IRS Releases 2015 Inflation Adjustments

The IRS has released various inflation-adjustments for 2015 (IR 2014-104 & Rev. Proc. 2014-61; IR 2014-99), including:

• Gift Tax Exemption:  $14,000 (same as 2014)
• Unified Credit:  $5,430,000 (up $90,000 from 2014)
• Top 39.6% Income Tax Rate:  $413,200 single/$464,850 joint (up $6,450/$7,250 from 2014)
• Standard Deduction:  $6,300 single/$12,600 joint (up $100/$200  from 2014)
• Personal Exemption:  $4,000 (up $50 from 2014)
• AMT Exemption:  $53,600 single/$83,400 joint (up $800/$1,300 from 2014)
• Contribution Limit for 401(k)/403(b)/457 Plans:  $18,000 (up $500 from 2014)
• Catch-Up Contribution Limit (Age 50+) for 401(k)/403(b)/457 Plans:  $6,000 (up $500 from 2014)
• Income Limit for Full IRA Deduction:  $61,000 single/$98,000 joint (up $1,000/$2,000 from 2014)
• Income Limit for Full Roth IRA Contribution:  $116,000 single/$183,000 joint (up $2,000 from 2014)
• Defined Benefit Plan Annual Benefit Limit:  $215,000 (up $5,000 from 2014)

The IRS Scandal, Day 539

Investor's Business Daily editorial:  IRS Is A Unique Troublemaker Among Federal Agencies:

It's also been used as a political weapon. President Obama may owe his 2012 re-election to the IRS, which blocked the formation of groups that opposed him.

The IRS-Tea Party scandal entered Day 536 on Monday by the TaxProf blog's count, and it appears that the scandal will go on much longer without resolution.

Bob Woodward suggests that the media investigate it as it did Watergate. We laud his bravery. He's opened himself up to attacks from two vicious and unaccountable adversaries: the IRS and the mainstream media.

• Breitbart:  Head of Group Targeted By IRS: Court's Dismissal Means Government Free to Violate Our Rights
• Patriot Post:   A Tale of Excused Abuse at the IRS

Linkfest................“Switzerland is by no means the only tax haven in which Indians have salted away money…”

1. India: List of Black Money holders in Swiss Bank accounts leaked by WikiLeaks? India.com
2. India: Black money disclosures may prove costly for banks Business Standard
3. ‘Differences with India on making public Swiss bank account information’  The Economic Times
4. Swiss banks trying to distance themselves from Indian clients Economic Times
5. Act quickly on black money stash Deccan Chronicle
6. 73 Of 100 Swiss Banks In Bed With The IRS Are Eyeing The Sofa Forbes

Prosecutors Suspect Repeat Offenses on Wall Street

Here are some excerpts:
Prosecutors in Washington and Manhattan have reopened an investigation into Standard Chartered, the big British bank that reached a settlement in 2012 over accusations that it funneled billions of dollars for Iran and other nations blacklisted by the United States, according to the lawyers briefed on the cases. The prosecutors  are questioning whether Standard Chartered, which has a large operation in New York, failed to disclose the extent of its wrongdoing to the government, imperiling the bank’s earlier settlement.

New York State’s banking regulator is also taking a fresh look at old cases, reopening a 2013 settlement with the Bank of Tokyo-Mitsubishi UFJ over accusations that the bank’s New York branch did business with Iran, according to the lawyers who were not authorized to speak publicly. The regulator, Benjamin M. Lawsky, the lawyers said, is negotiating a new settlement deal with the bank that, if finalized, would involve a penalty larger than the $250 million it paid last year. Mr. Lawsky suspects that the bank initially played down the scope of its wrongdoing.

2015 Business Tax Climate: Chilliest in Blue States

The Tax Foundation yesterday released the 2015 State Business Tax Climate Index, which ranks the fifty states according to five indices: corporate tax, individual income tax, sales tax, unemployment insurance tax, and property tax. Here are the ten states with the best and worst business tax climates:

1	Wyoming	41	Iowa
2	South Dakota	42	Connecticut
3	Nevada	43	Wisconsin
4	Alaska	44	Ohio
5	Florida	45	Rhode Island
6	Montana	46	Vermont
7	New Hampshire	47	Minnesota
8	Indiana	48	California
9	Utah	49	New York
10	Texas	50	New Jersey

Interestingly, all 10 of the states with the worst business tax climates voted for Barack Obama in the 2012 presidential election, and seven of the ten states with the best business tax climates voted for Mitt Romney..... what a coincidence.

