Tag: citizenship issues

Why Is Bank of America Asking Clients About Their Citizenship?

info citizenship

from The Nation

Interesting that FATCA, which predates CRS is not mentioned here.If the U.S. were interested in reciprocity, wouldn’t this be the focus? In fact, this is not FATCA or CRS. It is plain and simple discrimination. If the U.S. continues making the U.S.an unwelcome place for immigrants, we may no longer have to listen to the nonsense that our leaving is irrelevant due to the much larger numbers of people clamoring to get into the United States of America.

Excerpts:

Bank of America sent a customer a notice demanding details about their citizenship—and if they refused to answer, their accounts were promptly frozen.

Outside the United States, this is a normal practice. Dozens of countries have agreed to the Common Reporting Standard aimed at combating tax evasion, and began collecting citizenship information as part of that effort in 2017.

In the UK the banking industry has already been charged with collecting information on foreigners as part of a bigger plan to create a “hostile environment” for undocumented immigrants. Immigrants and advocates worry the United States could be next.

Under a separate law, foreign banks must collect citizenship information from Americans, ostensibly in order to track down potential tax-dodgers.

But domestically, they are not required to collect customer citizenship information.

Writing in The Hill, Gonzalez speculates that “some banks are more than willing to carry out Trump’s agenda of creating a system where immigrants have fewer economic rights than others.”

The American Bankers Association declined to comment on specific institutions’ policies, but said that “strict regulatory requirements” aimed at deterring illicit activities justify requests for personal information. “Banks of all sizes are required to collect a range of information about their customers to comply with the Bank Secrecy Act of 1970 and ‘Know Your Customer’ standards,” says spokesperson Blair Bernstein. “Since 9/11, these strict regulatory requirements have steadily expanded.”

A pending class-action lawsuit filed with the US District Court of Northern California against Wells Fargo claims that the bank refused to accept applications for student loans and credit cards from DACA recipients, which plaintiffs claim is a form of illegal discrimination under California consumer-protection law, as well as a federal civil-rights law originally drafted to protect emancipated slave “aliens.”

This policy is far more subtle than a stark red line on a map, but could result in the same outcome, with a segment of Americans’ being systemically relegated to an underclass. Whether intentionally or not, citizenship questions may well push more immigrants further into the margins.
 

Former Hamilton school superintendent pleads guilty to forging documents to get his children US citizenship

 
Just a little something likely to amuse many expats
Really, it boggles the mind……..would appear nothing further reached the Consulate.
Those kids don’t know how lucky they are!
 

Excerpts:

Patrick Rocco’s case, which the judge called “puzzling,” leaves loose ends that Thursday’s court proceeding failed to answer.

Topping the list is why Rocco, who had a good career, no criminal record and a history of community service, broke the law to qualify his kids for dual citizenship.

While looking into the expenses, Figeuiredo inadvertently discovered emails between Rocco and Patrick Elliott, a vice-principal with the board, that hatched a plan to alter documents for the citizenship applications.

Rocco’s children are now aged 22, 21 and 19. He has been married 24 years.

On Jan. 5, 2015, Rocco, who was born in the United States, received correspondence from the U.S. Consulate in response to his inquiry about obtaining US citizenship for his children.

The consulate outlined the criteria, which included that one parent needed to be a U.S. citizen at the time of the child’s birth and living in the U.S. for periods totalling five years prior to the child’s birth, at least two of which were after the parent’s 14th birthday.

Rocco, who lived in Canada continuously since 1970 and has dual citizenship, did not meet the criteria.

On July 14, 2015 Rocco sent an email to Elliott that said: “I will call you, but need to change address on a PDF — I have the original as well that I scanned — any thoughts? Need to put in my US address and will explain.”

A series of email exchanges over the next month has Rocco sending two Niagara University documents to Elliott asking him to change the address he lived at while he was a student there from one in Niagara Falls, Ont. (where he actually lived from April 1977 to December 1986) to one in Lewiston, N.Y., where he fraudulently said he lived from 1984 to 1987.

On Aug. 4, 2017, Rocco was arrested by Hamilton police…..charged with two counts of making forged documents and two counts of using forged documents.

Court heard there was no evidence of plans to use the citizenships for financial gain or to jeopardize U.S. security.

“This was the misguided result of an effort to give broader options to his children,” Rocco’s lawyer told the court, without elaborating.
 

Solving U.S. Citizenship Problems – London U.K. – March 7, 2018

 

WEDNESDAY MARCH 7, 2018 LONDON UK
7:00 – 9:00 pm

Are you a US citizen living abroad?

Should the U.S. be able to tax the residents and citizens of other countries?

