claims of the US against Canadian citizens. I presume the Canadian government would honor XXVIA for US citizens/persons who are permanent residents of Canada who are not Canadian citizens. What I am afraid we will see, in spite of past rulings, is that the IRS will attempt to collect from Canadian bank branches in the US with corresponding branches in Canada. I have been told that this does happen by compliance people in spite of court rulings etc. However, it seems to me a bank would be liable to be sued, since presumably, PIPEDA (privacy laws) would in this case, apply to the US citizen/person even though it is overridden by the IGA when the bank sends info to the CRA. We have all seen how the compliance industry tends to enforce the “law” even when the IRS etc, has not provided guidance (which also, is not necessarily, the “law”). An example of this is putting someone who relinquished US citizenship decades ago, into the system according to 877A. Tax lawyers have tended to dismiss past citizenship laws that as far as can be seen, are not automatically changed retroactively. This is completely unacceptable. It is largely useless to Canada to have the right to collect on Canadian citizens resident in the United States due to the fact that once a Canadian is a permanent resident of another country, they are no longer liable for tax in Canada. This is also the reason that FATCA is of very little value to Canada.

and

Patricia Moon
2016-10-26 23:10:13
You may be interested in a few of the court cases mentioned (indirectly) above: United States of America v. Harden (1963), 41 D.L.R. (2d) 721 Supreme Court of Canada https://scc-csc.lexum.com/scc-csc/scc-csc/en/item/7322/index.do 68 O.R. (2d) 379; 1989 Ont. Rep. LEXIS 206 RE VAN DEMARK ET AL. AND TORONTO-DOM http://uniset.ca/other/cs6/68OR2d379.html Chua v. Minister of National Revenue, 2000 DTC 6527 (FCTD http://ca.vlex.com/vid/chua-v-minister-of-national-revenue-38618242

I received a message asking if I could confirm the information concerning Canadians at this post on the CitizenshipTaxation FB group.I became involved in the conversation and remembered that I had recently learned that Denmark also had such a clause protecting its citizens in the US-Denmark Treaty. So I wondered if it could be the same for the other three countries that have a Mutual Assistance in Collection clause in their treaties with the U.S. namely, Sweden, France and the Netherlands. It didn’t take too long to find that they do indeed have the same type of clause. I was dumbfounded. Why had we never heard this before? I was careful to look at the Protocols because some of the Treaty dates are over 20 years old; there was nothing to suggest the conclusion was incorrect. I also had a couple of professionals take a look and they agreed.

So this is A VERY BIG DEAL. If you are a dual citizen of DENMARK SWEDEN FRANCE the NETHERLANDS or CANADA and were a citizen at a time when the U.S. claims you owe U.S. tax, your country WILL NOT ASSIST THE U.S. in collecting U.S. tax. !!!!!!!!

Then I wondered about FBAR and where that might be confirmed since it is not specifically stated in the Treaty. I googled and found a link to a comment of mine that I have no memory of posting:

25 July 2012 T.I. 2011-0427221E5 – FBAR penalties

Principal Issues: Whether US FBAR penalties are included in “revenue claims” defined in Art.XXVI-A(1) of the Canada-US Treaty.

Position: No.

Reasons: FBAR penalties are not civil penalties in respect of taxes covered under Art.II of the Treaty.

https://www.taxinterpretations.com/tax-topics/treaties/article-26a#node-326646
25 July 2012 T.I. 2011-0427221E5 – FBAR penalties

XXXXXXXXXX
2011-042722
P. T.
(613) xxx-xxxx
July 25, 2012

Dear XXXXXXXXXX:

Re: Civil Penalties and Article XXVI-A

We are writing in response to your letter of November 7, 2011, in which you asked for our comments in respect of the application of Article XXVI-A of the Canada-United States Tax Convention (1980) (“Treaty”).