IRS PFIC Rules

PFICs are Passive Foreign Investment Companies (Pronounced “pee-FIK”). They either have half their assets in foreign passive income producing assets (Asset Test), or get a majority of their income from foreign passive sources (Income Test). But in fact, they really probably aren’t your companies. Nonetheless, the accounting work required is insanely difficult and time-consuming, and the tax treatment sort of stinks too.
What they are really are (or 99% of the time) are Foreign Mutual Funds (this is also the rule  IRS agents trained on).
So why this onerous PFIC tax treatment for Foreign Mutual Funds? Well, I can’t say what the cleaned-up “official” reason is, but I can tell you what the real reason is: Protectionism.  PFIC language was snuck into  Section 1291 of the Tax Reform Act of 1986 as a protectionist measure for the the US-based mutual fund industry (sorry Reagan fanboys — or maybe we can blame this on his Democrat rival Tip O’Neil?) . Entrenched Wall Street interests hated the fact that offshore mutual funds had a strategic advantage over domestic funds, with lower costs and higher returns, as foreign funds do not have to jump through the (editorial content warning) expensive, asinine hoops of the Securities and Exchange Commission (SEC). So instead of getting rid of the SEC (and all those federal jobs), Congress decided to intentionally make Foreign Mutual Funds less attractive by requiring expensive, mind-bloggling PFIC accounting. So everyone wins, except you.
How complicated and onerous is it? The accounting is so complicated, do you know who else hates PFICs perhaps more than anyone else? The IRS agents and technical advisers who have to audit PFIC accounting. Their supervisors have no concept of just how time-consuming it can be and fail to budget enough time. And computations prepared by even bright accountants and CPAs are routinely incorrect.

Pssssst super secret message to the U.S. government..............

Many people who want to cut their ties to the US are well-educated professionals and entrepreneurs. The U.S. policy objective of chasing these people away from the United States is working well. Carry on.  We don’t need achievers and builders and educated, intelligent people hanging around in the US (lol...sarcasm) .

What to do if you still want to expatriate in 2014.........

The usual propaganda pretending that the whole world loves FATCA and wants to emulate it but fails to mention that the US hypocrisy on information sharing continues......

As always leaving out the pertinent context that the US chooses to define the bank accounts of those living ordinary lives outside the US as somehow the business of the US Treasury, based solely on birthplace or parentage.

As usual, this article in Forbes leaves out that no other country practices CBT except the US. 

http://www.forbes.com/sites/taxanalysts/2014/10/27/fatca-envy-spreads-across-hemisphere/

It also carefully leaves out that the US serves as a tax haven for other countries, including Latin Americans, and has no plans to stop the US banks in Florida, Texas, etc. from doing so. See for example: January 23, 2013 News Analysis: Will U.S. Hypocrisy on Information Sharing Continue?
by Lee A. Sheppard http://www.taxanalysts.com/www/features.nsf/Articles/0C26B2CFD92F1FBE85257AFC004E8B38?OpenDocument

Therefore, though some other countries may be interested in the bank accounts that its RESIDENTS have outside its borders, they do not seek to do so based on a geographical birthplace, or the national origin of their parents. Anyone who is now writing about FATCA, in a source such as Forbes will know this. Leaving it out is willful blindness or deliberate evasion !

Let’s stop talking about FATCA’s “collateral damage” and start discussing real intent.  FATCA is the enforcement tool to collect IRS taxes and penalties from non US residents receiving no standard government services (schools, roads, education, or social welfare).  FATCA talking points contradict the administration’s own statements upon FATCA intentions.
 http://www.taxanalysts.com/taxcom/taxblog.nsf/Permalink/UBEN-9Q7FTD?OpenDocument

