Exotic 3 year vacations for top IRS agents

The IRS offers exotic 3 year vacations for its favored employees in Paris, London, Frankfurt, and Beijing—at taxpayer expense.
39 IRS investigators are located internationally, in places where it theoretically makes no sense.  In all of those locations, a US taxpayer should owe no tax.   So what is their intent?
The US tax system is unique in the world, in that it taxes-up any person unlucky enough to have been born a US citizen.  If the tax rate in any country is too low–the US will tax up its citizens to the higher rate.  This is done through a complex and expensive form process.
So, why is it that IRS investigators are out in places where they should know that they can’t make any money?
http://www.treasury.gov/tigta/auditreports/2014reports/201430054fr.html

follow up to my post from 9/27 .....Phil Hodgen has a write up :There is no DIY green card abandonment

Green card holders:  if you want to stop being U.S. taxpayers, you have to do the paperwork.  File Form I-407.  Until you do that, you are supposed to file U.S. income tax returns and pay U.S. income tax. Even if you have lived for the last 40 years in the deepest reaches of Burkina Faso and have no intentions of setting foot in the United States ever again, you are a U.S. taxpayer.

IRS and US Treasury still fail to collect unpaid taxes from homelanders never mind outside the US

The IRS failed to take all required steps for collecting unpaid taxes from people it can’t locate in over half the cases that investigators studied, according to a federal report released Monday.
The study does not estimate how much money that costs the government overall. But it says that in 2012, the IRS declared $6.7 billion in unpaid taxes to be uncollectable — involving nearly 483,000 tax returns — because it couldn’t find the taxpayer.
In tracking down those with overdue bills, IRS workers are supposed to take up to 10 actions like tracing postal, motor vehicle, court and other records. But in a study of 250 cases involving self-employed people and small businesses, investigators said that 57 per cent of the time, they found no evidence that agency workers had completed all required research before declaring the money uncollectable. In addition, 7 per cent of the cases lacked a required, public warning that the government was putting a lien on a taxpayer’s property, according to the report. The report was written by the Treasury Inspector General for Tax Administration, which audits the IRS.
IRS officials said that they generally agreed with the report but contested some of its findings. They took issue with investigators’ estimate of the value of some of the unpaid taxes, saying it “overstates the amount of potential unprotected revenue” when lien notices are not filed.The investigators’ report conceded that even if the IRS did a better job of tracking down those owing money, “It may be difficult for the IRS to collect on these outstanding liabilities considering that these taxpayers have already proven to be difficult to contact or locate.” The study estimated that about $53 million was at stake in cases where required notices had not been filed warning taxpayers the government was filing a lien against them. In a response included in the report, IRS officials said that the unpaid taxes at stake in cases where lien notices had not been issued was “significantly less” than $53 million. They also said they believed that “the government’s interest is adequately protected” by the lien notices they have filed. IRS officials said they were implementing some of the report’s recommendations, such as creating a checklist of research steps that workers are required to take.

See TIGTA report http://www.treasury.gov/tigta/auditreports/2014reports/201430052fr.pdf , and more commentary;http://www.accountingweb.com/article/tigta-finds-flaw-irs-collection-efforts-unpaid-taxes/223960

Analysis of recent plea

Last week, the U.S. Attorney's office announced a guilty plea of conspiracy to defraud the United States and willfully failing to disclose offshore bank account held in Switzerland and Israel.   According to the United States Attorney, for more than 25 years, Bernard Kramer hid at least $1.1 million in an undeclared account at UBS AG (“UBS”), a Swiss bank. Kramer did not list it on his tax returns (form 1040) and made sure that all disbursements made to him in the U.S. were for amounts less than $10,000.  Kramer and his Swiss bankers referred to the account by the code name “Hot Lips.” 

The IRS Scandal, Day 508

New York Observer:  Eric Holder Runs from a Ticking Time Bomb: IRS Deadline Approaches Fast, Federal Judges are Furious—and Where’s Andrew Selka?, by Sidney Powell:

The surprise resignation of Eric Holder, the first Attorney General ever to be held in contempt of Congress, exploded in the news today. Holder has been under unrelenting assault for the most egregious politicization and abuse of power in the Department of Justice in history—exceeding that of John Mitchell and Alberto Gonzalez. He has made the Department of Obstructing Justice notorious. Federal judges are stepping in to end his stone walling of Congressional and other investigations on several fronts, and now he’s on the run.

Why now? What is about to blow up? ...

IRS Provides A “Solution” for Streamlined and OVDP When Taxpayer has No SSN

The Offshore Voluntary Disclosure Program and the Streamlined Filing Compliance Procedures are procedures set up by the IRS to help Americans with overseas accounts and assets achieve tax compliance.  The streamlined program allows for taxpayers to certify that their tax noncompliance occurred as a result of “non-willful” conduct.  
 The streamlined procedures explicitly state that all tax returns submitted under the program require a TIN, namely the SSN for US persons:

What You Need to Know About the Refund Statute of Limitations

It is important for taxpayers and practitioners to know how to determine the period of limitations for filing a refund claim, how to apply lookback rules and what to do if the deadline for filing  a refund claim is approaching.
http://taxlitigator.com/wp-content/uploads/2014/09/BNA_Refund_Statute.pdf

Unfortunately I still find articles from willful FBAR ambulance chasers with hyperbolic threats..... my Wall Of Shame list is still getting bigger

update 09/30/2014 : after my protest the company took down the article from Brian Mahany and replaced it with "How FATCA May Impact Your Foreign Banking (And What to Do!)" by David McKeegan.