What factors are involved; how do I make a reasonable decision about what to do?

  • How will recent Tax Reform affect my situation?
  • What do I do if I have never filed an FBAR?
  • I am an “Accidental American” – do I really have to comply with all these requirements?
  • Should I register my children with the State Department?
  • I am self-employed; do I have to worry about this Transition Tax?

Please register in advance/obtain details by email: nobledreamer16 at gmail dot com
 
JVENUE near Russell Square Station
ADMISSION: £10
WHO: John Richardson, B.A., LL.B., J.D., is a dual Canadian-American residing in Toronto. He is a lawyer focusing on the unique problems of non-resident US citizens. He is a member of the bars of New York, Massachusetts and Ontario. He is the co-chair for the Alliance for the Defence of Canadian Sovereignty as well as the Alliance for the Defeat of Citizenship Taxation.
He has been at the forefront of the expatriate movement since 2011 and has engaged extensively in a worldwide educational outreach directed toward “US Persons” via seminars, interviews, and blogs.

Information presented is NOT intended or offered as legal or accounting advice specific to your situation.

 

Taxation of #AmericansAbroad in the 21st Century: “Country of birth” Taxation vs. “Country of Residence” Taxation- Part III

 

cross-posted from citizenshipsolutions

by John Richardson

Update January 2018: This post has been updated with some new links and discussion

Part I is here.

Part II is here.

*****

PART III

Legal Status of Citizen vs. The Engagement Required By Citizenship

Is the “legal status” of being a citizen sufficient? Is there a difference between the “legal status” of being a citizen and the “voluntary engagement” that is required by “true citizenship”? The “legal status” of being a citizen may NOT be voluntary. But, the voluntary engagement required by “citizenship” is voluntary.

The legal status of “citizen” vs. the voluntary engagement of “citizenship”

There is a difference between the “legal status” of being a citizen and the voluntary engagement with the community that is required for meaningful “citizenship”. To put it another way: Citizenship involves more than the “legal status” of being a citizen. As President Obama said in his 2013 State Of The Union Address:
 

“We are citizens. It’s a word that doesn’t just describe our nationality or legal status. It describes the way we’re made. It describes what we believe. It captures the enduring idea that this country only works when we accept certain obligations to one another and to future generations; that our rights are wrapped up in the rights of others; and that well into our third century as a nation, it remains the task of us all, as citizens of these United States, to be the authors of the next great chapter in our American story”

It is clearly true that many people born in the U.S. and NOT living in the U.S., have the “legal status” of being a citizen, but have not accepted the voluntary engagement that is required for meaningful “citizenship”. The story of London Mayor Boris Johnson (who was born in the U.S.) is a case in point.

Does the “legal status” of being a citizen justify imposing taxes on a person who does NOT live in the country?

The U.S. currently takes the position that the “legal status” of being a citizen is sufficient to impose taxes on a person who does not live in the U.S. Some of those with the legal status of U.S. citizen were born in the U.S. (making them 14th amendment citizens) and some were born outside the U.S. (making them citizens by an Act of Congress). There are many categories of people born in the U.S.

Five Possible Categories of Those Deemed to be U.S. Citizens Abroad and Their U.S. Connection

Those Born In The U.S. – 14th Amendment Citizenship – Who at a young age are taken by their parents to live outside the United States

The vast majority of U.S. citizens acquired U.S. citizenship because they were born in the U.S. The U.S. is aggressively taking the position that the following types of people, born in the U.S., but residents in other countries, with no economic connection to the U.S. are required to pay taxes to the U.S.:

A. Border babies: Those who were born in the U.S. and returned to Canada within months. (If their parents were Canadian citizens those border babies (who were dual citizens from birth) can renounce their U.S. citizenship without paying an Exit Tax. If their parents were U.S. citizens (meaning the children were not a dual citizens from birth) they are NOT permitted to relinquish U.S. citizenship without being subject to the Exit Tax.)

B. Children born in the U.S. who permanently left the U.S. with their parents as children (before reaching the age of majority) and who never returned to the U.S. They have never worked in the U.S. and have no connection to the U.S.

Members of Group A or Group B do not have and have never had a “voluntary connection” to the U.S. that could convert their “legal status” of citizens to the “voluntary acceptance” of the obligations of “citizenship”. Their birth in the U.S. and their moving from the U.S. were the results of decisions made by their parents. It’s hard to see how the “legal status” of being a U.S. citizen, is sufficient to require the payment of taxes to the U.S. Surely a demonstration of a “voluntary connection” to the U.S. should be required before an obligation to pay taxes is triggered.