Streamlined Foreign Offshore Procedures – Non-residency Requirement

This blog post will focus on the non-residency requirement for purposes of the SFOP. U.S. citizens and green card holders meet the non-residency requirement if—in at least one year during the three-year period that tax returns must be submitted under the streamlined procedure—they meet two tests. In at least one year, the taxpayer must have both (A) had a non-U.S. “abode” and (B) have been physically outside the United States for at least 330 full days. This latter requirement means that to qualify for the SFOP, for at least one year in the Streamlined period, taxpayers did not spend more than a maximum of 35 days (36 days in a leap year) in the United States.  If married taxpayers want to file joint tax returns, both spouses must meet this non-residency requirement.
The SFOP non-residency requirement takes its genesis from the “foreign earned income exclusion” rules contained in Internal Revenue Code Section 911.  Prior to the issuance by the IRS on October 8 2014 of FAQ’s regarding the “Streamlined Foreign Offshore Procedures”  and FAQs for its counterpart, the “Streamlined Domestic Offshore Procedures” the question was raised whether a taxpayer who could not qualify for the SFOP 35-day rule could use instead the alternative test contained in Section 911(d)(1)(A) for U.S. individuals who are “bona fide residents” (BFR) of a foreign country or who are otherwise residents of certain countries with whom the U.S. has an income tax treaty in effect. Generally, under the BFR test, the foreign earned income exclusion of Section 911 is permitted if the taxpayer was a “bona fide foreign resident” of the foreign country for at least one entire taxable year.
 The Married Couple and Kids’ Summer Vacation
The IRS FAQ’s now make clear that one cannot use the BFR test in order to qualify for the SFOP.  This will impact many expatriate taxpayers who are, for all intents and purposes living abroad, but who may spend lengthy summer vacations in the United States once children are off from school. Sometimes both spouses will spend a good part of the summer in the U.S. If so, they may lose eligibility for the SFOP.  Even if only one spouse spends the summer months in the U.S., the opportunity to file joint returns and qualify for SFOP will also be destroyed.

Why are the US Federal Register published statistics off by a factor of 8?

The data in the Federal Register is 8 times lower than what it should be. This is an exponential inaccuracy.
The Federal Register Quarterly Publication of Individuals Who Have Chosen to Expatriate” . This is a list which supposedly reports the quantity of Expatriating individuals from the US –the number is supposed to include 1) renunciants, 2) relinquishers, and 3) I-407 Figures or those long-term residents who have terminated their visa’s  (“this listing, long-term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship”).
A database of those who have renounced their US citizenship exists at the FBI. This is a result of the Brady Bill which disallows renunciants from purchasing firearms. To meet the intent of that act, the list only holds the category of renunciants. The Federal Register does not even match the FBI statistics.

With no access to factual data, one must turn to anecdotal information in order to attempt to pursue a truth. For example, in Belgium, a moderately sized country, the embassy has mentioned that they are processing about  5 renunciations per week, and that this is happening at embassies EVERYWHERE. With 190 countries in the world, this would imply 1000 renunciations per week! In Canada and Switzerland, where awareness of FATCA is very high, most embassies and consulates have waiting periods ranging from 2 to 18 months. The administration itself has reacted–by locking the doors to people of lesser means. First, the administration raised the renunciation fee from zero to $450.  And last month, the renunciation fee was raised to $2350. Compare this to the costs of acquiring a passport–$135.  Imagine that..... a renunciation from the US is 17 times more valuable than a passport to the US !

The data shows that the statistics of the administration just do not add up. What is the motive? What is the agenda? With this data available and analyzed, the burden of proof now lies upon the administration to fact up with its “statistics”.

Confirming opinion : http://www.nestmann.com/expatriation-statistics/#.VEtv4tEcTIU

http://bancdelasteroideb612.wordpress.com/

New York Times: Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

Frankly, "Civil Forfeiture is just another symptom of an out of control and unaccountable government." The I.R.S made 639 seizures in 2012, up from 114 in 2005. Only 1 in 5 was prosecuted as a criminal structuring case !

Note : the government can take everything you own and prevent you from hiring your counsel of choice. The government need not conclusively link the assets seized to the crime; they can simply charge you, allege a link and take everything you own.

This is why FATCA must be ruled illegal. The US in future will try to invoke MLATs, and MCARs to get payment from ex-pats. The US will say you’ve signed the treaty and must assist the US without any proof or evidence.
What would an ex-pat pensioner do if the US freezes an overseas bank account on simply a hunch she may have evaded taxes?
The US must be made to realise its tax border ends at its border.