This weeks mention goes to Brian Mahany from http://www.mahanyertl.com which is a small but well known FBAR ambulance chaser law firm out of Milwaukee,WI.
Find the article in question under :
http://www.greenbacktaxservices.com/blog/3-letters-no-one-wants/
I left the below comment to be moderated on their web site but as you can imagine it was never released since we have a "little" conflict of interest  in play here. Mahany uses Greenback Expat Tax Services for his clients FBAR filings  !
--------------------------------------------------------------

With reference to Brian Mahany`s  incorrect statement : "The penalties for noncompliance can be as high as the greater of $100,000 or 50% of the highest historical balance for each unreported account".................
Sorry but your guest poster who is supposedly a "specialist" in offshore tax reporting is unfortunately misinformed with regards to *highest* and *historical* outside of plea agreements.
1. The Statue of limitations for the civil FBAR assessments is 6 years and 5 years for criminal, there is no mention of anything relating to *historical*.
2. The statute is clear that the penalty is based on "the balance in the account at the time of the violation." The violation occurs on at the moment 6/30 turns into 7/1, which is the moment of failing to file the FBAR timely and NOT the highest historical balance.
Here is the statute - 31 USC 5321(c)(5)(C) & (D).
http://www.law.cornell.edu/usc...
(C) Willful violations.— In the case of any person willfully violating, or willfully causing any violation of, any provision of section 5314—
(i) the maximum penalty under subparagraph (B)(i) shall be increased to the greater of—
(I) $100,000, or
(II) 50 percent of the amount determined under subparagraph (D), and
(ii) subparagraph (B)(ii) shall not apply.
(D) Amount.— The amount determined under this subparagraph is—
* * * * or
(ii) in the case of a violation involving a failure to report the existence of an account or any identifying information required to be provided with respect to an account, the balance in the account at the time of the violation.
Now, the offshore penalty inside the OVDP and only in OVDP is based on the high amount for the 8 year disclosure period. But that penalty is an IRS miscellaneous penalty imposed / agreed to by the taxpayer in lieu of all other penalties and has nothing to do with the greater of $100,000 or 50% of the highest historical balance for each unreported account either.
Please Brian write something about what the IRS is realistically going to do especially when you address expats, green card holders and foreign-born Americans who have in the majority of the cases reasonable cause for their non willful behavior and not what hypothetically the IRS can and maybe will do......in less than 1 % of the cases.
Please Brian when you use this hyperbolic language about certain IRS threats keep in mind that even in the egregious case of Mr. Zwerner , DOJ TAX had to settle in the end for 2X wilful FBAR penalty and not the 4X they were waving at him from the beginning , never mind the hypothetical 6X per the Statue. I need to emphasize that 99% of the cases involving expats, green card holders and foreign-born Americans are NOT egregious.
Zwerner.......... U.S. Civil Suit for 4 Years of Willful Penalty of 50% Per Year : https://docs.google.com/file/d...

Court Rules Alien Needs to Formally Abandon Status to Avoid Tax or The Green Card Mine Field

A recent Tax Court case found that a resident alien hadn’t formally abandoned their status as a lawful permanent resident of the U.S., and so was still liable for U.S. tax.
In Topsnik v. Commissioner, 143 T.C. No. 12, the court held that a German citizen who was also the holder of a U.S. green card (and therefore a lawful permanent resident) was liable for tax on the gain from the sale of his business since he had not formally abandoned his permanent resident status obtained in 1977.

The wall created by congress around the borders of the US

"I think this fence business is designed and may well be used against us and keep us in. In economic turmoil, the people want to leave with their capital and there’s capital controls and there’s people controls. Every time you think about the fence, think about the fences being used against us, keeping us in.” Ron Paul

Video on #FATCA- what it is, why it needs to be repealed and what you can do.

A Cogent Look at the “What is a Return?” Question

 In Briggs v. United States, 511 B.R. 707 (Bankr. N.D. Ga. 2014), Bankruptcy Judge Wendy Hagenau carefully examined the facts of the case and the applicable law in concluding that a Form 1040 filed after the IRS assessed taxes based on a substitute for return procedures met the requirements for filing a return. I previously blogged about the mess created by the litigation and legislation in this area. Judge Hagenau worked her way through existing precedent and arrived at a conclusion that offers hope to many taxpayers who fail to timely file their return and later seek relief through bankruptcy.

Whistleblower law + big timely $ reward + tax audit resources = Large amount of tax evaded $ collected. Incentives!!

Canada Revenue Agency tax dodge informant line receives 1,000 calls

Program pays out 5-15% of funds over $100K recovered by tax agency

The Canada Revenue Agency's hotline to blow the whistle on tax dodgers has received more than 1,000 calls since January, but no rewards have been paid out yet while investigations continue.

Can the Streamlined Compliance Procedures Be Used to Correct Defective Returns That Go Back Beyond the Most Recent Three Tax Years?

Unfortunately see below an example of fear mongering and hyperbolic language aka. FBAR ambulance chaser and on top of it a few factual errors mixed into the offshore tax cocktail. Not recommended. 

The issue that this article seeks to address is whether a non-willful taxpayer with an undisclosed offshore account can use the streamlined compliance procedures to correct defective tax returns that go back beyond the most recent three tax years? In other words, are the streamlined procedures limited to the most recent three years of troublesome tax returns or could they go back as far as six? Assume for purposes of this blog that the most recent three tax years are 2013, 2012, and 2011

http://origin.library.constantcontact.com/download/get/file/1114502746809-33/Using+Streamlined+to+Correct+Defective+Returns.pdf

More minor changes to the Streamlined Version of OVDP to be announced soon

According to the BNA the IRS will soon announce several changes to the streamlined version of the Offshore Voluntary Disclosure Program, but won’t change the policies behind eligibility for the program, two agency officials said September 20, 2014.
For domestic participants the IRS will consider only the taxpayer’s personal financial interests in determining eligibility, not accounts for which taxpayers only have signature authority.
The agency will make it clear that domestic participants will have to include, in the penalty base, foreign assets that they may have already reported on a Form 5471 or a Form 3520.
These comments were made at the fall meeting of the American Bar Association in Denver by Jennifer Best, senior adviser to the deputy commissioner of the Large Business & International Division & John McDougal, special trial attorney for the Small Business/Self-Employed Division.

