Life in “Form Nation” (or is it a “waste of a life”) …
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PAYING tax always hurts. But America’s tax code seems designed to make it hurt as much as possible. It contains 3.8m words, and was changed 579 times in 2010 alone. Taxpayers must wade through a swamp of gobbledygook: tax compliance consumes 6.1 billion man-hours annually, according to the Internal Revenue Service (IRS). That’s the equivalent of 3m people working full-time, year-round—more than the entire federal workforce. Each year, Joe Taxpayer must sign a thick return that he cannot plausibly understand. And woe betide him if any of its contents should turn out to be inaccurate.
The primary obligation of U.S. citizenship is to “fill out forms”. While other countries produce, citizens of “Form Nation” think about forms, forms and more forms. Think of it 6.1 million man-hours annually. And this in a country where a the end of the day, a significant percentage of Americans don’t pay income tax. The U.S. Internal Revenue Code is the biggest “make work project” in the history of civilization. An example of “American Exceptionalism” at its finest!
Nobody is subjected to more forms than U.S. citizens living outside the United States. Here is a wonderful description:
There is the FBAR form, and the duplicative new FATCA 8938 form. There is the Foreign tax credit form, the foreign earned income exclusion form 2555. If you have mutual funds there is the Form 8621. Heaven forbid, if you try to open a business, then there is the Corporate Form 5471 problem. If you have a family trust, then you have another form 3520 to deal with. All of these forms come with serious and draconian penalties that Homeland tax payers do not have to deal with. Additional, with recent FATCA legislation, where all banks in the world are supposed to be IRS tax collectors, US persons are finding their lives complicated by being shut out of normal banking services. Banks don’t want US persons either, as they are too complex and expensive to deal with if they are to be compliant with US new world wide tax statutes.
The volume and complexity of the forms (not the payment of tax) is becoming a primary reason for U.S. citizens to renounce their citizenship!
Form Consulting – A truly essential industry!
Since the primary obligation of U.S. citizenship is to fill out forms, and nobody can understand the forms, every U.S. citizen needs a personal “form consultant”. (I would say “tax preparer”, but since many people don’t pay tax, it isn’t really about taxes, is it?) No, in the same way that every person needs a doctor and a dentist, every person needs that “form consultant”.)
HR Block – “Form Nation’s” Number One Consultant
HR Block has prepared tens of thousands of U.S. tax returns for U.S. citizens in Canada. They are excellent marketers. If a recent article in the Economist is to be believed, the firm prepares 1/6 of “assisted” U.S. tax returns. HR Block gives the impression of a company with true tax professionals. It is very easy to become an HR Block tax preparer. They have a complete training course designed to generate “tax professionals”. What does a consumer expect from a tax professional? When one goes to a tax professional one:
1. Wants all tax and reporting issues identified (including FBAR and other forms of information returns); and
2. Wants those obligations and forms explained and dealt with.
New HR Block Tax Talk – A blog produced by HR Block “Senior Tax Professionals”
HR Block Canada has recently introduced a new blog called “HR Block Tax Talk“. According to HR Block, their bloggers are “senior tax professionals” at HR Block. In their own words:
The Tax Advisory at H&R Block is a select group of senior tax professionals. Follow them as they blog regularly on tax topics and provide their insights on how it could impact you.
Here are some of their posts, which are relevant to U.S. citizens residing in Canada. Although these posts may be too basic for most, some of you might find them to be of interest:
U.S. deadline for filing taxes is today – April 18, 2011
U.S. Citizens Always Have Tax Obligations – July 11, 2011
Hurricane Irene brings some tax relief to lost U.S. citizens in Canada – August 31, 2011
U.S. citizens in Canada may get a reprieve from the IRS – December 12, 2011
What is an FBAR? – January 20, 2012
There is a lot of paperwork for U.S. citizens in Canada. Here’s some help - February 10, 2012
HR Block and Information Returns
In the past, HR Block has been “weak” when it comes to information returns. Prior to the Fall of 2011, HR Block made no mention of FBAR on its primary page describing U.S. tax requirements. In the fall of 2011 this page was amended, and the following paragraph about “some” information returns was added to their site.
