Category Archives: OVDP

Circa 2014 – A trip Down Memory Lane: #FBAR #FATCA And The Use Of Non-US Banks

This 2014 hearing held by the US Senate on Permanent investigations is very interesting.It features Senators Levin and McCain and includes discussion of tax evasion, Swiss banks, tax treaties, FATCA the Offshore Voluntary disclosure programs and more.

The logic of the United States is approximately this:

Homeland Americans use non-US bank accounts.

Americans abroad use non-US bank accounts.

Therefore, (but not acknowledging Americans abroad) both Homelanders and Americans abroad use non-US banks for the same (nefarious) reasons.

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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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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Mr. Bedrosian (a pioneer in FBAR history) meets Mr. #FBAR: The good, the bad and the ugly

Why the Arthur Bedrosian meeting with Mr. FBAR is important
Synopsis:

The Bedrosian FBAR case is an incredibly important victory for taxpayers. Judge Baylson first ruled that FBAR “willfulness” in the “civil” context did NOT require knowledge that filing an FBAR was a legal duty (the criminal standard). He then ruled that Mr. Bedrosian’s failure to report the account was a form of negligence that did NOT meet the required standard of “willfulness”.
Perhaps the message is:
The failure to file an FBAR will be “willful”, if the circumstances of the failure, were evidence of conduct that the FBAR statute was designed to punish.
 
In other words, it is possible to know about Mr. FBAR, fail to file Mr. FBAR and NOT be “willful”!
The “Readers Digest” Version …
The Bad …
The District Court held that the test for what constitutes “willfulness” in the “civil FBAR penalty” context is not the test used in a criminal context – “the intentional violation of a known legal duty”. All that is required is that the person voluntarily NOT file an FBAR. (One need not know that he is violating a legal duty).


The Good …
The failure to file an FBAR can be a form of “negligence” that falls short of “willfulness”. In other words, one can know about the FBAR requirement, fail to file the FBAR and still fall short of “willfulness”.


The Ugly …
The IRS had initially taken the position that Mr. Bedrosian’s misadventures in FBAR were nonwillful. But, they changed their mind.
Round 1 goes to Mr. Bedrosian. Will the IRS appeal?


Mr. Bedrosian has earned a place in FBAR history. He is a true “FBAR Pioneer”. His “Adventures in FBAR” place him in the club of: Mr. Pomerantz, Mr. Hom , Mr. Kentera, Mr. Horsky and Mr. Warner. Fortunately, mere visitors to American do not yet have to file the FBAR. Interestingly, Mr. FBAR appears to have been the “role model” for a Russia foreign bank account reporting laws.
To learn more about the FBAR Odyssey of Mr. Arthur Bedrosian …
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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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U.S. "culture of penalty" and inflation: First, inflation used to increase the size of #FBAR penalty base and then to increase the size of actual penalties

Introduction: Penalty as a part of American Culture


The above tweet links to a wide range of examples of America’s culture of penalty.
The purpose of this post is to explore how inflation results in the facilitation of enhanced penalty collection in America today.
What is inflation?
In its simplest terms:

“Inflation is defined as a sustained increase in the general level of prices for goods and services in a county, and is measured as an annual percentage change. Under conditions of inflation, the prices of things rise over time. Put differently, as inflation rises, every dollar you own buys a smaller percentage of a good or service. When prices rise, and alternatively when the value of money falls you have inflation.”
Source: Adam Hayes, CFA

(Note his use of the words “goods and services“. Are FBAR penalties and the S. 877A Exit Tax consumer goods or government services?)
Inflation can either be helpful or can be hurtful. Some benefit from inflation and others are hurt by inflation. At a minimum, inflation will always erode the value of cash.
Effect of inflation on owners/lenders of cash: When it comes to cash inflation will hurt the owners/lenders of cash. This is because inflation will erode the value of cash.
Effect of inflation on borrowers of cash: Inflation will help he borrowers of cash. This is because inflation erodes the value of the cash that must be repaid.
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Part 2: Be careful what you "Fix For" – Mr. Kentera meets Mr. #FBAR in the "Twilight Zone"

Introduction …


This post is one more of a collection of FBAR posts on this blog. The most recent FBAR posts are here and here.
The “unfiled FBAR” continues to be a problem for certain Homeland Americans with “offshore accounts” and all Americans abroad,  who continue to “commit personal finance abroad”.


The above tweet references a recent post which discussed how to “fix past compliance problems“. The introduction included:
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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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