"The Internal Revenue Service agents did not accuse Ms. Hinders of money laundering or cheating on her taxes — in fact, she has not been charged with any crime. Instead, the money was seized solely because she had deposited less than $10,000 at a time, which they viewed as an attempt to avoid triggering a required government report."

“How can this happen?” Ms. Hinders said in a recent interview. “Who takes your money before they prove that you’ve done anything wrong with it?” The federal government does.

Law Lets I.R.S. Seize Accounts on Suspicion, No Crime Required

Zero Hedge : http://www.zerohedge.com/news/2014-09-24/canada-warns-its-citizens-not-take-cash-usa

civil forfeiture laws by John Oliver :  http://youtu.be3kEpZWGgJks?list=UU3XTzVzaHQEd30rQbuvCtTQ

https://www.youtube.com/watch?feature=player_embedded&v=3kEpZWGgJks

The Ham Sandwich standard :
http://www.economist.com/blogs/democracyinamerica/2014/02/civil-liberties-and-supreme-court

Dan Mitchell at CATO : http://danieljmitchell.wordpress.com/2014/10/26/another-example-of-government-thuggery-and-another-reason-why-decent-and-moral-people-are-libertarians/

More Americans Renounce Citizenship, With 2014 on Pace for a Record and 2015 will be even higher!

The article includes:

Unlike other developed nations, the U.S. taxes citizens on income they earn anywhere in the world. The rule dates to the Civil War. U.S. tax liabilities can also cover children born to Americans abroad, extending the reach of the Internal Revenue Service across generations as well as oceans.  There are only partial offsets for double taxation for people who owe taxes both to the U.S. and a foreign country, and the reporting rules are onerous, experts say.
For decades these laws were rarely enforced. Now, scrutiny of Americans abroad is intensifying because of the Foreign Account Tax Compliance Act, or Fatca, which Congress passed in 2010. The law’s main provisions, which took effect in July, will require foreign financial institutions to report income of their U.S. customers to the IRS.

http://blogs.wsj.com/totalreturn/2014/10/24/more-americans-renounce-citizenship-with-2014-on-pace-for-a-record/

It is getting interesting : Swiss Category 2 Banks Push Back on DOJ's Draft NPA Agreement

From  Kristen A. Parillo, Swiss Banks Slam DOJ's Proposed Non-Prosecution Agreement, 2014 TNT 206-1 (10/24/14) or http://online.wsj.com/articles/swiss-banks-want-changes-in-justice-dept-hidden-account-program-1414085166 . The requested changes included limiting what the DOJ could do with the information it collected and dropping a requirement that banks also agree to disclose similar information to other foreign authorities. The pushback occurred in a letter from a number of attorneys representing the banks to the DOJ tax.  According to the reports,  28 lawyers representing 73 Swiss banks signed the letter.
According to the Parillo article, the draft NPA requires the Category 2 banks to :

• cooperate fully with the DOJ, the IRS, and any other domestic or foreign law enforcement agency designated by the DOJ regarding all matters related to the conduct described in the NPA;
• assist the DOJ or any designated domestic or foreign law enforcement agency in any investigation, prosecution, or civil proceeding arising out of or related to the conduct covered by the NPA;
• provide testimony as needed to enable the U.S. to use the information and evidence provided by the bank under the NPA; and
• provide the DOJ, upon its request, all information, documents, records, or other tangible evidence not protected by legal privilege or work product regarding matters arising out of or related to the covered conduct.
  The draft NPA also requires the banks to assist the U.S. with the drafting of treaty requests seeking U.S. account information (whether the account is open or closed), and to retain all records relating to its U.S. cross-border business for a period of 10 years from the NPA's termination date. The agreement also describes the circumstances under which the DOJ may determine that a bank has violated the terms of the NPA and may be prosecuted.

http://taxcontroversywatch.com/2014/10/24/swiss-banks-pushing-back-on-scope-of-agreement-with-u-s-under-amnesty-program/

Whistleblowers: IRS Officials Behind ‘Fraudulent’ Multi-Billion Dollar Corporate Tax Giveaways

Fascinating article. I am not a conspiracy theorist, nor do I have a deep-rooted distrust of government (although I am going that way of late), but if the allegations in the above article are true, I think two things:
- can the IRS and/or high level be prosecuted for a Klein conspiracy and
- IRS crowing about a few billion of taxes and penalties from private individuals is nothing but a p*ss in the wind compared to the systematic failure to create and enforce a proper tax regime.

 http://taxprof.typepad.com/taxprof_blog/2014/10/whistleblowers-irs-officials-behind.html

Kindermann and Krueger say that a top marginal tax rate in the range of 90 percent would decrease both income and wealth inequality...