Those born outside the U.S. – They choose neither their parents nor where they are born

C. In certain cases, the children of U.S. citizens who are born outside the U.S. are considered to be U.S. citizens. Examples include (but are not limited to), those born in Switzerland to U.S. parents. U.S. laws for the transmission of citizenship from U.S. citizen parents to children born abroad, have a long and complicated history. In fact – “American Citizens Abroad” – was founded to facilitate the acquisition of U.S. citizenship for children born abroad to U.S. citizen parents.

It is clear that that those born outside the U.S. have no connection whatsoever to the U.S. At most they have a connection to a U.S. citizen (that may or may not have a connection to the U.S.)

Those who choose to leave the United States as Young Adults Adults

D. U.S. citizens who were “Born In The USA” but who moved to other nations as young adults (not forced to move with their families), have developed their careers outside the U.S., married, had children and raised their families outside the U.S., done their financial and retirement planning outside the U.S., never had an economic connection to the U.S., and whose lives are have become citizens of their countries of residence.

Many in this group may have left the U.S. under unclear circumstances. Some may have left the U.S. with the intention of returning, some with no thoughts on whether they would return, and some with the clear intention of never returning. Regardless of their intention when leaving the U.S., many gradually become citizens (in a legal and voluntary sense) of their new countries and gradually lost any connection to the U.S. that they may have had.

Members of this group (especially in Canada and Western Europe) fully consider themselves to be primarily citizens of their new countries and no longer U.S. citizens. Example: “You know you are Canadian when you start rooting for Canada over the U.S. in hockey.”

Adults who moved from the USA with the intention of returning to the United States

E. U.S. citizens who move outside the U.S. for short periods of time with the full expectation and understanding that they are returning to the U.S. They live outside the U.S. as Americans and typically neither become citizens of their country of residence, nor disconnect from the U.S. In other words, they are truly “U.S. citizens abroad”. Their situation is very different from those described in Categories A, B, C and D. They have more than the “legal status” of being U.S. citizens. They have a voluntary connection to the U.S.

Citizenship-based taxation and a voluntary connection to the U.S.

It is clear that many of those with the “legal status” of U.S. citizen (Categories A, B, C, and D) do NOT have the “voluntary” (or any other) connection to the U.S. that could reasonably justify U.S. taxation.

The fact that those in Category (E) have a voluntary connection to the U.S. does NOT mean that good tax policy would subject them to U.S. taxation. It does mean that (if citizenship requires a connection to the United States that this is the group which might be subject to “citizenship-based taxation”).

Therefore a “Voluntary connection” to the U.S. is a necessary but NOT a sufficient condition for the taxation of Americans abroad

Is “citizenship-based taxation” justified even with respect to Americans abroad who DO have a voluntary connection (Category E) to the U.S.? It’s hard to understand the justification. No other country imposes taxes on its citizens abroad. Americans abroad already pay taxes in their country of residence. No scholar has ever explained exactly what it is about a “voluntary” connection to the U.S. that justifies taxation. Life is full of “voluntary connections” that do NOT require the payment of taxes. What is it about a “voluntary connection” (by way of citizenship) to the U.S. that means Americans abroad should be taxed at all, or (worse yet) taxed according to the same rules as U.S. residents?

Citizenship showdown coming: Has Australia ceded control of its sovereignty to foreign countries?

cross-posted from citizenship solutions

Shades of Larissa Waters …

Oh My God! Think of it:

My sources in Australia tell me …

This time it’s the –
Deputy Prime Minister
– and the first member of the lower house to be tainted by dual citizenship. This is significant. With the Senate they usually go to the next person on that party’s ticket from the last Senate election. With the House of Reps they have to have a by-election – and Turnbull’s government is hanging on by a single vote. So, if the High Court rules that Barnaby Joyce must vacate his seat, it could topple the government!

And I thought that Politics in Canada was dirty. And we all revel in the daily stench of the toxic partisanship in the USA. But, hey at least these two countries do NOT have constitutional provisions that (as they have been interpreted) allow other countries to interfere in who the elected representatives are! (We let them interfere in covert ways – think “From Russia With Love” ….)

But Australia. This really is unique. Think of it. Once a person is accused of being a dual citizen – AS DEFINED BY THE LAWS OF ANOTHER COUNTRY – then the person is disqualified from serving in the Senate or the Lower House. I had always thought of Australia as a sovereign country. Can it really be true that Australia allows eligibility for service in the Senate or the lower house to be determined by another country’s citizenship laws? Does it matter whether these “foreign laws” confer citizenship by force rather than citizenship by consent?