You have described a hypothetical situation involving an individual who is a citizen of the United States (“U.S.”) by right of birth, and a Canadian citizen by way of naturalization prior to 1995. The individual is a resident of Canada for purposes of the Income Tax Act (“Act”) and the Treaty. We are to assume that the individual has failed to file Form TD F90-22.1 Report of Foreign Bank and Financial Accounts with the U.S. Department of the Treasury as required under the U.S. Bank Secrecy Act. As such, the individual has been assessed a civil penalty (“FBAR Penalty”) in the U.S. for the failure to file Form F90-22.1.

In this regard, you have asked whether the FBAR Penalty could be considered a civil penalty that is included in a “revenue claim” as defined at paragraph 1 of Article XXVI-A of the Treaty, and if so, whether paragraph 8 of Article XXVI-A would preclude the collection of the FBAR Penalty by the Canada Revenue Agency (“CRA”) on behalf of the U.S. Government.

Our Comments

The CRA has previously indicated that Canada would assist the U.S. Government in the collection of interest and penalty in respect of U.S. taxes owing pursuant to Article XXVI-A of the Treaty. However, paragraph 8 of Article XXVI-A provides that Canada will not assist in the collection of a revenue claim from the U.S. Government in respect of an individual who is a Canadian citizen, such as the individual described in your hypothetical situation.

In addition, we are of the view that a civil penalty, such as the FBAR Penalty, which is imposed under the U.S. Bank Secrecy Act, is not a penalty in respect of U.S. taxes owing. Therefore, it is our view that an FBAR Penalty is not an amount that would be considered a “revenue claim” pursuant to the definition at paragraph 1 of Article XXVI-A.

We trust that our comments will be of assistance.

Yours truly,

Robert Demeter
Section Manager
for Director
International Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch

Then I started wondering about FATCA. The “reassurance” we receive constantly from the Canadian government is that FATCA does not result in any new tax etc, that it is just an information exchange. Which begs the question, why is the information being collected if there won’t be any “new” taxes? In this regard:

Andrew Bonham, “FATCA and FBAR Reporting by Individuals: Enforcement Considerations
from a Canadian Perspective” (2012) 60:2 Canadian Tax Journal 305-54, at 345.

Still, as noted above, the minister has the discretion to refuse assistance in collection. Certainly from a public policy standpoint, it must be relevant that the Crown, in providing collection assistance on a FATCA revenue claim, would in many cases be acting against its own taxpayers in the enforcement of a claim founded upon information obtained in a manner that may not be constitutional under the laws of Canada. The Crown is not obliged to do anything contrary to the public policy of Canada in collecting a revenue claim under the treaty. This last point is analogous to the common-law public policy defence discussed above.

However, it is also quite possible, and perhaps probable, that FATCA is in equal part both an information-gathering tool and a revenue-generating tool. It is for this reason that FBAR will never go away. With information garnered from FATCA FFI reports, penalties can be levied under both FATCA and FBAR if an individual fails to file. However, as we have noted, the long arm of the IRS cannot reach Canada with respect to FBAR, and as further posited, it is likely that FATCA penalties would also be unenforceable in Canada. From the US perspective, the best-case scenario would see all financial institutions around the globe complying with the strictures of the disclosure requirement. Armed with the massive list that would be generated from such compliance, the IRS would merely have to check names against received disclosures and levy fines against those individuals who had not complied. Carrying this scenario further, the IRS could then, after the exhaustion of all administrative appeal periods and recourse, approach the minister of national revenue with a list of individuals owing FATCA penalties and ask that those penalties be enforced by the CRA under the terms of the Canada-US tax treaty. It is assumed that in a large number of cases, a notice from the IRS to an individual noting lack of FATCA compliance would not be responded to, and in those cases, a penalty of $50,000 would be levied, thereby raising a very significant amount of revenue.

Finally, although the revenue rule and the penal/public-law rule would currently preclude Canadian courts from assisting in collection, the ever-expanding role of judicial comity may one day see a repeal of these rules, or at least a relaxation of their strictures. Should that occur, the United States would be in a position to resort to principles of public international law as a basis for enforcement, even against dual citizens. In such a case, it may well be open to defendants to argue that the mere fact of their US citizenship should not, in and of itself, be enough to satisfy the real and substantial connection test—especially in cases where the defendant has had little or nothing to do with the United States and has certainly derived no benefit from his or her US citizenship.