Unfortunately they did not make comments about if they would include a new guidance that would provide clarification on what "non-willful or willfully blind means".

Your final tax return when your U.S. income is zero or dual-status income tax returns

Question : How does the income tax return looks like for the year of expatriation: I file the 1040 with other forms covering income up to the date of renunciation. Do I still have to file a 1040NR from the date of renunciation to the end of the year when I don't have any US source income at all for either before or after renouncing? Unfortunately, the final year income tax return form is a little more complicated than that.  It is semi-hard to figure out whether you file Form 1040NR or Form 1040 as your tax return.  Once you have figured that you, you have to figure out what income to put on the tax return, and what income to leave off. Here is the short answer. In the year you expatriate, you must file an income tax return with the IRS. You will either file: Form 1040 treating yourself as a resident for the full year; Form 1040NR treating yourself as a nonresident for the full year; or Form 1040NR treating yourself as a part-year resident and a part-year nonresident. As the question notes, there are a bunch of other forms and schedules that are attached to the tax returns.  Don’t forget those. If you are filing Form 1040NR, you only tell the IRS about income that is from U.S. sources.  Income you derive from foreign sources is not reported on the Form 1040NR, and is not taxed by the United States. Now for the details.

What Does a Porn Star Have to Do With Your Bank Account?

Recently, The Economist reported that Chase Bank closed the accounts of hundreds of porn stars.

Among them was blond bombshell Teagan Presley, star of Just Over 18 #10 and more than 70 other porn videos. Chase informed her it had closed her account because she was prominent in the “adult” business.

Teagan Presley’s loss of banking privileges is an example of a much larger trend. It’s called “de-risking,” the decision by a bank or other financial institution to end a relationship with a customer to avoid possible embarrassment or, worse, government witch-hunts.

In the last few months, US banks have closed down tens of thousands of accounts of “politically incorrect” customers. They include gun sellers, coin dealers, fireworks suppliers, dating services, US citizens living abroad, Muslim students, money services businesses, diplomats from third-world countries, and, yes, porn stars like Teagan Presley.

In the US 40% pay no income tax - 1% pays 46% of all the tax

I would like to point out an article from the british magazine The Economist which discusses inequality and the narrowing tax base.
..."High income taxes tend to discourage effort and entrepreneurship, while encouraging all manner of activity to avoid them. That is why a basic principle of good tax policy has long been to charge a low rate over a broad base.

It is a target which many countries miss, and the gap is growing. Income taxes—one of the main sources of tax revenue across the rich world—are increasingly paid by a small minority of the most affluent. In Britain, employment has risen by 1.3m in the past five years, but the number of taxpayers has fallen by 2.2m. More than 40% of American households pay no income tax. In contrast, the most highly paid 1% of workers in Britain pay 28% of all income tax, while in America it is 46%. In 1979 those shares were 11% and 18% respectively. Corporate income taxes show the same concentration. In Britain just 830 firms pay almost half of all corporation tax. Five American industries account for 81% of the country’s corporate tax revenue, but just a third of its companies."

The IRS Scandal, Day 502

Politico:  Exclusive: Lois Lerner Breaks Silence, by Rachael Bade: 

Employers won’t hire her. She’s been berated with epithets like “dirty Jew.” Federal agents have guarded her house because of death threats. And she’s spent hundreds of thousands of dollars defending herself against accusations she orchestrated a coverup in a scandal that has come to represent everything Americans hate about the IRS.

Lois Lerner is toxic — and she knows it. But she refuses to recede into anonymity or beg for forgiveness for her role in the IRS tea party-targeting scandal.

“I didn’t do anything wrong,” Lerner said in her first press interview since the scandal broke 16 months ago. “I’m proud of my career and the job I did for this country.”

Lerner, who sat down with POLITICO in an exclusive two-hour session, has been painted in one dimension: as a powerful bureaucrat scheming with the Obama administration to cripple right-leaning nonprofits. Interviews with about 20 of her colleagues, friends and critics and a survey of emails and other IRS documents, however, reveal a much more complicated figure than the caricature she’s become in the public eye.

The portrait that emerges shows Lerner is, indeed, fierce, unapologetic and perhaps even tone-deaf when she says things that show her Democratic leanings. She had a quick temper and may have intimidated co-workers who could have helped her out of this mess. It’s easy to see how Republicans have seized on the image of a devilish figure cracking down on conservative nonprofits.

• Politico:  Lerner on Lerner: More From the Former IRS Official
• Politico:  Republicans Fume Over Lois Lerner Remarks
• Politico:  Timeline of IRS Scandal

Seventh Circuit panel seemingly unmoved by feds appeal of probation sentence given to Beanie Babies billionaire

As detailed in this new Chicago Tribune article, "Prosecutors in Warner tax evasion case grilled by appeals court judges," federal prosecutors apparently did not get a warm reception at oral argument in the Seventh Circuit as they pressed their claims that a probation sentence given to a high-profile tax cheat was unreasonable. Here are the basics:

Now that is what I call a tax amnesty but wait it is only for Homelanders

New Jersey’s Latest Tax Amnesty—Reduced or Zero Penalties—But Only Through November 17, 2014
If you are an individual or business who owes New Jersey taxes and would like to clean the slate potentially at a reduced cost, then the recently announced 2014 Tax Amnesty program is worth considering.
Until November 17, 2014 the New Jersey Division of Taxation is offering businesses and individuals that have unpaid tax liabilities and unfiled returns from tax periods 2005 through 2013 a way to request and enter into a closing agreement with the Division in order to satisfy outstanding tax liabilities with no or reduced penalties. Read more.

