Tag Archives: OVDP

Bye Bye Storify, Hello Wakelet – My "Stories" will live in this post and be moved to https://wakelet.com/@Expatriationlaw

Today is May 15, 2018. Tomorrow Storify closes forever (unless it provides a last minute_ reprieve.
Therefore, I am creating this post to “store” copies of my 6 Storify Stories.
They are being saved here in pdf format. I have also moved them over to my Wakelet account where I will continue posts of this type.
‘Will you walk into my parlour?’ – #Americansabroad and IRS “amnesty” offers in the 2009 #OVDP
Australian Greens Senator @LarissaWaters resigns because of her CANADIAN place of birth. Too bad she was born in Canada
Can the common law “revenue rule” be used to stop the enforcement of U.S. “citizenship taxation” on non-U.S. residents?
My tax professional told me my “non-U.S. mutual fund is a #PFIC! What is a #PFIC and what do I do?
Tax, culture and how the USA uses #citizenshiptaxation to impose US culture (and penalties) on other countries
The “Pax Americana” to the “Tax Americana”: How the USA is imposing a separate, punitive tax regime on “nonresidents”

Part 5: Responding to the Sec. 965 “transition tax”: Shades of #OVDP! April 15/18 is your last, best chance to comply!

Introduction
This is the fifth in my series of posts about the Sec. 965 Transition Tax and whether/how it applies to the small business corporations owned by tax paying residents of other countries (who may also have U.S. citizenship). These small business corporations are in no way “foreign”. They are certainly “local” to the resident of another country who just happens to have the misfortune of being a U.S. citizen.
The purpose of this post is to argue that (as applied to those who do not live in the United States) the transition tax is very similar to the OVDP (“Offshore Voluntary Disclosure Programs”) which are discussed here. Some of my initial thoughts (December 2017) were captured in the post referenced in the following tweet:


The first four posts in my “transition tax” series were:
Part 1: Responding to The Section 965 “transition tax”: “Resistance is futile” but “Compliance is impossible”
Part 2: Responding to The Section 965 “transition tax”: Is “resistance futile”? The possible use of the Canada U.S. tax treaty to defeat the “transition tax”
Part 3: Responding to the Sec. 965 “transition tax”: They hate you for (and want) your pensions!
Part 4: Responding to the Sec. 965 “transition tax”: Comparing the treatment of “Homeland Americans” to the treatment of “nonresidents”
*A review of what what the “transition tax” actually is may be found at the bottom of this post.
This post is for the purpose of the arguing that, as applied to those who live outside the United States, payment of the “transition tax” in 2018, is the financial equivalent to participation in 2011 OVDI (“Offshore Voluntary Disclosure Program”).
 


Seven Reasons Why The U.S. Transition Tax as applied to “nonresidents” is similar to the “Offshore Voluntary Disclosure Program As Applied To “Nonresidents”. In both cases there are benefits to Homeland Americans and extreme detriments to “nonresidents”. These detriments amount to a punishment for living outside the United States and becoming a “tax resident” of another country.
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Does the end of #OVDP signal a move FROM the "voluntary disclosure" model TO the "enforcement model"?

The IRS recently announced that it was ending OVDP – the “Offshore Voluntary Disclosure Program.”
The reaction of the “tax compliance community has been largely that the “retiring” of the OVDP program should be interpreted to be a “last, best chance to come into compliance!” A comment at the Isaac Brock Society asks:

“Those who still wish to come forward have time to do so.”
I haven’t finished reading John’s farewell to OVDP but that IRS statement caught my eye. It does NOT say “who must come forward” or “who have yet to come forward”. Who the heck would ever “wish” to come forward, especially after reading about Just Me’s trial by OVDP fire and the betrayal of trust suffered by our dear Dr. Marcus Marcio Pinheiro (aka markpinetree)?

I suppose there could be two possible reasons:
1. The OVDP program could be replaced with something worse; and/or
2. There could be some (few and far between) situations where OVDP might actually be better than streamlined.


What do the “tax professionals” think? A collection of comments from the twittersphere follows:


Interestingly, the IRS announcement was accompanied by the statement that:

The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.

A comment from the Isaac Brock Society asks:

Doesn’t this just mean that they will move from the “voluntary disclosure” model to the “enforcement model” where they will begin to use the information gathered in FATCA, etc, to send notices to people with large fines?
To me, this sounds more like a gunshot that begins the battle between the IRS and expats versus an expat victory.

And in the real world …
Last week I was shown a sample of an IRS form letter received by an elderly American woman who has (apparently) not lived in the United States for fifty years. During those fifty years she had dutifully and responsibly filed her U.S. tax returns. Of course, she was living in a “foreign” country outside the United States.
Those interested might have a look at the following form letter she received. Notice that the letter appears to have been prompted because the IRS received information that she had an account at a “foreign bank”.
IRS – ltr form 6019
Looks like quite the fishing expedition to me. What a “penalty laden” list of possible accusations. Would you like to receive a letter like this about your “local” bank accounts?