Think of the possibilities here. There have always been suggestions that “The USA via the CIA” had been (wonderful melody) instrumental in the dismissal of Australian Prime Minister Gough Whitlam. Why go to so much trouble? The way Australia is interpreting its own constitution, all a future U.S. Government would have to do is confer U.S. citizenship on the Prime Minister of Australia and he would be forced to resign. But this would be the intentional “weaponization of citizenship”. (But, the FATCA is that: the USA would NEVER use citizenship as a weapon now, would it?) Australia has already surrendered much of its sovereignty to the United States through a combination of the FATCA IGA and the “savings clause” in the Australia U.S. Tax Treaty.

It’s worse than you think. The problem extends to the ongoing changes in the citizenship laws of other nations

What about the change in one country’s citizenship laws conferring citizenship on an Australian citizen without his/her knowing about it?
For example, Canada has made significant amendments to its citizenship laws in 2009 and 2016. In both cases Canadian citizenship was conferred on people who did NOT have Canadian citizenship. One example is that prior to 1977, a person born abroad to a married couple where the father was NOT Canadian (say Australian) and the mother was Canadian would NOT have become Canadian by descent. In 2009 people in these circumstances were given Canadian citizenship. What if a person affected by this was in the Australian Senate in 2009 when the Canadian law was changed.
Would that person be forced to resign?

Can the citizenship of country A be forcibly imposed on a resident of country B who has NEITHER ACCEPTED NOR ACKNOWLEDGED THAT CITIZENSHIP?


Continue reading “Citizenship showdown coming: Has Australia ceded control of its sovereignty to foreign countries?”

Relinquished before 2004? Applying for CLN now? What are the IRS consequences?

reposted from Maple Sandbox .

Posted on March 6, 2013 by Pacifica777 .

There’s no question with renunciation (Immigration and Nationalities Act, s. 349(a)(5)).  You are relinquishing your citizenship and notifying the US government of it at the same time, and that’s the date your US citizenship ends.

But what if you relinquished your citizenship by a different method of INS, s. 349(a), such as taking citizenship in another country with the intent to relinquish your US citizenship (349(a)(1))?

The State Department is clear.  No matter when you notify the US govt of your relinquishment, once your CLN application is approved, your US citizenship ended on the date you actually relinquished it (that is the date your performed the relinquishing act, eg. naturalised as a citizen of another country — this date is indicated as your expatriation date on the the CLN.)

The IRS, however, according to s. 877A(g)(4) of the US Tax Code, considers the date of your relinquishment for IRS purposes is not the date of your actual relinquishment but the date you notified the US government of it (your consulate meeting).  This was not the case prior to 2004, however [the relevant section was 7701(n) in 2004 and it was replaced by 877A in 2008].

So, what if you relinquished your US citizenship long ago, but only recently learned of US law and policy changes which make it important to be able to prove you are not a US citizen, and wish to obtain Certificate of Loss of Nationality (a document you probably never even heard of before)?  What if the current law regarding IRS and citizenship termination did not exist at the time you relinquished?  Logic  leads one to the conclusion that laws passed after a person ceases to be a citizen are irrelevant.  The IRS has never made a definitive statement on this issue, however their instructions for the 8854 (expatriation tax form) are only directed at people with expatriation dates “after June 3, 2004.”

Tax lawyers Michael J. Miller and Ellen Brody have just published an excellent article on this matter, Expats Live in Fear of the Malevolant Time Machine, in which they point out the legal, as well as common sense, absurdity of a retroactive application position.  It’s very clear reading with useful references to legislation and case law as well.

Why is the United States imposing an “Exit Tax” on the Canadian pensions of Canadian citizens living in Canada?

cross-posted from citizenshipsolutions


by John Richardson

This post is based on (but is NOT identical to) a July 17, 2017 submission in response to Senator Hatch’s request for Feedback on Tax Reform

“Re the impact of the S. 877A “Exit Tax” on those “Americans living abroad” who relinquish U.S. citizenship:

Why is the United States imposing an “Exit Tax” on their “non-U.S. pensions” and “non-U.S. assets”? After all, these were earned or accumulated AFTER the person moved from the United States?”

Part A – Why certain aspects of the Exit Tax should be repealed

In a global world it is common for people to establish residence outside the United States. Many who establish residence abroad either are or become citizens of other nations. Some who become citizens of other nations do NOT wish to be “dual citizens”. As a result, they “expatriate” – meaning they relinquish their U.S. citizenship. By relinquishing their U.S. citizenship they are cutting political ties to the United States. They are signalling that they do NOT wish the opportunities, benefits and protection from/of the United States.

Yet Internal Revenue Code S. 877A imposes a separate tax on “expatriation”. The “expatriation tax” is discussed in a series of posts found here.