Forms to File
The 1040 form is the standard documentation for filing your income tax return to the Internal Revenue Service (IRS).
Besides filing an annual tax return, you may be required to submit documentation to the U.S. Treasury, as well. This form is called the FBAR for Foreign Bank Account Reporting. (http://www.irs.gov/pub/irs-pdf/f90221.pdf). Additional reporting is required if you own a Tax Free Savings Account, Registered Education Savings Plan or a Canadian corporation.
It’s good to see that HR Block’s “FBAR consciousness” has improved.
Starting with the summer of 2011, HR Block seems to have developed, a “form” (no pun intended) of FBAR awareness. By September of 2011, HR Block was fielding questions from Ambassador Jacobson’s 70 year old grandmas. The sheer volume of questions, prompted HR Block, in September of 2011, to issue a “Fact Sheet for Lost Americans”. On January 20, 2012 they produced a blog post specifically on FBAR. This is all welcome news.
HR Block – Advice On How To Deal With Past Compliance Issues
There at probably tens of thousands (if not hundreds of thousands) of “Lost Americans” with past compliance issues. HR Block (along with others) appears to be rendering conflicting advice on what they should do. What is the conflicting advice?
First, as has been previously noted on the Isaac Brock Society, HR Block has a web page that can be interpreted to mean that people are required to enter voluntary disclosure (“OVDI). This is extremely misleading.
Second, with the advice given by HR Block in September of 2011, “Fact Sheet for Lost Americans” was described in the Financial Post as follows:
Cleo Hamel, a senior tax analyst with H&R Block Canada in Calgary, Alta., says the tax service company’s offices across the country have been fielding questions from people confused about where they stand, especially those who left the United States when they were children and those with children born in Canada who may be considered American.
“I can’t say that I’ve seen anything like this that’s caused this much concern,” she says, “Even in Canadian tax.”
H&R Block has issued a fact sheet on “lost Americans” and its U.S. tax specialists are working more now than during the regular tax filing season, she says.
“I don’t think the average person should worry, but it’s really important that they take a moment, ask some questions and speak to someone, because people are so panicked and I think we all in general tend to make rash decisions,” Ms. Hamel says.
“We’ve been telling people, ‘Come on in, let’s sit down, take a look at what’s going on and let’s make a decision based on the facts,’ ” she adds.
Many people are struggling to understand whether the requirements apply to them, how many years of past returns and FBAR forms they should be filing, and whether they can do some or all of the work themselves.
Ms. Hamel notes that Canada has a tax treaty with the United States to avoid double taxation and with foreign tax credits, most of those who file returns will not end up owing tax money.
But they’re still spending thousands on accounting and legal fees. The Thompsons have racked up $6,000 each so far. While other estimates have put the total cost of compliance at $10,000 to $15,000, Ms. Hamel says the paperwork can cost as little as $1,000.
So is HR Block advising people “to OVDI” or to “not OVDI”? Very confusing, but HR Block is not the only firm giving confusing information.
HR Block is a great business which is protected from competition by the new IRS regulations – What would Warren Buffet say?
The United States of American (aka “Form Nation”) is a nation of tax laws and forms. The IRS is requiring all paid tax preparers to be registered with the IRS. The result: U.S. tax compliance is difficult and expensive for U.S. citizens living abroad. As expensive as HR Block can be, it is sure to continue to receive lots and lots of business. Although you can also get your taxes done by an attorney, CPA or enrolled agent, HR Block will simply cost less and is all the average family can afford.
HR Block is a strong brand in a growth industry. Furthermore, HR Block is also the major beneficiary of IRS attempts to regulate the tax preparation industry.
If you believe that the volume of forms and confusing tax rules will continue, then invest in HR Block. If you are a senior or student, looking for a job completing “forms”, then take the HR Block tax preparer course!
As goes “Form Nation”, so grows HR Block!