IRS announces the end of #OVDP: Fascinating tweets from the "OVDP Historians" who compose the tax compliance community

#OVDP: Reactions from the “tax compliance community” (and others who tweeted) to the termination of OVDP
(Note: For the purposes of this post I will use the terms “OVDP” and “OVDI” interchangeably. Each term describes a specific example of one of the “OVDP era” programs, as it existed at a specific point in time.  A particularly good analysis of the evolution of the “OVDP era” programs is found here – of interest only to those who want to “OVDP Historians“!)


On March 14, 2018 Professor William Byrnes reported that:

The Internal Revenue Service today announced it will begin to ramp down the 2014 Offshore Voluntary Disclosure Program (OVDP) and close the program on Sept. 28, 2018. By alerting taxpayers now, the IRS intends that any U.S. taxpayers with undisclosed foreign financial assets have time to use the OVDP before the program closes.
“Taxpayers have had several years to come into compliance with U.S. tax laws under this program,” said Acting IRS Commissioner David Kautter. “All along, we have been clear that we would close the program at the appropriate time, and we have reached that point. Those who still wish to come forward have time to do so.”
Since the OVDP’s initial launch in 2009, more than 56,000 taxpayers have used one of the programs to comply voluntarily. All told, those taxpayers paid a total of $11.1 billion in back taxes, interest and penalties. The planned end of the current OVDP also reflects advances in third-party reporting and increased awareness of U.S. taxpayers of their offshore tax and reporting obligations.

I have heard it said:
The good thing about bad things is that they come to an end.
The bad thing about good things is that they come to an end.
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Dewees 3: Lessons about the "Oh My God Moment" and dealing with the problems of U.S. citizenship

As I write this post, my mind goes back to one of my very first posts about U.S. compliance issues. This post was called “What you should consider before contacting a lawyer“. Since that time I have written hundreds of post describing the problems faced by Americans abroad.
More recently …
In Dewees 1, I explained the importance of the Canada U.S. tax treaty and how it provides “some protection” to Canadian citizens from U.S. tax debts.
In Dewees 2, I explained some of the characteristics of the OVDP program and how Mr. Dewees got caught in it.
In Dewees 3 (this post), I am suggesting some possible lessons that can be learned from the story of Donald Dewees.
Ten thoughts on U.S. taxation, non-compliance, Americans Abroad and the U.S. taxation of Americans abroad
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Dewees 2: Why did he participate in the 2009 #OVDP Horror Show?

In an earlier post I explained why the Canada Revenue Agency assisted the IRS in collecting a $133,000 U.S. dollar penalty on a Canadian resident. The bottom line was that he was presumably NOT a Canadian citizen and therefore did NOT have the benefits of the tax treaty. This post is to explain where the penalty came from in the first place.
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Be careful what you "fix for"! A Holiday Gift: What to do about the unfiled #FBAR

As 2016 comes to an end …


I suspect that history will show that that the growth in renunciations of U.S. citizenship (and abandonment of Green Cards) continued in 2016. Absent a change in the way that the United States treats its “U.S. Persons Abroad”, I suspect that the growth in renunciations of U.S. citizenship will continue.
The purpose of this post and a short summary …
This blog post will hopefully encourage those with U.S. tax issues to consider whether they can deal with minor/unintentional FBAR violations as a “stand alone single problem”. There may be no need to escalate and expand one single problem into a multi-dimensional full blown tax problem that may end up with unintended and unanticipated costly professional fees as well as undue time spent!  Read on and learn why.  Keeping a calm head is most important, even if it is most difficult to do in the face of the scary situation of not being in compliance with the U.S. tax and regulatory regime.
This post consists of the following six parts:
Part 1 – Problems, more problems and the expansion of problems
Part 2 – Looking For Mr. FBAR
Part 3 – It often begins with a chance meeting with Mr. FBAR
Part 4 – How the compliance problems of “Homeland Americans” (particularly Green Card holders) differ from the compliance problems of “Americans Abroad”
Part 5 – Focusing specifically on the problem of FBAR non-compliance
Part 6 – Dealing with the tax professionals: Beware of how they can expand the number of problems
 
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"Coming Into Tax Compliance Book" – How Americans can come into U.S. tax compliance in a FATCA world

Are you “Coming To America” by entering the U.S. tax system as an American Abroad?
The “How To Come Into U.S. Tax Compliance” book for Americans abroad
John Richardson, LL.B, J.D.


