The Senate Finance Committee just released the comments (1400 submissions) sent by the public including myself on tax reform.

As expected, there are lots of comments about CBT and FATCA.

The actual number of files was slightly different, 449 for individual and 316 for international (plus 5 broken links in international).  I used an Adobe tool to search all PDF files in a folder and count the number of files that contained the keywords citizenship, FATCA or FBAR.
Results:
Individual 172/449 = 38%
International 175/316 = 55%
Those are impressive percentages I’d say and beneath them lie many persuasive testimonies with thoughtful suggestions for reform. I think that having more than 50% of the submissions ought raise awareness. At Ways and Means, they pretty much ignored an overwhelming quantity of submissions. It will take them a much greater effort to ignore these which surpass the 50% mark.

http://www.finance.senate.gov/newsroom/chairman/release/?id=3b14e94b-69f9-41e2-9fd3-7d191971b7ee

In Search of FBAR Fullfilment and Consciousness

When history is written, 2011 will be remembered as the “year of the FBAR.”
So far court  decisions have only confirmed the plain wording of the FBAR statute which says that no FBAR penalty will be imposed if there is "reasonable cause" and the balance in the offending account was properly reported. We are still left with the "fact specific interpretation" of what constitutes precisely "reasonable cause".
What is deemed wilful has very nicely been documented in released FOIA docs:
https://www.bragertaxlaw.com/previously-unreleased-irs-guidelines-for-fbar-audits.html
It Begins in the 1970s:
The historical roots of the FBAR may be found in the Bank Secrecy Act which was enacted in 1970. Here is what it says:

“1970    CONGRESS ENACTS THE BANK SECRECY ACT (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) which requires American financial institutions to assist U.S. government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments and file reports of cash purchases of these negotiable instruments of $3,000 or more (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion, or other criminal activities. (Bank Secrecy Act of 1970).”

THE BSA REGULATIONS NOW REQUIRE ALL FINANCIAL INSTITUTIONS to submit five types of reports to the government including:
FBAR: Department of the Treasury Form 90-22.1 Report of Foreign Bank and Financial Accounts (FBAR): Each person (including a bank) subject to the jurisdiction of the United States having an interest in, signature or other authority over, one or more bank, securities, or other financial accounts in a foreign country must file an FBAR if the aggregate value of such accounts at any point in a calendar year exceeds $5,000. (31 CFR 103.24)
The FBAR Has Been Asleep For A Long Time - But FBAR Consciousness Has Been Renewed and Is Moving Closer To Many Borders.

Why would you choose to be an American taxpayer without getting any of the benefits of citizenship or residence?

The situation, in a nutshell: you and your spouse are both U.S. citizens. You renounce your citizenship, but your spouse remains a U.S. citizen. You can elect (discussion below) to be treated as a U.S. taxpayer, even though you are no longer a U.S. citizen and are not living in the United States.
What the election does :
If you elect to be a U.S. taxpayer, the result is that you treated like a resident for income tax purposes, and for withholding on wages paid to you:
A nonresident alien individual with respect to whom this subsection is in effect for the taxable year shall be treated as a resident of the United States—
(A) for purposes of chapter 1 for all of such taxable year, and (B) for purposes of chapter 24 (relating to wage withholding) for payments of wages made during such taxable year.

FATCA Security Risks with Sensitive Data

The Foreign Account Tax Compliance Act, commonly called “FATCA” has caused Americans abroad to be fearful of security risks when their personal financial information is reported by non-US financial institutions or foreign government agencies to the IRS. FATCA reporting will include the name, address and taxpayer identification number of each US account holder at the financial institution; the account number; account balance and value; the account’s gross receipts and gross withdrawals or payments; and other account related information requested by the Internal Revenue Service (IRS). The Treasury Inspector General for Tax Administration has expressed concerns with the security of data transmission as mandated by FATCA.  In September of 2014 the IRS issued a fraud alert to all international financial institutions that are complying with FATCA. Scam artists posing as the IRS have fraudulently solicited financial institutions seeking account holder identities as well as financial account information.  Financial institutions directly registered to comply with FATCA, and those in jurisdictions that are treated as having an IGA in effect to implement the FATCA provisions through their home governments, have already been approached by parties impersonating themselves as the IRS. The IRS now has reports of incidents from various countries and continents.

