“Just Me” comment on Susan Tompor – Detroit Free Press – Some foreign accounts must be reported to IRS

FBAR Consciousness Moving Closer To Canadian Border …

is the title of a post that I wrote yesterday on the Isaac Brock site. Susan Tompor of the Detroit Free Press wrote an interesting article about how the IRS reporting rules affect ordinary folks. Not those “high rolling tax cheats”. Not those wealthy politicians. No, just ordinary people. You can find the article here. I suggest that you read it and make some comments. As an incentive to make some comments, what follows is a comment about this article from “Just Me”. Hope it provides encouragement and motivation!

Dear Susan,
Thank you for being one of a very select group of reporters highlighting what the past 3 years of IRS jihad against offshore accounts is all about. It is about more than just finding the Rich hiding ill gotten gains in secret Swiss accounts, as openly characterized by the IRS, and parroted by the media, generally speaking.  Your article has broken the mode of the popular narrative.  My hat is off to you.
Another reporter who has understood this has been Amy Feldman, who wrote about the subject for Reuters under the headline, Taxpayers with overseas accounts seethe at penalties.
As you have so well pointed out, Canada is hardly “overseas” or an offshore tax haven, and the story is much broader than what the IRS would have you believe.
The more compelling story is the impacts on normal, average, middle class auto manufacturing managers in Detroit.  These people may have been benignly in non compliance with a heretofore obscure FBAR form, or they may have failed to understand that America was the sole country in the world, except Eritrea, that taxes its Citizens world wide, no matter where they live or work.  Another story that no one is telling yet, is of the millions of immigrants in America who are similarly impacted. You have a big community there in Detroit that are being caught up in this, or will be. They are here escaping persecution and human rights abuses at home, and now are being pursued as criminals by the IRS. Their plight too needs to be separately highlighted.
The IRS has chosen to rightfully target rich tax UBS type cheating Whales (I call them), but has used the wrong instrument which employees broad brush solutions. These hastily designed, and then continually modified programs punishes the Minnows who got caught in their net, very harshly.  And don’t be easily persuaded that the lessor penalties that trecently come into play represent fairness. They don’t apply against tax failure, they apply against total aggregate accounts and assets, and that can be devastating of life savings for those of modest means, even at a 5 or 12.5% level.  They are still harsh for the ‘so called’ crime, and not at all in keeping with other types of tax failures in the Homeland, like Timothy Geithner’s, who didn’t have to pay any penalty at all for “his crimes” except interest.  And I use the word “crimes” advisedly, as that is how it would have been characterized were the IRS on that type of witch hunt at the time his disclosure conveniently came to light just before his confirmation hearings.    How fair is that?
Also, now the IRS says, that if a person had reasonable cause, or was non willful in their compliance failure, once they enter the OVDI, the can Opt Out.  The question that should be asked, is why the hell does this “Opt Out” come at the end of the process, rather than at the front end as a better point to separate the Minnows and Whales?  Why not make it early in the process, if compliance is your only objective? Why require Minnows to go through the same lengthy and complex processing plant as the Whales? Sadly many are turned into fish fertilizer at the end, frozen in fear of wiggling off the conveyor.
The IRS like to call this an amnesty, and threaten you to “come clean” as if the Minnows were actively engaged in the same evasion techniques as the Whales.  Shulman tells us…”get right with us before we find you,” and there is no discussion about what is or is not “right” about the Citizenship tax model that drives all this nonsense.
What the IRS is offering is hardly an amnesty as proclaimed.  An amnesty is what the Canadian tax authorities do when they have a voluntary disclosure program.  Read from their VDP page…
“The Voluntary Disclosures Program (VDP) allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information they have not reported during previous dealings with the CRA, “without penalty or prosecution.”
Repeat:  “without penalty or prosecution!”  Now that is an Amnesty!
Now compare that to the most recent IRS OVDI.  – 27.5% penalty on 8 year highest aggregate of all accounts and FMV of assets, plus interest, plus a 20% accuracy penalty for tax underpayment!

And you wonder why Expats overseas and new immigrants to America, or auto manufacturing managers in Detroit aren’t all that excited about these proposals.  I would question whether or not this new measure will really increase compliance.