IRS Interviews of Taxpayers and Return Preparers

Requests to interview the taxpayer and/or return preparer during an otherwise normal IRS examination have become somewhat common. During the examination, the examining agent is auditing the return for accuracy and the taxpayer’s representative is typically trying to determine the nature and scope of the examination, gather responsive documents and information, etc.
It is nearly impossible for the representative to be able to determine why an examination commenced but a good starting point is to simply ask the examining agent. A typical response may be that the return was randomly selected for examination. However, there are actually few random audits. Examinations are typically focused on issues, areas, or industries having a historically high rate of non-compliance. Other examinations begin because the IRS received information from a related examination of another taxpayer or, perhaps, someone purposely provided information to the IRS relating to the taxpayer. Informants usually include disgruntled employees, ex-spouses or business partners, competitors or financial mercenaries seeking a whistleblower reward.
Interviews of the taxpayer serve a dual purpose: (i) to further the tax examination and (ii) to identify potential violations by a tax return preparer.  During the initial interview and throughout the examination process, the examiner can be expected to ask questions regarding the return preparation as appropriate to the case and issues being developed. Whether through the interview process or other documentation, the examiner will also be determining whether return preparer penalties might be appropriate to the situation.

Treasury Faces a Labor of Sisyphus to get FATCA Infrastructure in Place....Only 5 !! IGAs are Fully “In Force”

Treasury’s Overall Goal is 195 IGAs
To implement FATCA, Treasury has in principle to negotiate an intergovernmental agreement (IGA) with each of the 195 other countries of the world. Treasury initially proposed a one-size-fits-all model agreement, but that soon evolved into two basic types: Model 1, in which the signatory country itself agrees to transmit the FATCA-required account information to the US (after its own financial institutions have first provided that information to the relevant governmental body), and Model 2, in which the signatory country permits its individual financial institutions to register directly with Treasury (as “foreign financial institutions” – FFIs) for individually transmitting the required data.
IGAs Concluded or Being Negotiated
A look at the Treasury Department website on the status of FATCA agreements as at 1 September 2014 revealed negotiations with 101 other countries.[ii] Well, better than halfway there. But oops! – 59 of those countries “have reached agreement in substance and have consented to be included on this list” – so in fact no IGAs have actually been signed with these countries. Signed IGAs to date: 42.
 “As to the five countries fully in force as of 1 Sept. 2014 (as listed by TIAS), they are: Cayman Islands, Gibraltar, Mexico, Spain and Switzerland … Cayman Islands and Gibraltar agreements don’t have the title of being FATCA agreements, but the texts have that effect.”

So why are people who are non-willful being categorized as “willfully blind?”

Answering this question — it goes to the entire heart of what tax litigation is and IRS administrative practice. And it goes to my absolute frustration when people play attorney with the IRS, instead of actually advocating a position by doing the necessary ground work first. 
Enforcement authorities always like to have ill-defined and vague parameters in laws and regulations with penal sanctions as that gives them discretion and bargaining power......................

Linkfest

1. Secrecy planning for evasion is illegal, stupid & ineffective. Plan properly to play the game better or leave the game!
http://www.swissinfo.ch/eng/-tax-cheats-will-have-nowhere-to-hide-/40790010
2. Whistleblowers Mind: Huge financial award BUT can't visit Switzerland in the future...Here is where you can send me my check http://www.reuters.com/article/2014/09/19/us-switzerland-whistleblower-idUSKBN0HE23K20140919 …
3. Favourite Charles Feeney Quote: Every $ saved in tax is another $ to give away to a charity I chose. http://finance.ninemsn.com.au/newsbusiness/aap/8908110/ex-billionaire-gives-away-last-of-fortune …
4.  U.S. can’t deliver on FATCA promises http://www.compasscayman.com/cfr/2014/08/08/U-S--can%E2%80%99t-deliver-on-FATCA-promises/#.VBtgAvkRYVI.twitter 
5.  Wood has produced an article full of innuendo and implication, without reference to the nuances and complexities that he is very aware of. http://www.forbes.com/sites/robertwood/2014/09/22/armed-with-fatca-irs-hunts-offshore-tax-evaders-while-canada-eases-up/

Thank you, FATCA, You’ve Just Busted My Marriage

This is an angle that should be developed. People may not be able to understand tax, or get immediately detached when the word “tax” comes up, yet they can understand “busting marriage.” 
Democrats Abroad (DA), is the overseas arm of the Democratic Party. This week, DA issued detailed reports analyzing the results of its 2014 global survey conducted in June and July 2014 examining the experiences of Americans abroad as they relate to the “Foreign Account Tax Compliance Act” (FATCA).  Over 6500 responses were received from Americans living across six continents with each US State and the District of Columbia being represented by respondents to the survey.
The DA reports highlight the significant concerns and problems faced by Americans living overseas due to FATCA. DA has already sent the reports to various members of Congress, US Treasury and Internal Revenue Service (IRS) officials. DA is in continuous discussions with each of them about the urgent need for reform of the tax and financial information reporting imposed on overseas Americans and to alleviate the unintended FATCA fallout.