An Emotional Audit: IRS Workers Are Miserable and Overwhelmed

Businessweek thinks the IRS sucks.  The reasons are largely outlined by the John Oliver video above.  I’m sure this has generated a lot of scoffs, but I honestly do try to keep this in mind as I sit on hold for 90 minutes.  Maybe it helps me from being a complete jerk to the person who eventually picks up.  Solid chance that person’s day is worse than mine. How much longer before this all implodes? Is that the goal?  Might work.

Combining FBAR and 8938 is a step toward simplification of the onerous reporting required of US persons living overseas.

https://americansabroad.org/files/5914/2913/2714/tax-advocate-recommendations-13-april-2015.pdf
One set of nonfiling/inaccuraty penalties would be eliminated and that is a good step.
TAS did not go far enough to reduce the questionable and maybe even unconstitutional FBAR fines. Accounts in those countries are not foreign and should not be treated by such with "foreign account" penalties.
While one may hope that relieving FFI of their reporting obligations for bona fide tax residents, will be a relief for US persons living overseas - the notion is hypothetical. All FFI under FATCA  must vet through their account lists and hunt down US persons among existing accounts, for any new accounts, and this still must be done if the US persons are bona fide tax residents or not. So will this be any help? It will add an extra layer of bureaucracy and questions imposed on the banks at their expense to ask the extra questions.
There is no mention of the foreign nationals in the US getting their accounts shut in their home countries as a result of FATCA regulations.
Also, no mention of US persons with a "foreign address" getting financial accounts closed or services limited on US based accounts. This is still Unamerican!
Clearly with FATCA,FBAR, and Citizenship Based Taxation the US has treated overseas US persons with an expectation that they are to serve the US government, instead of the US government having the prime responsibility to serve them.
Double taxation, without representation, with excessive compliance, and with excessive compliance penalties, and with $0 in US government services in exchange is still wrong and unjust.

Income tax return that must be filed in the year of expatriation:

When a US person expatriates and becomes an alien , there is a dual status year. If the event happened in October, and X was a US person for >183 days in the year X expatriates, does he need to file a Form 8840 for the part of the year that he was an alien?

Will Filing an Amended Tax Return Extend the Statute of Limitations?

Many people fear that filing an amended tax return will cause the statute of limitations to be extended. In general, the filing of an amended tax return does not extend the statute of limitations on assessment.  If an amended return is received by the IRS within 60 days from when the assessment statute expiration date would otherwise expire, then the IRS is granted a period of 60 days from the received date to assess additional amounts of tax on that return. See IRC Section 6501(c)(7). For example, if an amended income tax return for the 2011 tax year was received on April 3, 2015, the IRS would have 60 days from April 3 to assess any additional tax due on that income tax return.


To claim a refund, Form 1040X must be filed generally no later than the date that is 3 years after the date the original return was filed or within 2 years after the date the tax was paid (whichever is later). Returns filed before the due date (without regard to extensions) are considered to be filed on the due date.

You can check the status of your Form 1040X (PDF) using the Where’s My Amended Return? (WMAR) online tool or the toll-free telephone number 866-464-2050 three weeks after you file your amended return. The WMAR tool allows you to track the status of amended returns for the current year and up to three prior years.
More information from the IRS on the topic of amending tax returns can be found here.

Nina Olson testifies before House Committee on Annual Report to Congress, April 15, 2015

Yesterday the  National Taxpayer Advocate Nina Olson testified before the House Committee on Oversight and Government Reform about her 2014 Annual Report to Congress.

She discussed this year’s tax filing season and the key points of the report, including the IRS’s failure to meet taxpayers’ need for service, which she said erodes taxpayer trust in the system and undermines voluntary compliance.

Watch the full testimony: House Committee on Oversight and Government Reform: The Taxpayer Advocate’s Annual Report.

Read the full text of the testimony.

Tax Heavyweight Says Congress Should End Puerto Rico Tax Incentive

Over the last year or so, the scheme that I’ve said “no” to more than anything else involves Puerto Rico. Back in 2012, Puerto Rico—a US territory—enacted tax incentives designed to entice hedge fund managers and other wealthy immigrants into relocating there from the mainland US.

The specific law I criticized is Act 22. Anyone who becomes a bona fide resident of Puerto Rico is now eligible for the following benefits, courtesy of Act 22:

• 100% tax exemption from Puerto Rico income taxes on all Puerto Rico source dividends and interest payments.
  