A lot of interesting possibilities are discussed in the article above and it is definitely worth reading. While there are no guarantees that these Treaties will not change in the future, the advantage of this information now is:

  • if you are in an unsure situation at the moment, this is something that is as much a part of your situation as your “U.S. Person-ness” and can be a great help in deciding what your risk level is
  • if you are not compliant & not yet a citizen of the 2nd country, you might consider applying for citizenship now
  • you can help get this information out to other members of your expat community

Lastly, here are the actual wordings in the treaties involved; I am only including the Article/paragraphs that pertain to this idea.

SWEDEN
• Income Tax Treaty – 1994
• Protocol – 2005

ARTICLE 27

Administrative Assistance

1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which this Convention applies, together with interest, costs, and additions to such taxes.

4. The assistance provided for in this Article shall not be accorded with respect to the citizens, companies, or other entities of the State to which the application is made, except as is necessary to insure that the exemption or reduced rate of tax granted under this Convention to such citizens, companies, or other entities shall not be enjoyed by persons not entitled to such benefits.

FRANCE

• Income Tax Treaty – 1994
• Protocol – 2004, 2009

19 ARTICLE XII
Paragraph 5 of Article 28 (Assistance in Collection)
of the Convention shall be deleted and replaced by the following:

“The assistance provided for in this Article shall not be accorded with respect to citizens, companies, or other entities of the Contracting State to which application is made.”

ARTICLE 28
Assistance in Collection

1. The Contracting States undertake to lend assistance and support to each other in the collection of the taxes to which this Convention applies (together with interest, costs, and additions to the taxes and fines not being of a penal character) in cases where the taxes are definitively due according to the laws of the State making the application.

5. The assistance provided for in this Article shall not be accorded with respect to citizens, companies, or other entities of the Contracting State to which application is made except in cases where the exemption from or reduction of tax or the payment of tax credits provided for in
paragraph 4 of Article 10 (Dividends) granted under the Convention to such citizens, companies, or other entities has, according to mutual agreement between the competent authorities of the Contracting States, been enjoyed by persons not entitled to such benefits.

Article XII of the Protocol replaces paragraph 5 of Article 28 (Assistance in Collection) of the Convention. The change revises paragraph 5 so as to remove the now obsolete reference to the provision of paragraph 4 of Article 10 (Dividends) of the existing Convention prior to amendment by the Protocol related to the “avoir fiscal.”

NETHERLANDS

ARTICLE 31
Assistance And Support in Collection

1. The States undertake to lend assistance and support to each other in the collection of the taxes which are the subject of the present Convention, together with interest, costs, and additions to the taxes and fines not being of a penal character.

4. The assistance provided for in this Article shall not be accorded with respect to the citizen, corporations, or other entities of the State to which application is made, except in cases where the exemption or reduced rate of tax granted under the Convention to such citizens, corporations or other entities has, according to mutual agreement between the competent authorities of the States, been enjoyed by persons not entitled to such benefits.

DENMARK

INCOME TAX TREATY 2000

ARTICLE 27
Administrative Assistance

1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in Article 2 (Taxes Covered), together with interest, costs, additions to such taxes, and civil penalties, referred to in this Article as a “revenue claim.”

8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and b) where the taxpayer is an entity that is a company, estate or trust, the revenue claim relates to a taxable period in which the taxpayer derived its status as such an entity from the laws in force in the requested State.