The problem with the naive assumption that more money for the government would increase everyones well-being is that governments have proven numerous times to be ineffective and inefficient when it comes to budgets.
  Academics always like high tax rates, because their advantages (good locations, subsidized housing, free tuition for their children) are typically immune from tax. It's a little bit like the French nobles, under Louis XVI, who wanted to raise excise taxes. They, of course, were exempt from them. Currently, the top rate of 39.6 percent is paid on income above $406,750 for individuals and $457,600 for couples. Fewer than 1% of Americans, or about 1.3 million people, reach that top bracket.
http://papers.nber.org/tmp/99111-w20601.pdf

Where former IRS Commissioner Shulman was vindictive, Koskinen is just brain dead! PART II

This has got to be one of the most unintelligible things that could be uttered by a man who is supposed to be smart. It makes no economic sense to go chasing after a dollar if it will cost you more than a dollar to acquire it. His comments just illustrate the mentality of DC (not just Treasury and the IRS) – he really believes that CBT is fair and FATCA just helps enforce compliance of laws already on the books. He has no clue, has and will never be the victim of the pointy end of the FATCA spear. He will never be the one to stand up and say to Congress “hey CBT is unfair, it’s hurting US citizens living abroad, we need to move to RBT to solve this problem”….he is so clueless and DC centric he will never see the problem never mind propose to fix it.  Koskinen makes no mention about any of the programs spawned by OVDI. How can any organization function effectively when it has to implement so many programs to fix the problems created by the previous ones? Their inefficiencies and lack of foresight have squandered shameful amounts of scarce resources.
We saw this in his “testimony” before Congress about the IRS harassment of conservative charities where he defined bureaucratic arrogance in the face of the people’s representatives! He ignores his own department’s internal evaluations to continue a program that is spiteful, hateful, useless, and imperialistic. He talks of the $7 billion, but misses that most of these people were resident INSIDE THE USA, NOT OVERSEAS! He doesn’t consider that 70% of this revenue represents penalties; of the 30% that represents taxes due, 80% are past taxes due, not recurring revenue. So of that $7 billion less than $1 billion is likely to be on-going revenue and therefore won’t come anywhere close to covering the costs for administering FATCA! In the meantime, the global banking community will be spending tens of billions to comply with this Frankenstein piece of BS legislation!
Americans have given up their passports because of the imposition of this decidedly un-American and un-Constitutional process, and it makes the dual American citizens second-class with respect to their privacy everywhere.
Finally, he clearly doesn’t have a clue about who pays what in America. Those making over $200,000 pay over 80% of the taxes in America – this comes from the IRS.gov statistical data-book available on-line to anyone. It is the rich people with their fancy lawyers and accountants who pay almost ALL of the taxes that the IRS collects. Those making $50K or less only pay some 6% of the taxes collected.
Koskinen clearly is interested in serving his department instead of serving “we, the people”, for if it were the other way around, he should be fired already! And not just for this. The bigger reason that he conveniently doesn’t mention when he quotes that erroneous $7 billion figure is his department has been sending out over $20 BILLION each year in fraudulent tax refunds according to TIGTA – i.e., the IRS’ own internal auditor! And all overseas Americans and duals are meant to think none of this will happen with our accounts once the details of our bank accounts, their numbers, the amounts, along with our social security numbers and addresses are in their possession??
This is the height of BS out of this administration! And it has a lot of competition!!

Where former IRS Commissioner Shulman was vindictive, Koskinen is just brain dead!