• 100% tax exemption from Puerto Rico income taxes on all short- and long-term capital gains accrued since becoming resident in the territory.
  

By itself, this exemption isn’t particularly noteworthy. But the US Tax Code provides that bona fide residents of the territory need not pay federal income tax on “income derived from sources within Puerto Rico.” 

Taxpayer Advocate Request Easing Foreign Reporting Requirements For US Taxpayers Abroad

The National Taxpayer Advocate suggested to the Internal Revenue Service to reduce the duplicate foreign asset reporting requirements created by the Foreign Account Tax Compliance Act. The Taxpayer Advocate Service (TAS) is your voice at the IRS. Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights.
April 13, 2015 the National Taxpayer Advocate stated in Recommendations for Published Guidance under IRC §§ 60380 and 1471: Eliminate Duplicative Reporting of Assets on the FATCA Form 8938 if the Asset is Reported or Reflected on the FBAR (FinCEN Report 114) and Exclude Financial Accounts Maintained by a Financial Institution in the Country of  Which the U.S. Person is a Bona Fide Resident from FATCA Reporting:

1. That taxpayers shouldn’t have to report assets on the Form 8938, Statement of Specified Foreign Financial Assets, if those assets are already reported or reflected on a Financial Crimes Enforcement Network Form 114, Report of Foreign Bank and Financial Accounts (FBAR).

2. The IRS should amend the FATCA regulations to ease reporting for banks in countries where U.S. account holders are bona fide residents.

• Those banks shouldn’t be required to report those accounts under FATCA if the institutions are organized under the laws of that country.

• Those accounts also shouldn’t be among the specified foreign financial assets required to be reported on the Form 8938.

The UK is phasing out tax returns over the next 5 years. Here’s how to do the same in United States.

Let’s start with a dream: what if all you need to do on April 15 is open a pre-filled return online, see what the government thinks you owe, make any changes, and be done. No more charges from your accountant. No paying for software you don’t need. For most of us, taxes would be a breeze.

This is a happening in the UK.

Britain’s Chancellor of the Exchequer announced last month that the UK will phase out all annual tax returns within 5 years. That includes personal, small business, and large corporations. They’ll achieve this by automating the tax system - tying data from employers, banks, investment firms, and anyone else required to report, to a personal tax account.

LOL.....7 Tips For Dealing With A Cash-Strapped IRS

https://www.law360.com/tax/articles/641758/7-tips-for-dealing-with-a-cash-strapped-irs

With the IRS operating under constrained resources, tax practitioners are dealing with drawn-out audits, more correspondence exams and less-experienced agents. Here, experts provide seven tips for reducing the stress of working with a cash-strapped IRS.

Educate the Auditor

IRS Commissioner John Koskinen on Wednesday warned again about the “brain drain” at the agency. With a hiring freeze in place and the service losing employees to attrition, agents with decades of experience and specialized expertise are leaving the agency, and less-knowledgeable employees are taking their places....

Obama and Biden Release Their 2014 Tax Returns

President Obama and Vice-President Biden yesterday released their 2014 tax returns. Here are charts putting the 2014 returns in context with their earlier returns:

Obama:

Year	AGI	Tax	Charitable Gifts	Gifts/AGI
2014	$477,383	$93,362	$70,712	14.8%
2013	$481,098	$98,169	$59,251	12.3%
2012	$608,611	$112,214	$150,034	24.7%
2011	$789,674	$162,074	$172,130	21.8%
2010	$1,728,096	$453,770	$245,075	14.2%
2009	$5,505,409	$1,792,414	$329,100	6.0%
2008	$2,656,902	$855,323	$172,050	6.5%
2007	$4,139,965	$1,396,772	$240,370	5.8%
2006	$983,826	$277,481	$60,307	6.1%
2005	$1,655,106	$545,614	$77,315	4.7%
2004	$207,647	$40,426	$2,500	1.2%
2003	$238,327	$51,856	$3,400	1.4%
2002	$259,394	$68,958	$1,050	0.4%
2001	$272,759	$86,072	$1,470	0.5%
2000	$240,505	$63,732	$2,350	1.0%

Biden:

Year	AGI	Tax	Charitable Gifts	Gifts/AGI
2013	$388,844	$90,506	$7,380	1.90%
2013	$407,009	$96,378	$20,523	5.00%
2012	$385,072	$87,851	$7,190	1.90%
2011	$379,035	$87,900	$5,540	1.46%
2010	$379,178	$86,626	$5,350	1.41%
2009	$333,182	$71,147	$4,820	1.45%
2008	$269,256	$47,464	$1,885	0.70%
2007	$319,853	$66,273	$995	0.31%
2006	$248,859	$42,832	$380	0.15%
2005	$321,379	$70,473	$380	0.12%
2004	$234,271	$41,845	$380	0.16%
2003	$231,375	$38,393	$260	0.11%
2002	$227,811	$41,756	$260	0.11%
2001	$220,712	$40,728	$360	0.16%
2000	$219,953	$42,313	$360	0.16%
1999	$210,797	$40,309	$120	0.06%
1998	$215,432	$35,131	$195	0.09%

The IRS Scandal, Day 702

The Blaze, ‘America Is Fed Up’: GOP Schedules Votes on Major IRS Reforms Next Week:

The House next week is expected to pass several bills aimed at reforming the IRS, in

particular the way the IRS handles applications for groups seeking tax-exempt status.

That issue has been highly controversial since it was revealed that the IRS applied extra scrutiny to conservative groups seeking tax-exempt status just before the 2012 election. The resulting scandal forced former IRS official Lois Lerner to leave the agency, although Lerner has so far dodged any punishment for her role.

For example, the Justice Department just said it won’t prosecute Lerner for her decision not to testify before Congress about her actions in the targeting scandal.

GOP leaders say the IRS needs real reform, and quickly, to ensure it doesn’t become a political weapon for whichever party runs the executive branch.

“The IRS has maliciously targeted individuals and groups simply because of their personal beliefs,” House Majority Leader Kevin McCarthy (R-Calif.) told his colleagues on Thursday. “The current system is unfair and America is fed up.”

Three of the bills up next week deal with the targeting scandal. One of these, from Rep. George Holding (R-N.C.), would try to to ensure the IRS can no longer play politics with tax exempt applications by allowing groups to declare tax-exempt status on their own, without having to wait for the IRS.

Another from Rep. Jim Renacci (R-Ohio) calls for the firing of any IRS worker that delays their tasks for political reasons, such as slow-walking the tax-exempt status of a political group. And the third, from Rep. Pat Meehan (R-Pa.), would require the Treasury Department to issue regulations allowing groups to appeal decisions by the IRS not to grant them tax-exempt status.

The bills are being considered long after the targeting scandal broke, which shows a lingering resentment among conservatives, and a feeling that reforms are still needed at the tax collection agency. Just last month, some Republicans accused the IRS of quietly working to undo some of the reforms Congress has tried to impose on it, by putting forward a budget plan that doesn’t include language related to ending the political targeting of tax-exempt groups.

IRS Ethics Lawyer Disbarred

Not all attorney disbarments make news. But when the attorney being disbarred was an employee at the IRS who dealt with ethical issues, it becomes noteworthy.
The District of Columbia Court of Appeals last week accepted the recommendation of the Board of Professional Responsibility that Takisha Brown be disbarred. It found that Brown had intentionally misappropriated funds and made false statements with reckless disregard for the truth.
According to the Board, Brown misappropriated amounts from a settlement of an auto accident case that she handled in private practice, and misrepresented that she had paid a bill when in fact the bill had not been paid. The Hearing Committee noted that disbarment is the presumptive sanction for lawyers who intentionally misappropriate client funds, unless extraordinary circumstances justify a less severe sanction. The Court of Appeals upheld the Board’s conclusion that Brown failed to demonstrate extraordinary circumstances warranting a departure from the presumptive sanction of disbarment.

FBAR audit success story ????

After I read this blog post yesterday about a so called ``FBAR audit success story`` from a well-known FBAR ambulance chaser law firm I was thinking ......yes even 4/2015 these things happen. Where is Caroline C. Ciraolo when you need her !? I know it is a free market and buyers be aware.
http://www.irsmedic.com/2015/0...
The story does not make much sense and seems kind of invented or altered for promotion purposes because German income taxes are much higher than US income taxes. Reginald has the FEIE and FTC plus annual carry-overs. Reginald never had an income tax liability to the US.
He committed a “Form Crime“ by not filing 1040s, 8938 etc. and FBARs.
No big deal – typically the Service does not assess FBAR penalties when there is no tax due and Reginald has on top of everything else strong RC arguments. Another easy target and $25,000 income for IRSmedic.

