Monthly Archives: July 2012

Why IRS conduct may contribute to establishing “Reasonable Cause” for failure to file Mr. FBAR

Two solitudes – To “OVDP” or to NOT “OVDP”



When it comes to the “compliance dilemma”, the thinking seems to be:

“To OVDP or to NOT OVDP” – Note the Isaac Brock press release on OVDP 2012

That question has consumed created enormous “life altering anxiety” and a large number of LCUs life credit units). Readers of this blog will have seen a number of compliance options acknowledged and considered. These range from “compliance going forward” at one end of the spectrum to OVDP at the other. At a minimum it is important to consider the ramifications of all options. That said, there are a large number of lawyers who believe that entering OVDP is the “default option”. At least one lawyer as stated his view that compliance means OVDP. (The validity of this position was strongly questioned here. At least one other lawyer has stated that he has “always gone in under reasonable cause”.

In any event, I have come to see that the question is NOT:

“To OVDP or to NOT OVDP”.

The question is:

“To reasonable cause or to NOT reasonable cause” Continue reading


Hunting U.S. citizens abroad – How the banks help the IRS – FATCA Training Videos

These come from a comment to a post that I did at the Isaac Brock Society.

The comment notes that:

Harks back to the days of the Nazis scouring through records looking for Jewish “indicia.”

Thanks Carl Levin.

Williams case reversed – “willfulness” no longer means “willful” – Judges legalize IRS tyranny

Updated July 22, 2016 – almost four years to the day of the original post

I am updating this post to appear in the “Looking For Mr. FBAR” series of posts. A previous post confirmed that to impose a “willful FBAR penalty”, the government must prove that the failure to file the FBAR was the result of “the intentional violation of a known legal duty. Clearly this is a question of fact. The post was and is to explore the extent to which knowledge of the FBAR requirement can be inferred from Schedule B and other facts surrounding the preparation of the tax return.

I have updated this post to include third commentary on the impact of the Williams case. This post is now divided into two parts.

Part A – The original 2012 post

Part  B – The 2016 updates: The third party commentary on Williams

Part A – The original 2012 post

As you know, Mr. FBAR is a particularly nasty piece of work. Absent a showing of “reasonable cause”, Mr. FBAR opens the door to a sliding scale of penalties. In the past I have written about Mr. FBAR and the non-willfulness penalty structure. This post is about “willfulness.” Specifically, what constitutes “willfulness”? Conviction for the “willful” failure to file an FBAR comes with “unspeakably high penalties”. So, I won’t speak of them here. The non-willful penalties are bad enough. But, the penalties for “willfulness” clearly invite 8th amendment (“excessive fines”) scrutiny. This is certain to come. In fact, it may well be that the next step in the “Williams saga” will be just that.

The Williams Saga

A brief overview of the Williams saga may be found courtesy of Robert Wood here and Jack Townsend here (appellate decision) and here (initial trial decision). Before analyzing these decisions and considering what they may mean, it is important to understand that this is not a situation of the IRS attempting to target a taxpayer whose sole sin was  a failure to file FBARs. Mr. Williams, by his own admission was a willful tax evader. In addition, he failed to file FBARs. What is interesting is that the IRS decided to go after him for FBAR violations as well. Why? I haven’t a clue. I am not sure if I see a purpose to it. But maybe the IRS simply lacks purpose … Continue reading

The arguments apply equally to U.S. citizenship-based taxation of individuals.

International Liberty

Mitt Romney is being criticized for supporting “territorial taxation,” which is the common-sense notion that each nation gets to control the taxation of economic activity inside its borders.

While promoting his own class-warfare agenda, President Obama recently condemned Romney’s approach. His views, unsurprisingly, were echoed in a New York Times editorial.

President Obama raised…his proposals for tax credits for manufacturers in the United States to encourage the creation of new jobs. He said this was greatly preferable to Mitt Romney’s support for a so-called territorial tax system, in which the overseas profits of American corporations would escape United States taxation altogether. It’s not surprising that large multinational corporations strongly support a territorial tax system, which, they say, would make them more competitive with foreign rivals. What they don’t say, and what Mr. Obama stressed, is that eliminating federal taxes on foreign profits would create a powerful incentive for companies to…

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The evolution of Barck Obama: First you take the high road, then you take the low road, then you take the ditch!

American Exceptionalism = Extreme Corruption

In other countries this sort of bribery takes place underneath bridges and with cash in brown envelopes. In America it is institutionalized and legal but it is the same thing: Cash to politicians in return for favorable treatment from the government.

The U.S. tax system is not simply corrupt, it is corrupt in a deceptive manner that has degraded the entire system of American government. Congress is able to funnel vast sums of money in perpetuity to its favored funders through the tax code without anyone realizing it.

