On May 18, 2011 IRS Commissioner Shulman spoke at the John Hopkins Business School. An excerpt from his prepared remarks included:
“Let me begin with our efforts to combat offshore tax evasion.
During my tenure as Commissioner, I’ve made putting a significant dent in offshore tax evasion a major priority. In the U.S. and other nations, we view offshore tax evasion as an issue of fundamental fairness. Wealthy people who unlawfully hide their money offshore aren’t paying the taxes they owe, while schoolteachers, firefighters and other ordinary citizens who play by the rules are forced to pick up the slack.
Our approach follows a natural course…cleaning up the abuses of the past and then mining and leveraging the data we receive to mount a greater attack on the abuse. A good example is our work on the Swiss bank – UBS – where for the first time in history, a bank secrecy jurisdiction turned over thousands of names and account numbers.
As we increased our enforcement efforts and gained significant momentum, we gave taxpayers their best chance to come in voluntarily and avoid going to jail. Now, in a typical year, we get 100 or so taxpayers who use our voluntary disclosure program. For this program, we thought that figure would rise to maybe 1,000.
So, we were very pleased that we had approximately 15,000 voluntary disclosures from individuals who came in under a special program we created, which entailed payment of back taxes and stiff penalties. And since it closed, we’ve received an additional 4,000 voluntary disclosures from individuals with secret bank accounts from around the world. We’ve even launched a second disclosure program with much tougher financial penalties – but no jail time – if taxpayers come clean with us. We are now mining the information we have received to date and have launched our next wave of investigations on banks, bankers, intermediaries and taxpayers.
Collecting additional revenue for past misdeeds – as important as that may be – is not the main consideration here. It’s equally important that we’re bringing U.S. taxpayers back into the system…back into compliance… so they properly report and pay their taxes for years to come.
Our goal in this effort is to fundamentally change the risk calculus of taxpayers – we are well on our way to deterring the next generation of taxpayers from using hidden bank accounts to cheat on their taxes. Through our ongoing efforts, we are demonstrating that the world has become a smaller place… that we will eventually find you if you are hiding assets overseas… and that the average American taxpayer can believe the tax system is fair.”
http://www.irs.gov/newsroom/article/0,,id=239550,00.html
Note that compliance means that people will properly report their taxes for years to come. It is in the interests of the IRS, the American Government and taxpayers to be and continue to be compliant. It is also in everybody’s interest that taxpayers, lawyers and accountants know what to expect from the IRS. To put it simply: lawyers need to be able to advise non-compliant taxpayers on what course of action to take.
Yes there are tax evaders. Yes there are wealthy Americans (not in and of itself a crime) who have been using overseas bank account particularly in Switzerland to evade U.S. taxes. These were the people who prompted OVDI 1 OVDI 2. The purpose of OVDI, as articulated by Commission Schulman was:
“The time has come to get back into compliance with the U.S. tax system, because the risks of hiding money offshore keeps going up,” said IRS Commissioner Doug Shulman. “Our goal is to get people back into the system. The second voluntary initiative gives people a fair way to resolve their tax problems.” (
Note that the Commissioner speaks of bringing taxpayers back into the system. This means two things:
1. Disclosure of assets; and
2. Giving the IRS the ability to tax those assets for a long period of time.
The purpose of OVDI was to bring those who have been using foreign bank accounts to evade tax back into the system. See the following Fox news interview with Commissioner Shulman:
http://video.foxbusiness.com/v/3894259/irs-commissioner-on-ubs-settlement\
Many expats seem to fall into one of the following two categories:
1. They were scared into entering OVDI when they should not have (they were not tax evaders); or
2. They were too scared to do anything.
This is not a good situation for anyone. U.S. expats living in Canada are not using an account at the Bank of Nova Scotia (or any of the other Canadian banks) to evade taxes. U.S. expats in Canada need banking services to live their lives. The U.S. tax laws are making it increasingly difficult for expats to do normal saving and retirement planning. Canada is the opposite of a tax haven.
U.S. expats are terrified. The IRS is waging a reign of terror. The is helped by a number of articles in the mainstream media which suggest that expats and tax evaders should be treated in the same way. The time has come for this to stop! Canadian politicians have entered the discussion – requesting leniency for U.S. expats living in Canada. If Commissioner Shulman is serious about bring assets back into the tax system, then he must make it possible for expats to come back without financial ruin. Most expats owe little or no tax and have little or no knowledge of the FBAR filing requirements.
If you are a U.S. expat living in Canada, do you recognize yourself in the following article?
http://www.reuters.com/article/2011/11/09/us-offshoreaccounts-irs-idUSTRE7A85AT20111109
“For those who have been hiding assets overseas from U.S. tax authorities, knowingly or not, the news that Credit Suisse will turn over names and account details of certain U.S. clients to the Internal Revenue Service could be the beginning of the end.
The IRS, aggressively seeking to bring taxpayers with offshore assets and income back into the tax system, offered several rounds of voluntary disclosure windows to induce taxpayers to confess. The last window closed on September 9.
Now those with undisclosed foreign assets, who did not take advantage of the amnesty, should seek tax advice immediately.
“The advice to someone over in Switzerland is to run like hell for the nearest tax lawyer to discuss whether it makes sense to do a voluntary disclosure,” says Dennis Brager, a Los Angeles tax attorney with Brager Tax Law Group, who specializes in tax controversies.
Read the complete article here.
U.S. Persons Abroad - Members of a Unique Tax, Form and Penalty Club 
Well, isn’t it lovely that I now need to spend thousands on an international tax attorney when my family can ill afford to do so. This ridiculous “Hire” legislation is harming middle class and poor ex pats MUCH harder than it is hurting actual tax cheats who have millions. We are not those people yet we are the ones paying the high cost. And people wonder why those who have been American for their entire lives are renouncing. We’ve been demonized, told we need lawyers, threatened with fines, our spouses and children’s accounts are suspect and subjected to U.S. tax even when they are not American. Enough already. Why are we being treated as criminals are when we’ve done not one thing wrong and did not owe the U.S. any “tax”