QROPS – New Options For UK Pensioners Moving to the US

According to an article published this week by IFC Review, those with UK pensions hoping to retire in the United States may now have a legitimate option to avoid their pension benefits being swallowed up by the IRS. The relief comes by way of Malta and a new double taxation agreement between Malta and the United States. The agreement allows anyone with a green card or permanent residence affiliation here to transfer their UK pension into a Malta based Qualifying Recognised Overseas Pension Schemes (QROPS).

So What Does “Non-Willful” Really Mean Under The Streamlined OVDP?

It appears that whatever Non-Willful means outside of the OVDP streamline program; it is certainly being applied differently in evaluating a Taxpayer’s ability to transition from the OVDP program into this new 2014 streamline program.
Below I’ve attached two excerpts one from Forbes and one from BNA Daily Tax Report, both verifying that taxpayers who are currently in the OVDP program are having very little success in proving “non-willfulness” during their requests for transition into the new 2014 streamline procedure.

Comments on Questions Surrounding Standards of Willful Conduct Under Streamlined Version of OVDP

  Questions Surround Standards of Willful Path Conduct Under Streamlined Version of OVDP 

The Daily Tax Report quoted Scott D. Michel regarding questions raised on the streamlined version of OVDP. Key areas of uncertainty included, how far back the IRS will look to assess willfulness and which version of the program will be offered to taxpayers living in the U.S. For the complete article, please click on the link above to view a PDF.

“We see evidence as to how the IRS interprets non-willfulness and they're going to hold taxpayers to a pretty high standard. The test is, did you know in your stomach that you were supposed to be telling the government about these accounts? But that test goes to knowledge of the legal obligation and should not necessarily mean per se that the failure to disclose was willful. Very few people who are actually residents will qualify. Those people may be held to a tougher standard because there is a greater expectation of awareness of IRS requirements. You'd better be prepared to address why your client is not willful and you must be prepared to address why your client is not willfully blind. You're being asked to disprove a negative.“

My comment to an immigrant who has been stuck in OVDP for the last 2.5 years

Comment picked up from a public blog : "Do you think the IRS would bother to assess an FBAR penalty in a situation where the tax payer had no tax due and received a refund after filing taxes for that year the FBAR penalty would be on? I have a situation in 2007 when I failed to file my FBAR forms, but I had a foreign account with over 1 million dollars in it. I ticked no foreign accounts on my 1040 and I did not specifically declare the income from this account, but I paid enough tax to cover the income and in fact got a small refund for that year. My agent is gesturing that I am open to a FBAR penalty . I have said take me to court, because no judge is going to award a penalty when there was no harm done and no tax due. Do you think he would really carry out the threat and assess a penalty in this situation? And if he did, do you think as the issue moves up the ladder of the IRS, that higher ups would just drop the assessment because it would not hold up in court?In my country when there is no harm, ( ie. tax owed) there can be no foul ( penalty assessed). I find it absolutely astounding that the IRS can possibly assess a $500,000 penalty on a 1 million dollar account which was not created by money leaving the USA, but was earned while I was a citizen of a foreign country living in that country. I simply left it in my home country when I moved to the USA on a green card. The IRS was not out a penny of tax in 2007, they just want 500,000 because I failed to report the account. Do you really think a jury or judge is going to let the IRS get away with such a penalty? Is there no justice or fair play.? "

my response :

BLOOMBERG BNA 2015 PROJECTED TAX RATES

Expatriation to Avoid Tax

For calendar year 2015, an individual with “average annual net income tax” of more than $160,000 for the five tax years ending before the date of the loss of United States citizenship under §877(a)(2)(A) is a covered expatriate for purposes of §877A(g)(1).

Tax Responsibilities of Expatriation

For tax years beginning in 2015, the amount that would be includible in the gross income of a covered expatriate by reason of §877A(a)(1) is reduced (but not below zero) by $690,000

Foreign Earned Income Exclusion

For tax years beginning in 2015, the foreign earned income exclusion amount under §911(b)(2)(D)(i) is $100,800

Unified Credit Against Estate Tax

For an estate of any decedent dying during calendar year 2015, the basic exclusion amount is $5,430,000 for determining the amount of the unified credit against estate tax under §2010.

http://bnainfo.bna.com/pdf2014/11507_2015_Projected_Tax_Rates.pdf

That didn't take long - 2 months after enactment, the first US prosecution of a FATCA violation starts

This indictment demonstrates the strength of US law enforcement efforts to combat offshore fraud and is the first to charge a FATCA violation. The prosecution focus was the defendants alleged attempt to avoid FATCA compliance. It is expected that these initiatives lead to increased US treaty requests, inquiries, investigations and enforcement actions around the globe.
On September 9, 2014, in US v. Robert Bandfield, et al., federal prosecutors in the Eastern District of New York announced the indictment of a US citizen and others, including offshore corporate service providers (CSPs) and investment managers, for conspiring with numerous US citizens to violate securities and tax laws, including evading reporting obligations under the recently implemented Foreign Account Tax Compliance Act (FATCA).1 According to US prosecutors, the defendants engaged in a US$500 million offshore securities fraud, tax avoidance and money laundering scheme. The indictment describes a sophisticated multi-agency undercover operation and clearly demonstrates the United States’ commitment to use a wide variety of law enforcement tools to combat offshore tax evasion and financial fraud. Notably, this week’s indictment is the first time a FATCA violation has been charged as an “overt act” in furtherance of a tax conspiracy and securities fraud and strikes a cautionary note for financial institutions and financial service providers that may be used as instrumentalities of crime.
Please see full alert below for more information.