Specific examples of HOW the “Exit Tax Rules” effectively confiscate pensions earned outside the United States are here.

Assuming, “covered expatriate status” and NO “dual-citizen exemption to the Exit Tax“, the S. 877A “Exit Tax” rules operate to:

  1. Virtually “confiscate” non-U.S. pensions that were earned
    when the individual was NOT a United States resident; and
  2. Allow for the retention of “U.S. pensions” which were earned
    while the individual WAS a resident of the United States.

(One would think that the result should be THE EXACT OPPOSITE!”)

Specific request: The S. 877A Exit Tax should be repealed. If the United States is to impose a tax on expatriation, the tax should not extend to “non-U.S. pensions” earned while the individual was NOT a U.S. resident. Furthermore, the tax should NOT extend to “non-U.S. assets” that were accumulated while the individual was NOT a U.S. resident.

But, that’s assuming that the United States should have ANY kind of “Exit Tax!”

Continue reading “Why is the United States imposing an “Exit Tax” on the Canadian pensions of Canadian citizens living in Canada?”

When government turns predator

 

This was the very first post at the Isaac Brock Society, published there on December 10, 2011 by the founder of Brock, Petros. At the time, there was outright terror in the expat community. Horror stories from the 2009 OVDP were coming out. Threats from Shulman (then IRS Commissioner), the media and primarily, the tax compliance industry were non-stop. Confusion and fear reigned and it was like being in a perpetual OMG moment……….

Over 5 years later there is little to suggest much has changed. It would take a major shift, such as passing tax reform that included a switch to RBT for me to even consider the U.S. government has anything less than outright malice for Americans living outside the country. The year is half-over and health care reform is still the focus. There will be no hope for change in 2018 due to the midterm elections.

There have been a few minor concessions-Streamlined was improved and offers foreign filers penalty-free filing as long as there is “reasonable cause.” However, we now have passport revocation for unpaid taxes of $50k and over; extended OVDP with the in-lieu of penalty of 27.5% of the highest aggregate value of OVDP assets (50% if the foreign financial institution is already under investigation by the IRS); attempts to pass the EXPATRIOT ACT; adjustment resulting in increase of FBAR penalties to reflect inflation (without similar treatment for the $10k threshold); two years of FATCA reporting have taken place; threats that the Streamlined Program will be discontinued; collection agencies are coming after us, the list goes on and on.

Though this comment will provoke the compliance community, one thing apparent now, is the IRS seems to have no real way to collect unless one comes forward. And we can see those who have done so, are the ones hurt the most. It is obvious that the majority of expatriates are NOT filing (out of a total of 9 million, approximately 1 million are). There are situations where some can remain hidden, depending to a point on one’s risk-tolerance. Outward resistance remains; the Canadian IGA suit is moving toward the second trial; the Bopp suit will be refiled; ADCT is on hold until we see whether there is RBT or not. And the Accidental Americans in France have begun their fight to bring forth litigation there and/or in the EU courts.

At any rate, I have always considered the post below to be a sort of rallying cry, a call to wake up to the fact that the U.S. government is indeed a predator to be dealt with…..

UPDATE

This recent comment of Andrew over at Brock says it all:

This entire story is and continues to be sickening. I too am so grateful to have renounced several years ago and to have been able to completely extricate myself from this web of nightmares. Sadly, friends and business contacts haven’t been so lucky and many of them are now embroiled in protracted legal cases, with demands that they pay millions, even though they, in two cases, have never lived in the United States and were total “accidentals” one having spent twelve days there after birth and never returned, the other only five days! Still, the corrupt system has gone after them both and they are fighting it as hard as they can. One thing both of them have said is that thy won’t pay anything, no matter what the threats. One, who has business interests in no less than sixteen countries will cut off all activity with the U.S. and stop all investment from his associates into the U.S. arm of their business.
If I didn’t witness all of this for myself I wouldn’t believe that it could be possible, but then, look at the U.S. today and the state of how it is governed. Who could believe that is possible? The best advice, stay away from that place and advise others to do the same.

*******
When Government Turns Predator by Petros

Honest US citizens are being turned into prey by the IRS, the victims a hunt for tax evaders. It is the natural, if lamentable, product of the urge to power our Founders warned us against.

More than two centuries ago, George Washington stated:

Government is not reason; it is not eloquent; it is force. Like fire, it is a dangerous servant and a fearful master.

Over the years, General Washington’s prescience has been demonstrated as government usurped and abused power. The myth that government serves the people should be shattered by now. Increasingly, government behaves as the master, not as the intended servant.