I have contributed to establishing the new “Citizenship Taxation” site. As part of launching that site, I have written a series of posts providing relevant information (in a broad sense) about how Americans abroad, who did not know about their U.S. tax obligations, can come into U.S. tax compliance.
Sooner or later, it’s likely that many people will receive a FATCA letter. In your panic, you should be careful. There are a number of things Americans abroad should consider before consulting a lawyer or tax professional.
This series of posts developed from my “Educational Outreach” program for Americans abroad. It is an effort to respond in a practical way to the questions that people have.
The chapters of “Coming Into Compliance Book” are:
Chapter 1 – “Accepting Cleanliness – Understanding U.S. Citizenship Taxation – To remain a U.S. citizen or to renounce U.S. citizenship
Chapter 2 – “But wait, I can’t renounce U.S. citizenship if I’m not a U.S. citizen. How do I know if I am a U.S. citizen?”
Chapter 3 – “No matter what, I must come into U.S. tax compliance – Coming into U.S. tax compliance for those who have NOT been filing U.S. taxes
Chapter4 – “Oh no, I have attempted U.S. tax compliance by filing tax returns. I have just learned that I have made mistakes. How do I fix those mistakes?”
Chapter 5 – “I don’t want to renounce U.S. citizenship. How to live outside the United States as a U.S. tax compliant person
Chapter 6 – “I do want to renounce U.S. citizenship. This is too much for me. How the U.S. “Exit Tax” rules might apply to me if I renounce
Chapter 7 – “I really wish I could do retirement planning like a “normal” person. But, I’m an American abroad. I hear I can’t invest in mutual funds in my country of residence. The problem of Americans Abroad and non-U.S. mutual funds explained.
Chapter 8 – “We all have to live somewhere. Five issues – “The problem of Americans Abroad and non-U.S. real estate explained
Chapter 9 – “Receiving U.S. Social Security – #Americansabroad and entitlement to Social Security
Chapter 10 – “Paying into Social Security – #Americansabroad, double taxation and the payment of “Self-employment” taxes
Chapter 11 – “Saving the children – INA S. 301 – “Residence” vs. “Physical Presence” and transmission of US citizenship abroad
Chapter 12 – “Issues surrounding 401k, IRAs, Roths and Americans Abroad
Chapter 13 – “Married filing separately” and the “Alien Spouse” – the “hidden tax” on #Americansabroad
Chapter 14 – “The Obamacare “Net Investment Income Tax” – Pure double taxation of #Americansabroad
Chapter 15 – “To be “FORMWarned is to be “FORMArmed” – It’s “FORM Crime” stupid!!
Chapter 16 – “Most “Form Crime” penalties can be abated if there is “reasonable cause”
Chapter 17 – “How to get “credit” for taxes (foreign) paid to your country of residence
Chapter 18 – “I don’t pay taxes in the country where I live. Can I “exclude” my foreign income from the U.S. tax return?
Chapter 19 – “Is it better to take the “Foreign Tax Credit” or the “Foreign Earned Income Exclusion” – a discussion

Chapter 20
– “The child tax credit: take it, leave it or how to take it
Chapter 21 – “How #Americansabroad can continue to use the #IRA as a retirement planning vehicle
Chapter 22 – “To share or not to share” – Should a U.S. citizen share a bank account with a “non-citizen AKA alien spouse? – Reporting Edition
The “Coming Into Compliance Book” is designed to provide an overview of how to bring some sanity to your life.
 Coming to America
You may remember the old Eddie Murphy movie about “Coming To America”.


Welcome to the confusing and high stakes rules for U.S. taxation and Americans abroad.
The United States has the most complex, confusing, most penalty ridden and most difficult anti-deferral regime in the world. McGill Professor Allison Christians has noted that Americans abroad are both:

“deemed to be permanently resident in the United States for tax compliance and financial reporting purposes” …
and are
“subject to the most complex aspects of the U.S. tax code regardless of any activity in the United States, and facing extraordinary compliance costs and disclosure risks even for nil returns”

Although Americans abroad are deemed to be resident in the United States, their assets are treated as “offshore”. In addition Americans abroad are subject to taxation in their country of residence.
All of this means that:
1. Americans abroad are subject to the worst and most punitive aspects of the U.S. tax system (there is no Homelander who is treated as badly as an American abroad); and
2. Denied most benefits of the tax systems of their country of residence.
To put it simply, Americans abroad get the worst of all possible tax systems.
The most horrific aspects of the U.S. tax system are saved for Americans abroad. Prepare to be shocked. As one commenter at the Isaac Brock Society site recently said:


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How the logic of the quantifiers: "All", "Some", and "Not All" apply to Canadian mutual funds


What is a PFIC?
The acronym “PFIC” stands for “Passive Foreign Investment Corporation”. For your reading pleasure, I refer you to:
S. 1297 of the Internal Revenue Code which defines what a PFIC is; and
S. 1291 of the Internal Revenue Code which describes the “default taxation” of a PFIC.
Assuming that all Canadian mutual funds are PFICs, the results are horrific. I have written about this problem in two separate submissions to the U.S  Senate Finance Committee.
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