And from the IRS Commissioner …
On June 3, 2014 IRS Commissioner Koshinken in prepared remarks commented on matters of interest to U.S. citizens abroad including:
1. Tax Compliance (and rather non-compliance) on the part of U.S. citizens abroad; and
2. The wonders of FATCA and the IRS commitment to implement and impose FATCA on the world. He commented on the public availability of those Foreign Financial Institutions who had received the “IRS Seal of Good Bankkeeping” by registering through the FATCA portal. U.S. tax lawyer Robert Wood devoted a blog post – 77,000 banks to report to IRS – to this announcement.
Here are the Commissioner’s remarks in their entirety:
They should be read carefully. The comments are in the context of a speech about International tax, international tax enforcement, international tax evasion and FATCA. The comments are NOT in the context of a discussion about the problems of Americans abroad. The sections of direct relevance to Americans abroad need to be read in the context of the complete remarks.
Although less than 24 hours old, the Commissioner’s remarks, have been the subject of the usual blogs, and included:
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 willfully evading their tax obligations and are not accommodating enough to others who don’t necessarily need protection from criminal prosecution because their compliance failures have been of the non-willful variety. For example, we are well aware that there are many U.S. citizens who have resided abroad for many years, perhaps even the vast majority of their lives. We have been considering whether these individuals should have an opportunity to come into compliance that doesn’t involve the type of penalties that are appropriate for U.S.-resident taxpayers who were willfully hiding their investments overseas. We are also aware that there may be U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties.
We are close to completing our deliberations on these respects and expect that we will soon put forward modifications to the programs currently in place. Our goal is to ensure we have struck the right balance between emphasis on aggressive enforcement and focus on the law-abiding instincts of most U.S. citizens who, given the proper chance, will voluntarily come into compliance and willingly remedy past mistakes. We believe that re-striking this balance between enforcement and voluntary compliance is particularly important at this point in time, given that we are nearing July 1, the effective date of FATCA. We expect we will have much more to say on these program enhancements in the very near future. So stay tuned.
Although there is no way to know what this means, the remarks suggest:
1. The changes will be modifications to existing programs;
2. The modifications will be targeted to Americans abroad;
3. This is very very big!! Green Card holders take note! It appears that the reference to “U.S.-resident taxpayers with unreported offshore accounts whose prior non-compliance clearly did not constitute willful tax evasion but who, to date, have not had a clear way of coming into compliance that doesn’t involve the threat of substantial penalties” may be to Green Card Holders. If this is true this is welcome (possible) relief to Green Card holders who have been subject to deliberate, unconscionable and unjustifiable persecution from the IRS. The “FBAR Fundraiser” has destroyed the life of many a Green Card holder.
Those interested in details (although they are speculative) may want to keep track of the comments at Jack Townsend’s blog. Mr. Townsend does reiterate the obvious and reasonable reality that:
One of the ironies of the design of the offshore voluntary disclosure iterations since the beginning was that it benefited the worst offenders the most. They were the ones who really needed relief from the risk of criminal prosecution and would be subject to the most onerous monetary penalties. But, those taxpayers whose conduct was less offensive to the tax system, did not need relief from criminal prosecution and should not be subject to onerous monetary penalties. But because of uncertainties as to how they may be treated should they not join OVDI/P, they often joined and then were discouraged from opting out because of the black box nature of what the IRS was doing with potential large monetary penalties should they opt out. For example, there was a risk that the IRS could imagine and assert at least willful blindness– a concept that is of uncertain scope of and operation — as a substitute for willful conduct to assert the willful FBAR penalty. My actual experience on opt outs have shown a reasonable application of the monetary penalties in all except one case — a case which, in my mind, fully justifies the fears of persons who are actually nonwillful in their FBAR filings. My hope has been that, at least, the IRS would offer more concrete guidance about what it is doing and will do in opt outs so that taxpayers can make informed decisions. I have never understood the IRS’s need to persist in black-boxing the opt out process.
IRS Acknowledges Not all offshore accounts are for tax evasion
Better late than never, but it will certainly be too little too late!
The obvious goal of the IRS is to encourage Americans abroad to come into tax compliance. Interestingly, without even hearing the IRS offer, some commenters have dismissed any IRS proposal as simply:
Too little too late!
The IRS has so eroded the trust of taxpayers that many perceive the risks of coming into compliance as exceeding the risk of “lying low”. The egregious conduct of the “cross border professionals” has exacerbated a difficult situation.
There are minnows and benign actors still stuck in OVD and Opt-Outlandia years and hundreds of days later, and where is the consideration that they tried to become compliant in the only way the IRS demanded? Will they continue to wait in line behind the applicants to this newest program too? The Taxpayer Advocate and others have noted that those waiting the longest, and paying the highest proportion of penalties in ratio to tax owed and amounts in question were the more benign.
Doesn’t the IRS owe some consideration to those who came forward at great personal expense, paid significant legal and accounting fees due to OVD complexity, and are still in limboland – many of which would not owe any US taxes, and could argue reasonable cause? There are no doubt people who would have fit into Streamlined had it existed, and who probably would have benefited from whatever this newest tweaking is, but who the IRS is not apparently concerned about at all – and is happy to allow to languish in the stocks and dangle on the rack.
As I say, the IRS has eroded any level of trust it ever may have had.
On the issue of fairness to Americans abroad in general, consider: