(Interesting discussion in the above twitter feed.)
On April 30, 2020 I hosted a discussion with Karen Alpert, Laura Snyder, David Johnstone and Keith Redmond. The discussion touched on a variety of subjects of interest to Americans abroad and Accidental Americans.
"What Is The Future Of Citizenship-Based Taxation?" Prof. William Byrnes (Texas A&M Law), Prof. Edward Zelinsky (Cardozo Law), John Richardson (Canadian attorney who represents US-Canada dual nationals), Kat Jennings (CEO Tax Connections) https://t.co/LP63MHEFYS
— William Byrnes (Tax Monk) (@williambyrnes) May 5, 2019
You are invited to submit your questions in advance. In fact, PLEASE submit questions. This is an opportunity to engage with Homelanders in general and the U.S. tax compliance community in particular.
Thanks to Professor Zelinsky for his willingness to engage in this discussion. Thanks to Kat Jennings of Tax Connections for hosting this discussion. Thanks to Professor William Byrnes for his willingness to moderate this discussion.
Tax Connections has published a large number of posts that I have written over the years (yes, hard to believe it has been years). As you may know I oppose FATCA, U.S. citizenship-based taxation and the use of FATCA to impose U.S. taxation on tax residents of other countries.
Tax Connections has also published a number of posts written by Professor Zelinsky (who apparently takes a contrary view).
This is the third of a series of four posts that reflect views and experiences of Americans abroad who are experiencing the reality of actually living as an American abroad in an FBAR and FATCA world. (The first part is here.) The second part is here. I think it’s important to hear from people who are actually impacted by this and who have the courage to speak out. The “reality on the ground” is quite different from the theory.
Interesting thoughts from @VLJeker: Part I: Identity Theft, FATCA Security Risks, Tax Zombies, Phishing and Other Scams – Be Careful Out There…. https://t.co/9mGiBBfPlX
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) August 8, 2018
Her thoughtful post includes:
FATCA Security Risks with Sensitive Data
The Foreign Account Tax Compliance Act, commonly called “FATCA” has caused Americans abroad to be fearful of security risks when their personal financial information is reported by non-US financial institutions or foreign government agencies to the IRS. FATCA reporting will include the name, address and taxpayer identification number of each US account holder at the financial institution; the account number; account balance and value; the account’s gross receipts and gross withdrawals or payments; and other account related information requested by the Internal Revenue Service (IRS). The Treasury Inspector General for Tax Administration has expressed concerns with the security of data transmission as mandated by FATCA. In September of 2014 the IRS issued a fraud alert to all international financial institutions that are complying with FATCA. Scam artists posing as the IRS have fraudulently solicited financial institutions seeking account holder identities as well as financial account information. Financial institutions directly registered to comply with FATCA, and those in jurisdictions that are treated as having an IGA in effect to implement the FATCA provisions through their home governments, have already been approached by parties impersonating themselves as the IRS. The IRS now has reports of incidents from various countries and continents.
The most significant piece of information that a U.S. citizen discloses to a “Foreign Financial Institution” under the FATCA IGAs is his/her TIN (“Taxpayer Identification Number”) AKA his “Social Security Number”.
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.
Why a nonwillful taxpayer might prefer OVDP to streamlined – The "penalty base" in #OVDP is different from the "penalty base" in streamlined and treatment of #PFIC is is different. But, … "IRS OVDP to End on September 28, 2018" | US OVDP Tax Law Firm https://t.co/KGr5e3yabd
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) March 19, 2018
What do the “tax professionals” think? A collection of comments from the twittersphere follows: #OVDP Tweets
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.
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?
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) August 25, 2017
Well he won the lottery. Specifically he won the “Green Card” lottery. He and his wife came all the way from an Asian country to “Live The Dream” – specifically the dream of living in the United States of America.
He spoke English. His wife did not speak English. He believed in strict compliance in the law. His wife relied on him to ensure her compliance with the law.
As a Green Card holder he was vaguely aware that he could be deported if he were convicted of certain kinds of offenses. But, mainly he believed in compliance with the law for its own sake.
As a Green Card holder and as a U.S. resident he was subject to laws that were never explained to him. He didn’t realize that he was taxable on his WORLD income (including a small pension that he received from his country of citizenship).
In 2009 the “Offshore Jihad” began. He didn’t think of himself as having “offshore accounts”. After all, he was a just citizen of another country. Surely it could NOT be criminal to have a bank account in his country of origin. Did he have to report his small foreign pension to the IRS? That pension was in no way related to the United States of America? And then he learned about the alphabet soup of “reporting requirements” – Mr. FBAR, Uncle FATCA, etc. He began to learn what the “reporting requirements” were. But, the penalties (as least described) were certain. He could not believe the extent of the penalties.
It was at this moment that his “Oh My God” moment began. He was confused and mentally disorganized. At that moment, all of his life assumptions were reversed. Assumption 1: He had always believed that he was a good, moral “law abiding” person. How could it be that he was NOT in compliance with the law. He had no reason to believe that the reporting requirements would even exist. Welcome to the United States of America where any involvement with anything “foreign” makes you a presumptive criminal. Assumption 2: He had always believed that the United States was a “just nation”. How could the United States threaten to impose such penalties on a person in his situation?
Welcome to the United States of America where justice is NOT the norm. What’s a poor “Green Card” holder to do?
He was ill prepared to deal with the situation in which he found himself.
He strived to learn what he could. The IRS would not answer his questions – suggesting that he go to a “tax professional” The “tax professionals” gave him different, conflicting and contradictory answers.
His greatest frustration was that he could NOT completely understand what was expected of him – although he did understand the threat of penalties, penalties and more penalties.
He eventually decided that he had to move back to his home country. He did this NOT to escape U.S. taxation, but because:
He could not completely understand what was required of him to be U.S. tax complaint; and
He was worried that he would die and leave his wife in a situation where she would not know how to be U.S. tax compliant.
In order to prepare for leaving he:
entered the streamlined program (domestic version) and “back filed” for 3 years
stayed in America for two more years so that he could certify the “five years of tax compliance” when he handed in the I-407
even filed the “Sailing Permit” (The 1040C) that is required of ALL aliens (resident or nonresident) when they leave the United States
He in now trying to file his final return and 8854. Fortunately he will not be subject to the S. 877A Exit Tax. He is currently focusing on staying alive long enough to complete his U.S. tax filings. He feels that it is important that he NOT die and leave the U.S. tax compliance problem to his wife. His emotional state:
Like many he is living in a state of fear. I pointed out to him that he was a small insignificant person and that nobody in the U.S. Government cared about him. He thanked me for telling him that “nobody in the U.S. Government cared about him”. He said that it was the first time in his life that he felt good that nobody cared about him. Epilogue:
One more day. One more life ruined. One more person chased out of America because of the Internal Revenue Code.
His greatest wish is that he lives long enough to file Form 8854 to log him and his wife out of America.
Nobody, but nobody should move to America without reading the fine print!
#YouCantMakeThisUp! John Richardson
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