Fareed Zakaria – America Needs a two page tax code

How corruption in the political process is affecting the Presidential Election Continue reading

FATCA Form 8938 – Where it came from, how it came about, what it means for U.S. citizens abroad

Where it came from – 2009 – Obama describes his justification for what is to become FATCA

Obama Goes After Overseas Tax Cheats AKA U.S. Citizens Abroad – See the following video which was uploaded in May 2009.  Obama says taxes are an obligation of “citizenship“.  Obama lauds the work of Levin and Rangel (at this point they are the future architects of FATCA). The whole video (where “First Tax Cheat Geithner” introduces Obama) is interesting.  Note in particular the video starting at 7:30 where Obama provides his justification for what is to become FATCA.

How it came about – 2010 – The Hire Act (which included FATCA) was enacted.

It is important to note that FATCA was legislation which was unrelated to the principal purpose of the Hire Act. It was “slipped in” at the last minute. It is likely that few legislators knew what they were signing when FATCA was signed into law. FATCA was “Trojan Horse” legislation at its finest. But, FATCA is many other things including:

FATCA is a creator of jobs

FATCA  has created new and lucrative work for accountants and lawyers. (An NYU tax professor recently referred to FATCA as “The gift that keeps on giving“.) It has been a boon to the education industry – it will be soon be possible to receive a certification in FATCA compliance.

FATCA is a form of Capital Control

President Kennedy said that the U.S. government has never had to erect a wall to keep our people in. That was then. This is now.

FATCA is an attack on the sovereignty of other nations

Why should foreign banks do what the IRS wants?

FATCA – through Form 8938 – is an attack on U.S. citizens living abroad

This is the primary purpose of this post.

FATCA needs to be understood as legislation which is aimed at foreign financial institutions and U.S. persons with foreign assets. Almost all of the FATCA discussion has been about the effect of FATCA on foreign financial institutions. Form 8938 is the part of FATCA aimed at U.S. persons. It has received very little analysis until now. FATCA mandates form 8938 which  allows the U.S. government to impose massive penalties and force people to disclose their assets to the government. Continue reading

Insightful stuff Dan. The real issue is that some people in the world believe that they have the right to do what they want with their money and some believe that the government has the right to do what it wants with your money.

International Liberty

A few days ago, I explained why I’m a big fan of tax competition. Simply stated, we need to subject governments to competitive pressure to at least partially offset the tendency of politicians to over-tax and over-spend.

Tax havens play an important role in this liberalizing process, largely because they do not put themselves under any obligation to enforce the bad tax laws of other jurisdictions. They also use privacy laws to protect their sovereign control of what gets taxed inside their borders (this is what separates a “tax haven” from a more conventional low-tax jurisdiction). This means they are fiscal safe zones, particularly for people who want to protect their assets from the pervasive double taxation that exists in so many nations.

Not everybody agrees with my analysis (gee, what a surprise). To cite one example, the petty bureaucrats at the OECD got so agitated at me…

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Thanks again – your posts should be spread far and wide!

International Liberty

Politicians exaggerate as a routine matter and have well-deserved reputations for stretching the truth. But when they repeatedly make assertions that they (or their aides) know to be false, they surely deserve to be criticized. That is the purpose of my new video. Entitled “President Obama’s Dishonest Demagoguery on So-Called Tax Havens,” the four-minute presentation looks at the two sound bites that the President uses to demonize low-tax jurisdictions.

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Thanks for this incredible post and videos. Americans who still believe in “Life, Liberty and Pursuit of Happiness” need you and the CATO institute!

International Liberty

Earlier this year, I defended Mitt Romney and Bain Capital from the absurd accusation that they did something wrong by utilizing low-tax jurisdictions.

So-called tax havens, as I’ve explained on many occasions, play a valuable role in the world economy. Indeed, they should be emulated rather than persecuted.

In a follow-up post, I mocked ABC News for a ridiculous non-story as they tried to make Romney appear guilty for following good business practices.

The issue has become hot again, so I talked about Romney and tax havens with Jason Riley at the Wall Street Journal.

Since nobody has claimed that Romney violated U.S. tax law, this kerfuffle only exists because the left wants to create the impression that tax havens are bad and then tar the GOP’s presumptive nominee with guilt by association.

Brian Garst of the Center for Freedom and Prosperity nails the issue in his column…

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Opinion: What’s U.S. Citizenship Worth? William McGurn

Video streaming by Ustream

This is an incredibly interesting video. The video was made in association with an article that Mr. McGurn wrote in April 2012 titled – “What’s U.S. Citizenship Worth?” Mr. McGurn certainly clarifies that many people are NOT renouncing U.S. citizenship to avoid taxes. He emphasizes the complexity, the reporting requirements and the simple fact that people outside the United States do not want to be associated with U.S. citizens. Interestingly he introduces analogy of the Berlin Wall. Months and months ago I wrote that with FATCA, the U.S. was creating it’s own Berlin Wall.

The United States is in serious trouble. It must:

Stop citizenship-based taxation and repeal FATCA.

What is U.S. citizenship worth? It depends where you are coming from. But, for long term residents abroad, the value of U.S. citizenship is far less than the problems associated with keeping it!