In order for legislation to have “moral force”, it should at a minimum:
1. Be read by legislators prior to it becoming law; and
2. Not contain provisions that are unrelated to the main purpose of the legislation – i.e. NOT “hitch a ride”
“Hitching a ride”** is especially easy if the Congressmen don’t read the legislation. Nancy Pelosi commenting in relation to Obamacare, noted that it was important for Congress to pass the bill, so that the American people (and presumably Congress) could learn what was in it.
FATCA is unrelated to the purpose of the HIRE Act. It simply “hitched a ride” into the Hire Act. Who knows how many Congressmen read and understood the Hire Act prior to voting in favor of it? Provisions that “hitch a ride” into legislation are analagous to soldiers left inside a Trojan Horse*. Once the primary legislation takes effect, the “hitchhiker provisions” will be unleashed on an unsuspecting public.
FATCA has been referred to as the “neutron bomb” of international finance. It is the most dangerous act of American Imperialism ever. It will hasten the demise of the U.S. as a world power. Continue reading →
On January 9, 2012 the IRS reopened “OVDI” (Offshore Voluntary Disclosure Program). Some people with past compliance problems will surely consider (with the encouragement of the “cross border professionals”) whether to enter OVDI. The Isaac Brock Society issued a press release warning people to not enter OVDI without carefully considering the merits. Obviously nobody should enter OVDI without a careful consideration of the penalties. At the risk of oversimplification (and this post is not legal advice or any other kind of advice):
1. If you enter OVDI, in addition to paying any taxes owing, you are agreeing to pay penalties of a percentage of your net worth (a range from 5% to 27.5%).
2. If you do not enter OVDI and information return penalties become an issue (outside the context of voluntary disclosures), they will not be automatically presumed (but again this is heavily dependent on the circumstances and you should absolutely get legal advice).
The following comments are part of a thread. I thought they were worth a separate post. They are a conversation between a former IRS attorney and a famous “minnow”. They are relevant to the issue of penalties for failing to have filed information returns.
Interpret this as you will. It is not offered as legal advice. But, it does raise issues that might we worth discussing with your lawyer. Thanks to Mr. Mopsick. It is a rare lawyer indeed, who is willing to talk about anything but OVDI! You may want to read the complete post before reading these comments. (I have made no effort to fix the typos in these comments.) Continue reading →
Yesterday I wrote a post describing why FBAR and FATCA will make U.S. born children unadoptable. After all, they carry with them U.S. tax filing and reporting obligations. The general toxicity of U.S. citizenship is such that non-U.S. citizens will NOT wish to risk financial involvement with U.S. citizens. Here is another example.
As it stands, there are a number of normal investments prohibited to U.S. citizens living abroad. U.S. citizens living abroad will likely find it much more difficult to find an accountant or tax prep person to help them with their taxes. There are at least three reasons:
(Whether this can be applied to preparers outside the U.S. or not, it will certainly reduce the number of people willing to take this on.)
2. Professional liability – Who would want the risk of making a mistake? I know at least one Canadian CA who will not take American clients. Who would want the problems? In addition to the 1040, there is the problem of the FBAR, the new 8938 form, the appropriate RRSP election form, and a host of possible other forms (see below).
3. Too much work for too little money – The work is so substantial that, that I expect the minimum fee will be in the range of $1000 (for somebody who has no assets or issues). Although this I small change for some taxpayers, it is clearly too expensive for most taxpayers.
Thanks to Barrie McKenna of the Globe and Mail for this article and to his support on this important issue during this most difficult time for U.S. citizens residing in Canada and the rest of the world. Thanks also to Finance Minister Flaherty and the MPs who have supported Canada/U.S. dual citizens during this time.
On December 7, 2011 the IRS posted a Fact Sheet providing information about this issue. I have written some commentary about the Fact Sheet here.