CANADA

Article XXVI A
Assistance in Collection

1. The Contracting States undertake to lend assistance to each other in the collection of taxes referred to in paragraph 9, together with interest, costs, additions to such taxes and civil penalties, referred to in this Article as a “revenue claim”.
8. No assistance shall be provided under this Article for a revenue claim in respect of a taxpayer to the extent that the taxpayer can demonstrate that
(a) where the taxpayer is an individual, the revenue claim relates to a taxable period in which the taxpayer was a citizen of the requested State, and………

Article 22
1. Subparagraph 8(a) of Article XXVI A (Assistance in Collection) of the Convention shall be deleted and replaced by the following:

(a) Where the taxpayer is an individual, the revenue claim relates either to a taxable period in which the taxpayer was a citizen of the requested State or, if the taxpayer became a citizen of the requested State at any time before November 9, 1995 and is such a citizen at the time the applicant State applies for collection of the claim, to a taxable period that ended before November 9, 1995; and

2. Paragraph 9 of Article XXVI A (Assistance in Collection) of the Convention shall be deleted and replaced by the following:

9. Notwithstanding the provisions of Article II (Taxes Covered), the provisions of this Article shall apply to all categories of taxes collected, and to contributions to social security and employment insurance premiums levied, by or on behalf of the Government of a Contracting State.

Will a BusinessTrip to the United States of America Trigger a Chance Encounter with Mr. FBAR?

reposted from the citizenshipsolutions blog

Prologue: Circa 1948 – George Orwell anticipates the arrival of Mr. FBAR

‘By the way, old boy,’ he said. ‘I hear that little beggar of mine let fly at you with his catapult yesterday. I gave him a good dressing-down for it. In fact I told him I’d take the catapult away if he does it again.

‘I think he was a little upset at not going to the execution,’ said Winston.

‘ Ah, well — what I mean to say, shows the right spirit, doesn’t it?
Mischievous little beggars they are, both of them, but talk about keenness! All they think about is the Spies, and the war, of course.
D’you know what that little girl of mine did last Saturday, when her troop was on a hike out Berkhamsted way? She got two other girls to go with her, slipped off from the hike, and spent the whole afternoon following a strange man. They kept on his tail for two hours, right through the woods, and then, when they got into Amersham, handed him over to the patrols.’

‘What did they do that for?’ said Winston, somewhat taken aback. Parsons went on triumphantly:

‘My kid made sure he was some kind of enemy agent — might have been dropped by parachute, for instance. But here’s the point, old boy. What do you think put her on to him in the first place? She spotted he was wearing a funny kind of shoes — said she’d never seen anyone wearing shoes like that before. So the chances were he was a foreigner.
Pretty smart for a nipper of seven, eh?’

‘What happened to the man?’ said Winston.

‘Ah, that I couldn’t say, of course. But I wouldn’t be altogether surprised if-‘ Parsons made the motion of aiming a rifle, and clicked his tongue for the explosion.

Chapter 5 of George Orwell’s 1984

Writing in 1948, George Orwell (in his book 1984) identified the need to identify and punish all things “foreign” as being important for domestic security.

Continue reading “Will a BusinessTrip to the United States of America Trigger a Chance Encounter with Mr. FBAR?”

Never Forget What Happened in 2011 – JustMe and the OVDP, an 851-day Nightmare

 
reblogged from the Isaac Brock Society

A Series of Posts to Explain the Anger and Vehemence Fueling the anti-FATCA, anti-IGA & anti-CBT Movement
 

 

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
minnows…..little guys
whales…big guys
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!

MarvinAfter 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
 

Just_Me writes:

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!!
Continue reading “Never Forget What Happened in 2011 – JustMe and the OVDP, an 851-day Nightmare”

Never Forget What Happened in 2011

reblogged from the Isaac Brock Society

 
A Series of Posts to Explain the Anger and Vehemence Fueling the anti-FATCA, anti-IGA & anti-CBT Movement
 

 

Perspective:

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
 
RenounceUSCitizenship writes:

 

The IRS assault on U.S. citizens living outside the United States has been a frightening interplay among three groups:

1. The Taxpayers

2. The Cross Border Professionals

3. The IRS

Let’s imagine the perspective of each.

The Perspective of the Taxpayers

I suspect that few U.S. expats will forget the events of 2011. It was a year where they realized how quickly life could change. For the most part U.S. citizens living abroad are hard working honest people who are paying higher income and value added taxes than they would be in the U.S. The U.S. uses citizenship-based taxation. Many of them have been filing U.S. tax returns. But, virtually none of them (except those who always had the benefit of specialized and expensive legal and tax advice) knew about FBAR. When they heard about FBAR, OVDI and the rest they were:

– scared out of their minds; and

– wanted to be compliant

It’s just that they didn’t know how. Hence, they did what anybody would do. They sought professional help.