 MR. HOFFMAN: What did you think of Steven Miller’s comments last week that he’s not sure that FATCA’s benefits will outweigh its costs, which were followed, I believe, followed shortly thereafter, by Nina Olson’s comments somewhat along a similar vein, concerned about the cost versus benefits of FATCA? COMMISSIONER KOSKINEN: Well, I think it’s always an important question if you’re going to make statutory changes and increase, by definition almost, some burden to some extent. You know, what do you gain from that? You know, we’ve already collected 6 or 7 — now over $7 billion in additional revenues that would otherwise not have been collected just through the offshore voluntary disclosure program. And, you know, that’s — there the burden was simply people had to come forward. It was a fairly straightforward process, so there was a fairly significant amount of money in return. I’ve always thought that the problem you have is you can’t measure the benefit just by the taxes you collect. What you have to do is measure the benefit by the overall impact on the system generally. And what I’ve always been, even before I got here, concerned about was if the average taxpayer felt I’m paying a greater burden of supporting the government because rich people with fancy lawyers and accountants don’t have to pay taxes, they can hide money in Switzerland. You know, hiding money in Switzerland has been a visible issue for 50 years. It’s corrosive to compliance and corrosive to the system. So when you’re going to talk about measuring the benefit, you can’t look just at the burden and the additional resources we get out of the filings there. But having said that, there are indications, not surprisingly, there was a preliminary review that said between 2011 and 2012 — in fact, you guys reported it — we got 500,000 more returns about foreign accounts with $100 billion of income. And we’re seeing the same thing in 1099-Ks.   But even as we do that, as I say, and we’re tracking, the voluntary compliance rate is going up as we go. In some cases, when people match, the revenue goes up, then suddenly their expenses magically go up. But those are signals that we can follow. So I think in FATCA, when you look at it, you won’t be measuring just by the amount of money we collect from the people we catch. You won’t be measuring it just by the increased reporting and money we collect from people who now are with the program. Ultimately, the benefit is, again, protecting the overall compliance rate in the sense of the average taxpayer that it’s a fair system.

http://www.taxanalysts.com/www/features.nsf/Features/C21A42AD927007A285257D780057410A?OpenDocument

The Swiss Government Released Q&A’s On Automatic Exchange of Information

1. The introduction of the automatic exchange of information is to be negotiated with the EU.

2. Regarding implementation of the Foreign Account Tax Compliance Act (FATCA), a Model 1 FATCA agreement should be negotiated with the United States. With the new agreement, data would be exchanged automatically between the competent authorities on a reciprocal basis.

3. Negotiations on the automatic exchange of information will be initiated with further selected countries. In an initial phase, consideration will be given to countries with which there are close economic and political ties and which, if appropriate, provide their taxpayers with sufficient scope for regularization.

4. The introduction of the automatic exchange of information with foreign countries will be conducted by means of agreements with partner countries. Moreover, implementing legislation will be required in national law. This is currently being prepared by the Federal Department of Finance and will be submitted to parliament together with the negotiated agreements. The existing legislative framework excludes the automatic exchange of information.

On October 8, 2014 the Swiss government’s Federal Department of Finance FDF issued Questions and answers on the automatic exchange of information, which provide the following:

Updated IRS streamlined filing program: snowbirds beware

On October 8, 2014, the IRS issued FAQs clarifying its amnesty programs for non-compliant taxpayers who want to catch-up on their U.S. tax filing obligations.¹ These FAQs address the recently amended streamlined filing compliance procedures, offshore voluntary disclosure program (OVDP), and delinquent information return and FBAR submission procedures.² The FAQs are not relatively enlightening, except for the FAQ on the nonresident streamlined procedures (dubbed the “Streamlined Foreign Offshore Procedures” by the IRS). After briefly summarizing some relevant general rules regarding streamlined, this blog will address the consequences of that FAQ for snowbirds who have not filed during the 3-year period for which tax returns must be submitted under streamlined and, according to the IRS, spend too much time in the United States. Ultimately, these snowbirds are ineligible for streamlined and must find an alternative way to catch-up with their U.S. tax filing obligations.
see also http://cncga.ca/wp-content/uploads/2014/07/2014-July.pdf
 http://www.robertsandholland.com/siteFiles/News/10-14_2014_Snowbirds%20Flying%20Blind%20%28MJM%29.pdf

Might there be a mess for my estate and non-U.S. spouse if I were to die suddenly before or between renouncing and filing Form 8854?