Oppression abounds, but nowhere is the raw abuse of power and coercion more possible and evident than in the Internal Revenue Service. They are the most dangerous member of the government gang. Now they have another tool to bully and expropriate wealth from innocents — US citizens living abroad.

Early in his presidency, Barack Obama pledged to add 800 new IRS agents to punish tax evaders with overseas accounts. In an effort, presumably designed to curtail and punish tax evasion on the part of wealthy Americans, legislation aimed at criminals now threatens the income and savings of the law-abiding.

Background

The Bank Secrecy Act became law in 1970 and implemented the Foreign Bank Accounts Report (FBAR) to monitor money laundering. The FBAR law required that US persons owning or having signing authority over foreign bank accounts report this information to the US Treasury Department. It was not much enforced for the obvious reason that a criminal does not willingly divulge incriminating information. During the first three decades of FBAR, there was widespread ignorance and disregard for the law.

In 2003, the Treasury Department handed over enforcement to the IRS. In 2004 non-willful non-compliance increased to a $10,000 fine per account per annum. Willful non-compliance allows criminal charges, a prison sentence, and fines of $100,000 or 50% of bank account’s contents, whichever is more (see Shepherd, p. 10).

The IRS has implemented two Voluntary Disclosure Programs I (2009) and II (2011), in which they waive criminal charges provided that all back taxes and penalties have been paid, along with an FBAR penalty of 20% (in 2009) or 25% (in 2011) of the account’s highest balance over the last six years. The penalty is lower (12.5%) for balances under $75,000. Persons who were unknowingly US citizens face a 5% penalty (see FAQ 52).

In 2010, Congress passed FATCA (Foreign Account Tax Compliance Act) which forces foreign banks to report on American clients, even if doing so would violate the banking and privacy laws of their country. Implementation of FACTA will be coerced by withholding 30% of US income from banks not in compliance.

The arrogance and brutality of the legislation is apparent. The penalties are severe and disproportionate. Economic blackmail of foreign banks is disgraceful. All of these actions will have repercussions, probably not intended.

US Citizens Abroad

US citizens living abroad must open a foreign bank account because commerce is done in the local currency. All who do are potentially in violation of the FBAR law. Most were unaware of the FBAR requirements; but now that the IRS has rattled its FBAR saber, taxpayers abroad are in a quandary.

Wealthier citizens spend thousands of dollars on accountants and tax lawyers to try to put themselves into compliance with the least financial damage. The average citizen not in compliance has limited options. His choices include:

  1. Do Nothing The IRS doesn’t know about you, so continuing to keep a low profile and ignore the law might be the best route. This option may become impossible once FACTA comes into force.
  2. File FBAR Forms IRS FAQ 17 of the 2011 Voluntary Disclosure Program states that filers who have complied with all taxes and filing requirements except FBAR should not enter the program but simply file the delinquent forms by August 31, 2011 with a letter of explanation. They promise that no penalties will apply to such persons. But given the severe threats of punishment issued to anyone failing to comply, many wonder whether the IRS will accept the excuse of ignorance of the FBAR requirement.
  3. Enter 2011 Voluntary Disclosure Program: Some US citizens who entered the 2009 Voluntary Disclosure Program and were otherwise in compliance with US tax laws, found that the IRS intended to apply to them the full 20% penalty (see, e.g., hereand here).
  4. Renounce Citizenship Many US citizens living overseas have lives fully integrated into their new country. They comply with the local tax laws and often possess dual citizenship. Compliance with US tax laws and FBAR are a nuisance and liability that they may be able to live without.

Renunciation of citizenship is not riskless. Such a decision will set citizens free from future liability, but may subject them to IRS penalties for prior non-compliance. In addition, for covered expatriates, those having two million in assets or $145,000 in average annual tax liability over the last five years, an exit tax is also required.

To appreciate the uncertainty and duress faced by US citizens living abroad, a couple of hypothetical situations are useful. International tax lawyer Phil Hodgen partly inspired the following hypothetical cases:

Hypothetical Case 1: Jim lives in a foreign country and has dutifully filed a US income tax return each year, but was unaware of FBAR filing retirements. Jim operates eight accounts: four retirement accounts (which he reported on his annual tax returns), two trading accounts, a checking account and a high interest savings account. The highest balance in these accounts is $1,000,000 over the last six years. His current balance is $800,000 after the market dip.

Jim doesn’t know what to do. After great worry, he enters the Voluntary Disclosure Program. The IRS assesses Jim a $250,000 FBAR penalty. In order to pay the penalty, Jim must withdraw funds from his retirement accounts forcing an additional tax liability of $100,000 on the income. Jim is no longer able to retire because his $800,000 has been reduced to $450,000, solely as a result of IRS capriciousness.

