Finally! The IRS seems to be listening to the travails of Accidental Americans with “law-abiding instincts”!?

Mixed Messages:IRS Commissioner Shulman vs. U.S. Ambassador
to Canada Jacobson
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The principle message made by the Commissioner was and is that the IRS is tracking down U.S. individual taxpayers with foreign assets. The Commissioner’s message is not nuanced to distinguish between the“ordinary” taxpayer residing overseas with foreign assets and those who take steps to hide assets and evade taxes. Specifically, the Commissioner made the following

Tax-Expatriation

The IRS Commissioner just announced, on June 3rd, a set of common sense statements about “U.S. citizens” who want to comply with their tax obligations.  Commissioner John Koskinen said the IRS will likely modify “in the very near future” (according to an article written by Jaime Arora and William Hoffman of TaxAnalysts) its offshore voluntary disclosure program for U.S. citizens residing overseas.

The full remarks are set out in the paper presented at the OECD international tax conference:

– OECD – INTERNATIONAL TAX CONFERENCE WASHINGTON, D.C., JUNE 3, 2014
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Some key excerpts are as follows:
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Now, while the 2012 OVDP and its predecessors have operated successfully, we are currently considering making further program modifications to accomplish even more. We are considering whether our voluntary programs have been too focused on those…

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7 thoughts on “Finally! The IRS seems to be listening to the travails of Accidental Americans with “law-abiding instincts”!?

  1. badger

    Why did Koskinen make those remarks to that particular audience at this particular time?
    Who is his intended audience?
    Why now?
    How soon is ‘very soon’ in IRS speak?
    How is this supposed to filter down to millions of US persons abroad who don’t have any reason to be in that audience, who have no subscription to Tax Notes or Tax Analyst, and who don’t lurk on the IRS website?

    How long has the IRS been not just ‘aware’, but; “…. well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives. “?
    And when did IRS become aware?

    The IRS has had an epiphany! That US citizens, as per US citizenship law, can actually be born abroad, and live abroad for “…perhaps even the vast majority of their lives..”.

    One might conclude that the IRS (and Treasury’s merry FATCA Mythmeisters) has been willfully blind. Without reasonable cause.

    What should the penalty be for that?
    Lets hear their particular facts and circumstances and see if they have a compelling story to tell.
    Who would find them believable or trustworthy?

    Reply
  2. nobledreamer

    @badger

    The Mondaq article states “….which quoted the Commissioner, he stated that the new program would be an expansion of the Offshore Voluntary Disclosure Program, which was announced in 2009 and extended in 2011 and 2012. “We’ve modified the program a couple of times already and so this will be an extension of it, but we won’t be starting from scratch,” he said.”

    I think it is interesting they would even bring up Fact Statement 2011-13 but the mere mention that the new program would have ANY basis/relationship to OVDP would fill me with fear and dread if I had to consider this as an option.

    Reply
  3. badger

    @nobledreamer, I had the same reaction when I read that reference to OVDP. At some point they started describing Streamlined as part of the OVD too. They will want to include any applicants to this proposed new compliance avenue in their ‘success’ stats so they can brag about how many trophy heads they bagged from ‘offshore’, in the usual gloating and distorted IRS and Treasury press releases. And they never did get around to issuing any real or helpful clarifications re all the unresolved questions that arose re the Streamlined, so I expect more of the same. They have willfully refused to release stats re the Streamlined – like how many participated, and what was ‘low’ vs. ‘high’ risk. Or, how many were accepted or rejected. Or what the outcomes were. Like how much actual US tax was brought in, etc. Their approach is to offer no useful information, no certainty, and release nothing to clear up confusion, or to indicate what the results were. I am curious about what they’ll come up with, but already, it is a bad sign when they don’t bother to release information in time for their target audience to meet looming filing deadlines for this year’s 3520/A, 1040 (without extension filed), FBAR, etc. They did that with Streamlined as well – meaning that those abroad must watch those timely filing dates go by without any information about whether the anticipated program might apply to them or not. What is the point of offering people a new method of catching up on filing but starting it by making them wait and miss several crucial deadlines already?

    One might continue to think that it is not compliance they really want.

    Good point @renounce, re the December 2011 Factsheet.

    And of course, they are still not really offering the more favourable terms of the Factsheet or of Streamlined to those in OVD if they still demand 8 years worth of filings from them regardless, and will base any examination and subsequent penalties on them for the full 8 year span, rather than the fewer number of tax years required in the other avenues – thus treating those who waited to come forward significantly better than those who came forward initially. And the deliberately scary letter and penalty list they were sending to all those trying to to opt out was written in 2011 – before the Factsheet, and before Streamlined, and before this to be announced program. So, why continue to send that same scary letter to people you’ve already acknowledge were not the desired target of the OVDI/P programs?

    Reply
  4. nobledreamer

    @badger,

    There was an article by Robert Wood at Forbes the other day where there was the chance to bring up the following:

    “A friend who happens to be a lawyer has pointed out that the law says one must file it does not say that the IRS may dictate particular ways in how one complies with the law. In fact, IRM 9.5.11.9.1 Voluntary Disclosure Protocols says the following: “All voluntary disclosures must meet the requirements contained in subsection 9.5.11.9. The voluntary disclosure practice does not specify any particular format for voluntary disclosure communications so long as these requirements are met.” Those requirements are too long to list here (http://www.irs.gov/irm/part9/irm_09-005-011-cont01.html) but the majority of minnows would easily meet them. It is also a fact that the Fact Statement 2011-13 (still on site and revised this year) outlines how one may file; it amounts to nothing less than the much-feared “quiet disclosure.” (http://www.irs.gov/uac/Newsroom/Information-for-U.S.-Citizens-or-Dual-Citizens-Residing-Outside-the-U.S ). It is most unfortunate that this information is not widely circulated and/or published. Media probably would ignore it as it is not sensational and an atmosphere of such fear has been created that this information is not believed by those who need to hear it the most.”

    As I recall from the May 2 ACA Debate in Toronto, Phil Hodgen said that there was no requirement to enter one of the programs and that IRS agents have to follow what is in the IRM. I believe I understood him correctly and that this is likely the section he was referring to (9.5.11.9.1). This suggests to me that the IRS cannot force anyone to enter one of the programs and that people who are minnows should be encouraged to avoid them at all costs.

    I keep counting my lucky stars as my OMG moment came inbetween OVDI 2011 and 2012 and shortly before the Fact Statement.

    Reply

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