There are 2 sets of rules for income tax. One set of rules says that the United States will extract income tax from U.S. citizens and "resident aliens" on their worldwide income. It does not matter where the citizen or resident alien lives. The other set of rules says that the United States will extract income tax from "nonresident aliens". These people only pay income tax to the United States on income that comes from sources within the US. The critical thing for the taxpayer is to know what he is. If he is a citizen or resident alien, he is taxed on everything, everywhere. If he is neither a citizen nor a resident (hence, he is a nonresident alien), then he is taxed on income earned in the United States.

10 Things to Know About the Taxpayer Advocate Service

Ten Things to Know About the Taxpayer Advocate Service
1. The Taxpayer Advocate Service (TAS) is an independent organization within the IRS and is your voice at the IRS.
2. We help taxpayers whose problems are causing financial difficulty. This includes businesses as well as individuals.
3. You may be eligible for our help if you’ve tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn’t working as it should.
4. The IRS has adopted a Taxpayer Bill of Rights that includes 10 fundamental rights that every taxpayer has when interacting with the IRS:
Taxpayer Bill of Rights

• The Right to Be Informed.
• The Right to Quality Service.
• The Right to Pay No More than the Correct Amount of Tax.
• The Right to Challenge the IRS’s Position and Be Heard.
• The Right to Appeal an IRS Decision in an Independent Forum.
• The Right to Finality.
• The Right to Privacy.
• The Right to Confidentiality.
• The Right to Retain Representation.
• The Right to a Fair and Just Tax System.

Our TAS Tax Toolkit at TaxpayerAdvocate.irs.gov can help you understand these rights and what they mean for you. The toolkit also has examples that show how the Taxpayer Bill of Rights can apply in specific situations.
5. If you qualify for our help, you’ll be assigned to one advocate who will be with you at every turn. And our service is always free.
6. We have at least one local taxpayer advocate office in every state, the District of Columbia, and Puerto Rico.  You can call your advocate, whose number is in your local directory, in Pub. 1546, Taxpayer Advocate Service — Your Voice at the IRS, and on our website at irs.gov/advocate. You can also call us toll-free at 877-777-4778.
7. The TAS Tax Toolkit at TaxpayerAdvocate.irs.gov has basic tax information, details about tax credits (for individuals and businesses), and much more.
8. TAS also handles large-scale or systemic problems that affect many taxpayers. If you know of one of these broad issues, please report it to us at www.irs.gov/sams.
9. You can get updates at

• facebook.com/YourVoiceAtIRS
• Twitter.com/YourVoiceatIRS
• youtube.com/TASNTA

10. TAS is here to help you, because when you’re dealing with a tax problem, the worst thing you can do is to do nothing at all.

The Economist: Taxing America's Diaspora: FATCA's Flaws

The Economist this week has an article criticizing FATCA. FATCA, like so many tax laws written out of political emotion (in this case, an escalating anxiety over expatriates (vaguely deemend "tratorious" because, after all, American citizenship is not the Civil-Law "nationality" relationship but rather "allegiance" as in "Pledge Of") sparked by a series of articles about wealthy expatriates in Forbes starting in 1994 (Brigid McMenamin, Flight Capital: Avoiding U.S. Taxes by Renouncing Citizenship, FORBES, Feb. 28, 1994, with follow-ups in 1996 and 1999). Earlier, the SCOTUS (Afroyim and Terrazas cases) had made US citizenship harder to repudiate. Today, the user fee for renunciation has rised from $450 to $2,350. Most "reluctant Americans abroad, without assets, income or heirs in the U.S., are likely to do nothing: if their passports do not show a U.S. origin, if their spouses are not American, why bother? Why forfeit family assets for OVDP if never visiting the USA will keep them out of TECS and out of sight? The IRS is a collection agency; it is not going to send its (few) overseas attachés around hunting for citizens. And even if it did, it has no standing to prove that a person who has never claimed a benefit of US citizenship but who was born abroad of a US parent is, himself, a US citizen: that depends on facts of parental marriage and residence.
What does all this mean for asset protection?

No Social Security Number and Renouncing Citizenship

My agenda this week includes meeting with a lot of people in Riyadh who are thinking of giving up their U.S. citizenship.  For some people it is an easy decision, and for others it is painful.  Tears-in-their-eyes painful.

Here’s the problem they face.  I will cobble together a question because I have had this conversation with a lot of people this week:

I was born in the United States but my parents brought me back to Saudi Arabia when I was two months old.  I have lived here ever since and never applied for a Social Security Number.  Now I want to give up my U.S. citizenship but I know that there are lots of tax forms to file.  How can I do this without a Social Security Number?