Download PDF[260KB]

EXECUTIVE SUMMARY: Using the First-Time Penalty Abatement Waiver

• The IRS’s first-time abatement penalty waiver (FTA), although introduced 12 years ago, is infrequently used by qualifying taxpayers. An FTA can be obtained for a failure-to-file, failure-to-pay, or failure-to-deposit penalty.
• A taxpayer may claim an FTA for only a single tax period. To qualify, taxpayers must not have been assessed any other penalties of a “significant amount” on the same type of tax return within the past 3 years and must be in compliance with all filing and payment requirements.
• IRS personnel use a decision-support software tool called the Reasonable Cause Assistant (RCA) to help determine whether a taxpayer is eligible for an FTA. However, the RCA has been criticized for yielding a high percentage of incorrect determinations of FTA eligibility that IRS personnel generally do not correct.
• Through persistence, a practitioner can often persuade the IRS to reverse an initial incorrect determination that a taxpayer does not qualify for an FTA.

Another summary : Which IRS Offshore Amnesty Program Is Right For You?

Offshore accounts and the tax problems that come with them can keep you up at night. Starting in 2009 with changes in 2011 and 2012, the IRS has given taxpayers a way to start sleeping easier. Over the last 5 years, thousands of people have done it. And since June 18 of 2014, there are now several programs to choose from. Depending on how you count, I come up with 5: OVDP, Domestic Streamlined, Foreign Streamlined, Transitional Relief, and Delinquent FBAR.
The IRS has kept the vanilla OVDP, involving 8 years of amended tax returns and FBARs. You pay taxes, interest and a 20% penalty on whatever you owe. For most people, there’s also a 27.5% penalty on your highest offshore account balance. In some cases, that penalty may be 50% depending on the bank and timing.
Understandably, many people ask about the other main flavor, the Streamlined one. It’s not for everyone, and it’s important to know the differences. For instance, the OVDP protects you from prosecution, while the Streamlined program does not. The OVDP costs more, but you get more. And if bad facts that you hope not to discuss come up, the OVDP absolves them.

Feds Pose Privacy Risk by Grabbing Overseas ISP E-mails

Court Grants US Extraterritorial Search of Emails
read the synopsis by the law firm of Pepper Hamilton LLP …

The DOJ's Swiss Bank Program and Coming Enforcement

Caplin & Drysdale's President Scott D. Michel spoke extensively with Geneva's Le Temps concerning the Department of Justice's continued investigation of Swiss banks. In the interview, Mr. Michel explains likely developments for bank and tax enforcement in Switzerland and other jurisdictions. For the full article, please visit Le Temps' website (subscription required). Mr. Michel predicted that the DOJ would announce sometime in the fall the first non-prosecution agreements entered into by the "Category 2" Swiss banks participating in the Bank Program. In response to a question whether the US was focused too much on Switzerland, he said, "It is true that Switzerland has been in the DOJ's sights for some time. But …it was the scene of intense activities concerning the accounts of American taxpayers. One of the fundamental principles of the DOJ in its dealings with the Swiss banks has always been to follow the flow of money. It will also continue to monitor the deposits leaving Swiss banks to Singapore, Hong Kong and the Caribbean though, in terms of the Cayman Islands, they were more transparent with the United States. I would not be surprised if the DOJ is also interested in Eastern Europe, Latin America and the Middle East."

FATCA/CBT: Acting In Your Own Defense

Democrats Abroad just released the results of a survey they conducted on the impact of FATCA on USPs abroad.  Three documents that you can find here:
https://www.democratsabroad.org/group/fbarfatca/democrats-abroad-publishes-fatca-research-fatca-affecting-everyday-americans-every

FBAR penalty litigation — what does case precedence tells us?

Right now, there is still scant FBAR litigation that is helpful to use in any meaningful analysis. The big cases that are out there — they really don’t tell us too much.  As those were for FBAR penalties assessed a long time ago under a different climate. And the underlying facts of each case are likely not to be repeated.  In McBride, the taxpayer actually didn’t control the accounts (but admits he made the mistake of representing himself in the FBAR audit), and the judge, somewhat inexperienced, appeared to have copy and pasted the governments’ brief, likely without much thought. And in Williams, the defendant plead guilty to a criminal charge of tax evasion prior to the imposition of a willful FBAR penalty, so the government has a solid self-admission from the taxpayer that they could use against him (and did). These 2 cases and to a limited extend Zwerner may be a classic example of bad facts making bad law.

Why the terms “Relinquish” and “Renounce” are Not Legally Distinguishable for Immigration or Tax “Expatriation” Law Purposes

It seems that many individuals think there is an important distinction, legally speaking for U.S. federal tax purposes.
In sum, I am of the view that both terms are in effect interchangeable for federal tax purposes.
The important time reference under the law of IRC Sections 877 and 877A is the “expatriation date” as defined in Section 877A(g)(3) –  which focuses on specific dates tied to meetings or events with the U.S. Department of State.
Indeed the tax statute uses the terms “renounce” and “relinquish” in the same breath.
The key terms of the statute are set out below:

Thank You, FATCA, You’ve Just Left Me Stateless

Multiple Nationalities – Caught in the Big FAT(CA) Trap
There is no international law or convention that determines an individual’s nationality or citizenship.  One’s nationality is strictly a matter of the laws of a particular country. For example, a country can grant citizenship by descent (usually from a parent or a grandparent). The nationality laws of the United States are found in various citizenship and nationality statutes such as the Immigration and Nationality Act, some provisions of which  bestow citizenship based on descent. US nationality is also based on the principle of  “jus soli” (the law of the soil).  “Jus soli”  is a rule of common law followed by the United States, under which the place of a person’s birth determines his citizenship. In addition to common law, this principle is embodied in the 14th Amendment to the US Constitution which states, in part, that: “All persons born in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.”