Hypothetical case 2: Nancy is a teacher and mother of three, married to a citizen of the foreign country where she has lived for fifteen years. She dutifully filed her taxes in the US, but never knew about FBAR. A friend entered the Voluntary Disclosure Program and was assessed $14,000. She contemplates the renunciation of American citizen, because her foreign husband owns a successful business and Nancy is a signer on business accounts. She fears exposing her husband’s business to the IRS and also fears that upon her death, the IRS will seek its pound of flesh from her estate. She renounces citizenship, though it breaks her heart.

Abuse Of the Law

FBAR was initially a harmless and little known embarrassment for the United States. It began as an ineffective attempt to stop money laundering. Like so many other laws (RICO, Homeland Security, etc.), it began with what some believed noble purposes, only to morph into a tyranny imposed upon law-abiding citizens. It is now a tool capable of arbitrary and oppressive expropriation of the wealth of millions of US citizens living abroad.

An insolvent government is a dangerous government. It is akin to a wounded and cornered animal. When conditions become really difficult, it is likely to do anything to survive. Arbitrariness in the interpretation of any law is dangerous to freedom, but especially so when government’s primary concern is survival rather than justice.

There are many reasons to be critical of FBAR. The following two will illustrate:

  1. Excessive fines: Ayn Rand said “The severity of the punishment must match the gravity of the crime.” This basic principle of human rights, enshrined in the Eighth Amendment, forbids excessive fines. It is immoral for the IRS to intimidate innocent citizens. Any law so uncertain that it could result in a loss of 50% of your wealth, depending upon the whims of the IRS, is not a law. It is government-sanctioned extortion.
  2. Guilt Presumed: The Fourth Amendment protects (or was supposed to) citizens against arbitrary fishing expeditions by government. Probable cause is required. The FBAR requirements circumvent this Fourth Amendment right, in effect saying: “You will volunteer to open the door to your house and let us look inside. If you don’t, we will fine and/or imprison you.” The IRS demands bank information based on a presumption of guilt even though holding funds in a foreign bank account is no crime.

Unintended Consequences

The term unintended consequences, a convenient euphemism for stupid policy or law, is appropriate. Some of the foreseeable outcomes are the following:

  1. An avalanche of US persons will renounce their citizenship. In July 2010, the State Department implemented a $450 fee for making a renunciation before a consular officer, presumably to exact additional income and possibly (highly unlikely) deter some from making the decision.
  2. Foreign banks and investors may decide doing business with the US is not worth the trouble of compliance with FACTA, particularly as the US economy collapses and the global economy shifts to the East.
  3. US Citizens abroad already find it challenging to open bank accounts both in US and in their countries of residence. This annoyance makes it more difficult for American companies and their employees to engage in foreign missions, business and trade.
  4. US citizens are already shunned from positions in foreign companies which do not want their banking details revealed to the United States Treasury Department.

Conclusion

The Bank Secrecy Act, passed in 1970, is an example of law designed for one purpose being expanded to be used against innocent citizens. Regardless of its good intentions, it is now a tyranny used to extort wealth from otherwise legal, law-abiding US citizens living abroad.

It represents a classic case of how government usurps freedom. What level of morality must government have to think they are entitled to shake-down hard-working citizens?

Monty Pelerin has never lived abroad or had a foreign bank account. He has friends who do and hopes that exposing this State plunder will cause it to cease in this and other parts of our lives.

NB: The preceding article appeared first at the American Thinker on April 5, 2011, then at Monty Pelerin’s World. Monty Pelerin is a retired economist who writes under a pen name. In March, I approached Monty asking if he would publish under his pen name an article on FBAR. He agreed and then we co-wrote the article and he kindly gave me no credit because I feared the long arm of the IRS. Then, Monty submitted it to the American Thinker. Now that I am out in the open with my IRS concerns, I’ve decided I can reproduce it here. So I want to thank Monty for his extraordinary help when nearly no one in the mainstream media or even conservative blogs were talking about this injustice which the IRS has afflicted upon millions of Americans – Petros

In four years, about 1% of diaspora non-filers chose to come into compliance through Streamlined: IRS

This is cross-posted from Brock. The author, Eric is a long-time writer there who composes excellent analytical posts, particularly concerning the inaccurate numbers of expatriations.