Of course, the IRS at the same time as it issues threats to ‘come clean’ before we find you, will trumpet their “successes”.  $4.4 billion collected.  33,000 cheats come clean!  And, sadly a lot of reporters just act as scribes and repeat those assertions without one skeptical question or ask for better statistical evidence to support the assertions of success.
Success can be measured many ways, but just putting out single numbers in a press release is disingenuous at best, and deceptive at worst.
They should know better, but no one asks a thing of them, and so they get away with it time, after time, after time, after time.  You accidently slipped into it too, as there were no qualifiers related your statements of success, but you are forgiven as you are  at least trying to write a broader story, and I appreciate that! 🙂
Now, if I were a reporter, and had a chance to speak with the IRS Commissioner, here is the type of questions I would be asking.
Commission Shulman, $4.4 Billion sounds like a lot of money, but, as you know, it is a number in isolation. A sole number by itself is pretty meaningless in terms of providing perspective.  One number does not a story make as any analysis or CPA will tell you,  so…
Before you started this program, did you do any cost versus benefit analysis,(like any business would do) so you would have come guidelines upon which you could judge this $4.4 Billion dollar success?
Was this more or less than you expected?
What was the actual cost to produce this new revenue, both direct and indirect costs? Have you included the cost of the unintended consequences in your analysis?
We understand there has been a lot of personal pain and trauma in the immigrant and expat community which has resulted in increased expatriation request. Also some immigrants are leaving or considering leaving due to this heavy handed penalty application.
Have you read their stories as represented by this blog posting…  http://isaacbrocksociety.com/2012/01/21/has-your-life-been-stolen-from-you/
Did you factor those costs into your cost versus benefit analysis? What is the long term lost of revenue for this short term gain?
What is the impact of the world wide negative publicity you are currently getting, where even the Economist is recognizing that the US unusual citizenship taxation model where “its passport-holders pay it tax no matter where they live gives many qualifying residents good reason not to apply.”
Of the $4.4 billion collected, how much was actual new taxes collected versus how much of it was the extreme penalties and interest you applied.
Of the new taxes collected, how much of that total was already taxed in the country the money was deposited?
How much of that money came from Minnows and how much of it came from Whales?
What is the Minnow to Whale ratio from your recent Voluntary Disclosure efforts?
IE, Of those that have come forward, how many were the Active Evader UBS types (Whales) you were targeting, and how many were just average middle class ordinary Immigrants and Expats (Minnows) who were benignly unaware of failures to file Foreign Bank Accounts Reports (FBAR) or report income which was most likely taxed in the country in their home country or current residence country?
The Minnows were your by catch of a program designed for Whales,, so would like to know how many of the 33,000 you say have come forward are in the Minnow category?
I understand from other reporting that you had disclosures from 140 countries around the world. Was that a surprise for you? Were you expecting that? Why?  This program was launched on the back of the UBS DOJ prosecution, and you allowed the press to make this a story of Switzerland, and yet, you get VDs from 140 countries.  By god, this certainly strikes at the core of our narrative, so please explain more.
BTW, why don’t Big Corporations have to pay taxes on the income they earn and keep  in foreign banks? Aren’t they now people too, as determined by the Supreme court, so why the separate treatment for the two legged, 2 armed walking talking type of individuals?  Just curious.
Why is the FBAR penalty unique and so draconian as compared to other tax failure penalties, and why is it so important that the FBAR be filed yearly anyway?
Prior to 2009, how many law enforcement actions were undertaken in the Justice Department as a result of information gleaned from the FBAR reports?
It seems that the FBAR penalty structure is such a disproportionate and severe one as compared to other types of tax non compliance like Timothy Geinther’s tax failures where he paid “no” penalties at all. Why is that?
The FBAR seems to be very important tool now in the IRS enforcement efforts, ever since it was delegated to the IRS from FINCEN.
Therefore…
Is it not true, that the FBAR was a pretty obscure form, and not well known about or even complied with in the Tax Practitioner community prior to your enforcement actions starting in 2009?
What actions did you take to warn “US Persons” who might be affected by your actions that this was coming? Any special alerts to immigrants? Any mass mailings? Any outreach to Expats? Any special messages on the front of a 1040? Any other special educational outreach that no one seems to have seen or recalled?
Were threats of imprisonment, with counter offers of lower than maximum financial penalties instead, it.  Was that all there was?  Was that your only educational out reach effort?
How is that different than what the mob does when it shakes down business on main street for protection money?  It sure feels the same. Surely not!
What were your goals when you started hammering people with penalty and imprisonment threats?
Was your desire solely to improve compliance, or was this just a revenue collection opportunity that you piggy backed on the UBS media attention created by the Justice Department court actions to pry loose 4500 secret accounts?
Do you know that you have allowed the press to continue to mis-characterize this as an enforcement action against the Rich hiding funds in secret Swiss Bank Accounts? Why haven’t you corrected that?
Did you know, your program would adversely affect millions of unsuspecting middle class immigrants, Expat of dual citizens, and Detroit auto manufacture mangers,  around the world before you launched it?
Are you aware of all the outrage in Canada about the IRS overreach in its attempt to extract FBAR penalties?
How many Total FBARs were filed prior to your actions in 2009?
According to reports from Senator Levin, only 345,000 FBARS were filed in 2008. Is that true?
How many do you think should have been filed?
What is the IRS estimate of the number of people around the world that should be filing FBARs?
How many FBARS were filed this year?
What was the compliance rate before you started, and what is it now?
What percentage rate improvement do you consider success? 1% 3% 10% 25%?
Commissioner Shulman, you say now that “Your goal all along was to get people back into the U.S. tax system. Looking back at previous statements at the start of the 2009 program, where would I find an indication of that objective?
Do you think that threats of imprisonment and fear amongst middle class expats and immigrants is the best way to accomplish what you now say was your stated goal?
Is there anything else the IRS could have done to mitigate the stress this has created for millions of people around the world?
Well, Susan, as you can see,  the questions really are endless, but I will stop now, as I think you get the point!
Unfortunately, many have bought the IRS narrative hook, line and sinker. You seem to be an exception, and I congratulate you!
Here is an analogy for you about what has been happening…
Reporters are standing on the docks, waiting for IRS ship to unload the 33,000 Whales caught, while listening to the Captain’s descriptions on what a successful hunt it was, how many tons of oil has been extracted. The Captain comments that the Whales that escaped last trip, had better just swim into port and beach themselves, as next time out he will find them all for sure.
As the Reporter turns to leave ,
he notices that forklifts are unloading tote after tote of Minnows from the hold of the ship. They that are being shoveled onto a processing belt that runs into a fish fertilizer factory, and yet not a question is asked of the Captain like, “Where did you catch those, and what are you doing with them? How many tons of oil will they produce? Were you intending to catch them when you went Whale hunting?”  Instead, the Reporter walks away marveling at how successful the Captain was, and files his report of what the Captain said for all fishermen of the world to hear.
Nary a mention of those Minnows!  Never mind.
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