Another summary what does NW mean ?

In order to use the Streamline Procedures (domestic and non-resident) a U.S. taxpayer must certify that their failure to file a timely FBAR was non-willful. The term non-willful is essentially a “clinical” conclusion based upon the absence of evidence of intent to conceal offshore financial accounts.
First, intent to conceal starts with analysis of the source of funds. Were the funds in the account deposited from lawful sources income, or gifts or inheritances or was the source of funds illegal source or the product of an act(s) of tax fraud or evasion.
Second, upon satisfying the test for source of funds, the next test is what efforts were made at compliance.

Voluntary Disclosure – Benefits of Timely Filing Amended and Delinquent Tax Returns

Voluntary Disclosure. Practitioners often struggle with the issue of whether a taxpayer can avoid a criminal tax investigation by making a disclosure to the IRS.  A "voluntary disclosure" is generally the process of voluntarily reporting previously undisclosed income (or false deductions) through an amended return or the filing of a delinquent return. A taxpayer's timely, voluntary disclosure of a significant unreported tax liability is an important factor to the IRS in considering whether the matter should be referred to the U.S. Department of Justice for criminal prosecution.

A voluntary disclosure must be truthful, timely and complete, and the taxpayer must demonstrate a willingness to cooperate (and must in fact cooperate) with the IRS in determining the correct tax liability. Further, the taxpayer must make good faith arrangements with the IRS to pay in full, the tax, interest, and any penalties determined by the IRS to be applicable. Additionally, the policy only applies to income earned through a legal business – so called "legal source" income.

Treasury To Amend The PFIC Regulations For US Persons With Stock of A PFIC

The Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) will amend the regulations under section 1298(f) of the Internal Revenue Code (Code) to provide guidance concerning United States persons (U.S. persons) that hold stock of a Passive Foreign Investment Company (PFIC).

CNBC : Tough Tax Rules See Expats Ditch Their U.S. Passports

CNBC quoted Scott D. Michel concerning American expatriates relinquishing their U.S. citizenship due to burdensome U.S. tax filing requirements. For the complete article, please visit CNBC's website.
Excerpt taken from the article.
"We probably get two or three calls a day from people saying they want to relinquish citizenship. That would have much rarer six or seven years ago, maybe once every couple of months," Scott Michel, the president of tax law specialist Caplin & Drysdale, told CNBC.
Michel was one of several lawyers and financial advisers across the U.S., Europe and Asia who told CNBC that more Americans were requesting advice on expatriating.

It’s about confiscation, stupid!!

Civil Forfeiture: The new #OVDP confiscation program for those in U.S. borders. 

It’s based on a simple principle: “We will do it because we can”. (Interestingly President Clinton noted that this is the least morally defensible reason for a course of conduct.)

A Made-in-America Offshore Tax Haven

The Internal Revenue Service treats the U.S. Virgin Islands as a foreign country, a designation that when combined with the incentives fuels a legal accounting alchemy in which high-tax U.S. profits are funneled to the low-tax islands. While plenty of non-U.S. havens have come under intense media attention in recent years, there is little focus on the U.S. Virgin Islands, the only nearly tax-free haven in the world to fly the American flag. (The Netherlands, Bermuda, Cayman Islands and Ireland head the list for havens with the most foreign profits booked there. Delaware, a massive onshore refuge for corporate America, offers state tax savings. Puerto Rico, a U.S. territory, offers incentives but not on the scale of those in the Virgin Islands.)“For the right company, the program offers an unmatched proposition: a dramatic savings on both corporate and personal taxes and a chance to work in one of the most beautiful places in the world,”

Six Corporate Executives / Six Corporate Entities Indicted For $500 Million FATCA Avoidance Scheme, Securities Fraud, Money Laundering for 100 US Clients

Defendants Created Three Brokerage Firms in Belize to Assist U.S. Citizens in Fraudulent Manipulation Schemes of Publicly Traded Companies, Including Cannabis-Rx, Inc. (CANA)

A multi-count indictment was unsealed this morning in federal court in Brooklyn, New York, against six individual defendants: Robert Bandfield, a U.S. citizen; Andrew Godfrey, a citizen of Belize; Kelvin Leach, a citizen of the Bahamas; Rohn Knowles, a citizen of the Bahamas; Brian De Wit, a citizen of Canada; and Cem Can, a citizen of Canada; and six corporate defendants: IPC Management Services, LLC; IPC Corporate Services Inc.; IPC Corporate Services LLC (collectively, IPC Corp); Titan International Securities, Inc. (Titan); Legacy Global Markets S.A. (Legacy); and Unicorn International Securities LLC (Unicorn).  The charges include conspiracy to commit securities fraud, tax fraud, and money laundering. Bandfield’s initial appearance for removal proceedings to the Eastern District of New York is scheduled for tomorrow at the Wilkie D. Ferguson Jr. United States Courthouse, 400 North Miami Avenue, Miami, Florida. The government will seek extradition for the other individual defendants.

COMPLEXITY WITH REGARD TO OFFSHORE DECISIONS

•  Research the risks vs. the benefits with regards to your specific facts and circumstances of your case :

• OVDP
• OVDP and Opt-out
• Streamlined Process for taxpayers residing outside of the U.S.
• Streamlined Process for taxpayers residing in the U.S.
• Transitional Rules for those who’ve mailed their OVDP Letter before July 1, 2014.
• Quiet Disclosure.
• Qualified Quiet Disclosure.
• Filing forward or GF.
• Do nothing since Statutes of Limitations have run.
• Traditional Voluntary Disclosure for those with domestic unreported income.
• Traditional Voluntary Disclosure for those duals or green card holders residing outside the US with "offshore" unreported accounts/income or non filers.
• Optional compliance procedures for those with unfiled FBARs but no unreported income.
• Optional Compliance Procedures for those with unfiled information returns but no unreported income.