There was a discussion today that made me think of putting this particular post up. This post clearly demonstrates that in spite of all the scares – the FBAR Fundraiser aka OVDP 2009, & the FAQ 35 Bait & Switch, OVDI 2011, OVDP 2012, , OVDP 2014 the FATCA Hunt; the endless clamoring of condors, the media and folks like Shulman and Koskinen going on about The Reed Amendment, the Expatriot Act, “Quiet” Disclosures, 877A is retroactive and last but not least, if you don’t have a CLN you haven’t lost your US citizenship – none of it has made a particularly huge dent on non-compliance of Americans abroad. It is literally making me physically ill to reference all this – a vicious cycle of fines, penalties, interest, scaremongering, & whatever else can be thought of to persecute those who are simply presumed to be guilty i.e., Americans abroad. There can be no doubt whatsoever, that this is intentional. Even with the more-or-less guarantee of no penalties via Streamlined, only a very small number are choosing to become compliant. There are likely many reasons; people have begun to see what the IRS can/cannot do in terms of collection (or even detection); people are no longer willing to enter the U.S., etc. I like to think that some of our efforts to help educate people outside the bubble of American exceptionalism, U.S. Law über alles etc has contributed to opeople making up their minds based upon reason rather than reaction. If I had thought I could avoid filing/renouncing perhaps I would have chosen that too. Yet, large numbers of people remain who were literally destroyed by this shameless persecution and there will be more people who will ruin their lives out of ignorance based upon the falsehood that filing is in their best interests. It is for them that we need to continue…….

Sora Fon The tragedy of “self assessment”, self-enforcement and draconian penalties created to enforce honesty while leaving loopholes for those with influence and wealth. It is all I can do to tell the many indigent US Persons abroad I see, who could never face enforcement or confrontation abroad by an IRS interested only in collections, that (apologies to FDR) the only thing they have to fear is fear itself.

TM Yes and should one publicly caution anyone about coming into the system, there is an immediate swooping of threatening condors always quick to claim one doesn’t know what one is speaking about, what a terrible person you are to advise breaking the law, they will find everybody and blah blah blah.

Sora Fon Just saw this quote which I have to repeat: “A nation of sheep will beget a government of wolves.” — Edward R. Murrow

TM Agreed. It is why we MUST NOT remain silent.

Some of you may be aware of the nonsense Keith Redmond has endured by emphasizing on Twitter that if one is not in the tax system, it may be best not to enter it.
Excerpted from a post on Brock:

I was very surprised to see some of the Tweets on Twitter when Keith Redmond tried to warn Accidentals not to put themselves into the US tax system. It is interesting that without any proof as to the ability of IRS able to collect via QI, he presumes it and treats Keith in a manner I found inappropriate and unprofessional. I believe the point of contention was to prove that actual Accidental Americans had been “outed” due to QI. This was not provided, nor has it been since that time. There were others that ganged up in more “attacks” that I will not put up here. Brock/Wed Rally Tweeps will remember this extremely unpleasant incident.

If there is no repeal of #FATCA and a move to RBT, it will be clear that resistance will become more and more prevalent. I personally would love to see massive, visible civil disobedience. At the very least, the government can count on seeing the low numbers discussed in the post below.
*************************
Posted on February 18, 2017

On Thursday, the IRS released their “Dirty Dozen Tax Scams” for 2017, among which they listed “unreported offshore accounts”. They go into more detail in IR-2017-35:

Since the first Offshore Voluntary Disclosure Program (OVDP) opened in 2009, there have been more than 55,800 disclosures and the IRS has collected more than $9.9 billion from this initiative alone.

In addition, another 48,000 taxpayers have made use of separate streamlined procedures to correct prior non-willful omissions and meet their federal tax obligations, paying approximately $450 million in taxes, interest and penalties. The IRS conducted thousands of offshore-related civil audits that resulted in the payment of tens of millions of dollars in unpaid taxes. The IRS has also pursued criminal charges leading to billions of dollars in criminal fines and restitutions.

Works of the U.S. government are not objects of copyright, which is a boon for stenographers who mislabel themselves as “journalists”: they can just cut-and-paste the U.S. government’s viewpoint on the issues into their magazines without thinking about it, or attempting any analysis.

Anyway, US$450 million is an average of about US$9,400 per Streamlined participant. Not as big as the $13,000 per head they extracted from minnows with two-digit annual tax deficiencies under the 2009 OVDP, but still a sizeable sum from the perspective of the individual.

I’m sure there’s some poor deluded souls in the IRS and the Joint Committee on Taxation staff who are salivating at the thought of getting nine grand per head out of the rest of the millions of diaspora non-filers too — that might help them turn those mythical FATCA revenue estimates into reality. If that’s their aim, however, then forty-eight thousand over four years is a rather slow start.

Continue reading “In four years, about 1% of diaspora non-filers chose to come into compliance through Streamlined: IRS”