Furthermore, professional help did not come easily. It did not come inexpensively. It was typically like this: “Yes, I will meet with you. But, bring in a money order for $2000 (or more) and we will start the conversation. The conversation usually focused on whether to enter OVDI. Entering OVDI was a logical option, an expensive option, but I believe for most people a bad option. It was also (because it was a new kind of program) something not well understood by the so called “cross border professionals”.

The Decision To Enter OVDI

For many there was no “decision” to enter OVDI. The entry into OVDI was an “emotional reaction” based on fear.

What happened was something like this:

1. Media publishes articles written by journalists who don’t have a clue what they are talking about. Yes, the IRS is going after U.S. taxpayers who don’t reside in the U.S. Yes, there is OVDI and you must get in the program by August 31, 2011. No, OVDI is not amnesty – but let’s pretend that it is and enter it. I have said before and I will say again that some people entered the OVDI program, without a consideration of their individual circumstances, following the advice of the so called “cross border professionals”. They will regret this.

It is interesting that the advice from a number of lawyers was something like:

“You must enter OVDI” – the IRS frowns on quiet disclosures, etc. These lawyers either did not think that “reasonable cause” was available or that the IRS would not consider arguments based on “reasonable cause”. The important point is that there were “cross border professionals” who did NOT inform their clients that:

A. OVDI was an optional program

B. Filing of FBARs was mandatory

C. The FBAR statute recognizes that “reasonable cause” was and continues to be a defense

(It is interesting that the effect of this advice was to deter people from doing what was mandatory (just file the damm FBARs) and encourage people to do what was voluntary (enter OVDI).

The purpose of OVDI was to go after people who were using foreign banks and other entities to evade U.S. taxes. There is nothing illegal about having a foreign bank account. Most U.S. citizens living outside the United States had local bank accounts for the purpose of living their lives. On the other hand, the IRS has publicized the cases of U.S. citizens living inside the U.S. who used foreign bank accounts for tax evasion. Those of you who are aware of (outside of OVDI) anybody paying FBAR penalties based on willfulness, please leave a comment.

Anybody could have entered OVDI – why would the IRS stop you? By entering OVDI you are simply agreeing to pay them penalties. Furthermore, the range of assets subjected to penalties in the OVDI program is greater than what is required to be disclosed on an FBAR (something not explained by some lawyers). Hence, it is clearly to the advantage of the IRS that people enter OVDI (plus the IRS doesn’t have to waste time on “reasonable cause” arguments).

It is important to note that OVDI is a program which is designed for criminals and removes “reasonable cause” from the discussion. The only way to get “reasonable cause” into the discussion is to “opt out” and subject yourself to a full audit along with all the risks and high costs associated with it.

“Reasonable cause” has always been a defense to FBAR penalties. S. 5314 of the FBAR statute bars the imposition of FBAR penalties if two conditions are met:

1. Failure to file FBARs was due to “reasonable cause”; and

2. The FBAR is filed

Now, I understand that there is no clear definition of “reasonable cause”. I also understand that this is a determination made by the IRS. My point is that the same “reasonable cause” arguments must be made either inside OVDI (after an opt out) or outside OVDI.

While OVDI was going on, few “cross border professionals” talked about “reasonable cause”. Maybe, they thought that the IRS wouldn’t recognize or apply the law. Who knows? I invite a lawyer who encouraged clients to enter OVDI to comment on this.

 
Now, if you came to the “expat movement” in say, 2013 or so, you might not think there is so much new info here. But in early 2012, this was very unusual. To find a concise and correct assessment that did not favour the completely chaotic viewpoint of the media and tax compliance community was not only life-saving (literally) but became the base for what we have become today: those who would dare fight back when the U.S. government came knocking, coming after you, your families and your hard-earned, non-U.S. money.
 
Next: stories of expats in the 2009 OVDP/2011 OVDI