This is a companion to the earlier post I wrote suggesting why Swiss banks should NOT join the OVDP program for Swiss banks. In this post I argue that individuals shouldn’t join OVDP for people. At the moment that means that nobody should join OVDP.
I have written a number of posts about the OVDP program for Swiss banks. The banks should stay away from it. But what does it mean for Americans in Switzerland? The answer is that they are being asked to prove that they are U.S. tax compliant. Remember that proof has nothing to do with proof.
For both Americans abroad and recent immigrants:Millions of people are agonizing over the question, “Should I just blow it off or do I really need to take some action?” The answer is easy: Whether you take action or not is all based on your personal tolerance level for risk and uncertainty. It is your decision to make. Many people are totally comfortable with the idea that they will never get caught violating the tax laws by not reporting foreign income and accounts or for some reason don’t care if they do get caught. This is because it is one thing for the IRS to compute a tax due and owing from a delinquent taxpayer, but the IRS is years away from routine collection in the ordinary course of delinquent taxes from Americans overseas, provided there are no periodic or regular payments like Social Security payments or pension payments leaving the US for accounts abroad.
Leaving one with the question for Americans abroad:
Is it more dangerous to be IN tax compliance or NOT in tax compliance?
Time will tell. If Mr. Mopsick is correct in his analysis, this suggests those NOT in tax compliance have time to respond to their situation and NOT react!
Letterman: This is crazy. Because of the #shutdown the NSA is closed. They're asking citizens to please spy on each other.— Andrew Malcolm (@AHMalcolm) October 04, 2013
The threat of FATCA enforcement has impacted every jurisdiction in the world and the global financial industry is quaking with fear. The US Justice Department has taken the position that the entire non-US financial industry is potentially part of a continuing criminal conspiracy with some US individuals and multi-national companies to evade US income tax. The Justice Department has unilaterally forged ahead to obtain indictments and convictions over prominent foreign banks, bankers, and some of their US customers. The United States justification for claiming the moral high ground is that it is merely seeking to have all US taxpayers pay tax as required under US law.
1. The Income Test – Has the composition of income hat has resulted in a U.S. tax bill of approximately 140,000 for each of the last three years (this is a paraphrase, look it up yourself);
2. The Asset Test – Has a net worth of two million dollars or more
3. The Compliance Test – Is unable to certify compliance with U.S. tax laws for each of the five years prior to expatriation. Note that this is intended to include having filed all relevant information returns. (I would argue that since FBAR is a Title 31 requirement it is irrelevant to Title 26 compliance). Interestingly, if you do not meet either the asset test or the income test, you have a huge incentive to ensure that you have five years of tax compliance.
When it comes to U.S. tax compliance:
The only thing worse than the fear of non-compliance is the certainty of compliance. Why?
That post included the following poll. The results are shocking!
In January of 2013 I began a series of posts to explore the rationale (if there is one) for “citizenship-based taxation”. I simply cannot understand how the United States of America, a country that once was a leader in human rights, can treat it’s citizens (not to mention Green Card holders) so badly. I assume that Congress has simply not considered this issue.
This series of posts (including the Prologue are):
In our country the people are sovereign and the Government cannot sever its relationship to the people by taking away their citizenship. Our Constitution governs us and we must never forget that our Constitution limits the Government to those powers specifically granted or those that are necessary and proper to carry out the specifically granted ones.
Assuming the correctness of this, it is very big. It signals that the focus of the IRS may be moving away from penalties and toward getting people back into the system! Note the discussion of the role of Taxpayer Advocate.
If you are not a U.S. citizen (or other kind of U.S. person) you may have little to worry about. Panic is starting to set in. There were many U.S. citizens who became citizens of other countries. They may or may not have lost their U.S. citizenship. Even if at this moment you believe you are a U.S. citizen, I urge you to consider this issue.
FATCA is in trouble – it appears to be stalled. Treasury was (at least it said) anticipating up to 50 IGAs by December 31, 2012. As of today, they have a total of four. That is a pathetic and pitiful number. To make matters worse, Treasury failed in its commitment to get regulations/information/direction to the foreign financial institutions by the December 31, 2012 date. (The word is that the release of the final FATCA rules is imminent. Update January 18: the IRS has finally released the final FATCA rules.)