How to tell the IRS that a TP was leaving the USA and is now a former U.S. taxpayer?

Are you familiar with the residency termination rule in the Regulations under section 7701(b) that states that unless one attaches a residency termination statement to the income tax return, the default residency termination date is December 31st of the year one leaves the US?

The tax rules for the final year of U.S. residency require that the individual attach a statement giving the IRS all of the details needed to establish a residency termination date. This is a residency termination statement.

There is a an FBAR nonwillfull penalty opinion entered April 1, 2015 by the US District Court for the Western District of Washington.

Taxpayers should not be forced to sue in federal court to get an explanation as to the agency’s rationale or the evidence it considered in making its decision.  In addition the District Court implies incorrect FBAR triggers !
The court seemed to muff up the FBAR reporting requirement threshold and then didn’t even acknowledge it later on: pg. 1, sec. II, “Essentially any person residing in the Unites States with foreign accounts totaling more than $550,000 [is required to file an FBAR].”
In legal terms, the proper follow up question is “WTF?” I can’t figure out where Judge Jones got this $550,000 figure or, if he decided that the filing threshold was $550,000, why he wouldn’t be compelled to rule that Mr. Moore did not have an FBAR filing obligation and, thus, deserved no penalties. So isn’t it fair to ask, that if a federal district court, presided over by a judge that must be fairly smart, and obviously well-rounded, after being briefed on this issue and having a staff of highly motivated legal clerks to assist him, can’t recite the actual FBAR reporting requirement correctly, what does this say about the burden placed on regular taxpayers?
I cannot get over this questionable revolving door career move from Caroline D. Ciraolo. Up to december of 2014 she played a big part in defending exactly these type of NW cases like the one here evolving Mr. Moore and just 2 month later I see her signature under this motion trying to nail exactly one of those NW TP she was so adamant in defending before.
Moore v. United States, 2015 U.S. Dist. LEXIS 43979 (W.D. WA 2015).  The opinion on summary judgment opinion is here.  The briefs  on the motion (excluding exhibits) are:

• US motion for summary judgment, here; 
• Moore's Response to the US Motion, here; and 
• the US Reply to Moore's Response, here.  

The docket entries as of 4/3/15 are here.
http://www.procedurallytaxing.com/district-court-fbar-penalty-opinion-raises-important-administrative-and-constitutional-law-issues/#respond

The cynical and embarrassing part of this case is that we learn that the US District Court for the Western District of Washington is only interested in procedural issues and that there is no binding law to guide the court when it comes to RC in the FBAR context or the standard of review issue .
What standard applied to the IRS’s determination on the FBAR penalty?
The court accepted the government’s position that it “should determine de novo whether Mr. Moore is subject to an FBAR penalty, but should review the IRS’s determination of the amount of that penalty only for abuse of discretion.”
Mr. Moore`s case thus opens the door to DOJ in the future to test the waters on perhaps getting a more deferential abuse of discretion standard of review on the question of liability.

You've never seen IRS penalties like these.............

http://money.cnn.com/2015/04/01/pf/taxes/irs-penalties/index.html?source=yahoo_hosted

Was it an April Fool's joke?  Only a homeland American could ask that.  US citizens abroad knew right away that it was dead serious.

FATCA: Swatting Flies With Atom Bombs:

Possible inflation of the offshore tax evasion problem and the staggering costs of the Foreign Account Tax Compliance Act are causing even the most ardent advocates of information sharing and ending bank secrecy to question the U.S. approach.
“For the U.S. to ask countries around the world to spend billions in implementation costs to deliver less than $1 billion per year is, economically, complete nonsense,” said Martin Naville, CEO of the Swiss-American Chamber of Commerce. He referred to FATCA as the least considered program in history and “mind boggling” in its unilateralism. “The net value of FATCA for the U.S. is probably negative,” said Naville, who added that tax compliance is a must but that there are better ways to achieve it.

But it goes after Fat Cats! Don’t you get our clever pun? And besides, how can we go after international money launderers without making it a crime to commit personal finance abroad?
Related: Wall Street Journal, Checking the IRS Overseas (Via the TaxProf). “Even the Obama Administration says the law would capture only $870 million a year in additional tax revenue, which is probably overstated given changes in behavior by Americans and their overseas employers.”