The IRS And Big Data

Something to consider for those who think the IRS doesn’t have the resources to go after minnows as well as whales:
 “The IRS And Big Data”
With another tax filing and estimated tax payment deadline coming up, you may have spent the last few days thinking hard about your taxes, but the IRS has been doing so for years – positioning itself as a leader in using Big Data.
Each year, April 15th is a memorable date for those of us in the United States – this is the deadline to file our taxes or to file an extension to delay filing a tax return to October 15th.
It is clear that the IRS is the dominant government agency in the United States. After all if there are no taxes, there can be no government. Politicians know this and over the decades have ensured that the IRS has all the powers it needs to raise federal taxes from the citizens, residents, and even tourists who stay long enough in the United States.
U.S. citizens cannot even escape U.S taxation by leaving the country because the tax law requires U.S. citizens who currently earn more than $9,750 to file even if they don’t live in the country. Even if you renounce your citizenship, as 3,805 did in 2011, you still have to pay an exit tax of 15% on all your assets including investments, homes, and even your personal possessions.

What do I do if I am being requested a W-8BEN-E from a withholding agent?

FATCA FAQs

Click the question to reveal the answer then click again to hide.
What is an FFI? What is an NFFE? What is FDAP Income? What is a Recalcitrant Account Holder? What is considered indicia of US status? What is a Deemed Compliant FFI? What do I do if I am being requested a W-8BEN-E from a US withholding agent? How do I know which Chapter 4 statuses I fall under? If my company is organized in the UK under the Model 1 agreement do I still need to register? What is the penalty for non-compliance? How can I prove that I have acted in 'good faith' to comply with FATCA law? What is an Intergovernmental Agreement (IGA)? What is the difference between an IGA Model 1 and Model 2 Agreement? How can I avoid FATCA? - See more at: http://www.ustaxfs.com/fatca/fatca-faqs/#sthash.hydNqAO3.dpuf

 FATCA FAQs

Click the question to reveal the answer then click again to hide.
What is an FFI? What is an NFFE? What is FDAP Income? What is a Recalcitrant Account Holder? What is considered indicia of US status? What is a Deemed Compliant FFI? What do I do if I am being requested a W-8BEN-E from a US withholding agent? How do I know which Chapter 4 statuses I fall under? If my company is organized in the UK under the Model 1 agreement do I still need to register? What is the penalty for non-compliance? How can I prove that I have acted in 'good faith' to comply with FATCA law? What is an Intergovernmental Agreement (IGA)? What is the difference between an IGA Model 1 and Model 2 Agreement? How can I avoid FATCA? - See more at: http://www.ustaxfs.com/fatca/fatca-faqs/#sthash.hydNqAO3.dpuf

http://www.ustaxfs.com/fatca/fatca-faqs/

Expatriate, then get a U.S. inheritance

Here is the question:

I was wondering if any of your blogs cover the question about non-resident alien (me, I renounced in 2010) inheritance from a US parent (my mother). The amount in the parent's estate is 2 million US, some of which will probably go to my two children, both US citizens. I looked through your blogs but couldn't find an answer to that specific question.

Short answer: there is no impediment to you receiving an inheritance. The fact that you expatriated will not matter. Even if you were a covered expatriate, it will not matter.

Canadian Grandma Pays $93,000 to IRS

Remember Ambassador Jacobson insisting IRS wasn’t after Canadian Grandmas?
Try telling that to this elderly Canadian widow who was just hit with $93,000 to the IRS on her Canadian husband’s estate–on top of the $37,00 she paid to CRA.
Global National: Canadians Paying Taxes to IRS

Tracking Travelers’ Entries and Exits Part I

For non-U.S. citizens, collecting data about a planned trip to the U.S. may begin even before an individual enters the U.S. For non-U.S. citizens who must first apply for a non immigrant visa to enter the U.S., the Department of State’s non immigrant visa application (Form DS-160) asks the applicant if he has made travel plans, and if so, for the details. Answering the question is optional, and obviously once the visa is issued, the Department of State does not track future travel plans. Additionally, the non immigrant visa application process requires an applicant to provide the Department of State with biographic and biometric data, which it stores in the Consular Consolidated Database (CCD).

Non-Filers Beware: Who’s That Knocking at Your Door ?

For numerous reasons, many taxpayers fail to timely file required U.S. income tax returns and associated reports. A “non-filer” is described as a taxpayer (or someone who ought to be a taxpayer) who does not file their return before the deadline to file the next year’s return. A “late filer” is taxpayer who misses the deadline for the year in question, but files the return within the following year. Many non-filers analyze optional strategies given the probability of audit and detection and the extent of penalties, if discovered. Others claim to be trapped into non-filing status because of past decisions. Typically, non-filers fall into three categories:
i)          Procrastinators – Know they should file but need assistance and/or prompting.  They will typically respond and always indicate that they will cooperate when contacted by the IRS.  However, information is generally slowly provided in a piecemeal fashion.
ii)         Uncooperative Non-Filers – They refuse to acknowledge and respond to correspondence and/or phone calls and if contacted by the IRS clearly state that they will not cooperate.
iii)        Tax Protestors – Advocate and/or use tax protestor’s schemes (i.e. refusal to file because of alleged constitutional reasons).
The IRS has identified at least 10 million delinquent returns and has been pursuing a cross-functional National Non-Filer Strategy to identify non-compliant taxpayers and design methods to encourage their compliance.