The short answer?  You almost certainly want to clean up your prior year tax nonfiling.  The only question is whether you do this before or after renouncing your citizenship.

• If the tax cost of covered expatriate status is too high, get the Social Security Number, then fix the past, then renounce.
• If the tax cost of covered expatriate status is low enough (like zero!), renounce, then clean up the past years.

Global cost of FATCA revealed:

A new US tax law raises only $9,000,000,000 for the USA.  However the world pays $200,000,000,000 to implement that tax law. That means that 9 zeroes were made by 11 zeroes.
The 2010 Congress’ HR 2847 Jobs for Mainstream Act, a domestic jobs bill, was funded by the Foreign Account Tax Compliance Act (FATCA).  FATCA’s mechanism is to force all of the world’s banks to identify their resident customers who might be suspected of being dual US citizens or US green card holders.  The law takes advantage of US’ globally-unique taxation system, which is allowed to tax any dual citizens or US visa holders even when such persons do not reside in US.   The only two countries of the world practicing this type of taxation is the US and Eritrea.  To better understand this method, envision being born in Iowa and paying lifelong taxes to Iowa even while living in Georgia or Ohio.

A Market for Tax Compliance

W. Edward Afield III (Ave Maria), A Market for Tax Compliance, 62 Clev. St. L. Rev. 315 (2014):

It is becoming increasingly clear that, due to political realities and budgetary constraints, the IRS is going to have to attempt to enforce the tax laws by doing more with less. Current enforcement efforts have yielded a tax gap (i.e., the difference between the amount of taxes that should be paid and the amount that are collected) of roughly $450 billion annually (over 20 million homelander taxcheats). Faced with this task, one of the steps that the IRS has recently taken is to try to improve the quality in services performed by paid tax preparers, a group that historically has been subject to little IRS regulation or monitoring but that continues to play an increasingly important role in the tax system.

The US Expat Banking Lock-Out

There are no concrete figures indicating how many US expats have had, and continue to have, difficulties in opening foreign bank accounts and using other types of essential financial services, although a recent survey of expats conducted by Democrats Abroad, the overseas arm of the Democratic Party, suggests that 1 in 6 respondents have had their bank accounts shut. When extrapolated across the entire expat community of 7.8 million, these findings suggest that over a million Americans are being denied access to basic financial services.

The IRS Scandal, Day 523

There are two dogs living in the White House other than the Obamas' pet dog. The first of the two dogs is the one that eats all the homework. It has been let loose across government agencies.

The Internal Revenue Service had an encounter with the dog. Lois Lerner, in charge of the division accused of harassing conservative groups, suddenly had her hard drive crash. All her emails were gone. Then six other employees mysteriously had their emails vanish. All seven were relevant to the congressional probe of the IRS.

The emails appear not to be on any servers. They do not seem to have been backed up, or the back ups were destroyed too. The emails have simply vanished. It is just awfully convenient that they were emails involved in a congressional probe.

Once the dog finished eating emails at the IRS, it moved over to the Environmental Protection Agency. The Competitive Enterprise Institute filed a request for certain emails and text messages from or to EPA administrator Gina McCarthy. According to the Washington Times last Wednesday, the EPA now says thousands of text messages related to Ms. McCarthy have simply disappeared. Her emails too are gone. The Competitive Enterprise Institute and the EPA are involved in a lawsuit, making the disappearance of the emails even more serious.

OVDP and Streamlined Procedure.... Am I Non-Willful ?

The are two problems:
1. Coming into compliance
2. Living in compliance
The second problem is worse than the first.

a summary from earlier posts :
http://taxlitigator.com/wp-content/uploads/2014/10/Streamline.pdf

The progression and evolution of the so called “IRS Amnesty” programs that began in 2009

2009 – IRS creates the OVDP program of 2009. Half way through the program, they engaged in the “bait and switch”. Tax lawyers had believed that people could enter program and argue “reasonable cause”. IRS “shuts” down “reasonable cause arguments. Also, IRS discovers PFICs giving them a new vehicle to terrorize Americans abroad.
2010 – In March of 2010 Mr. Obama signs FATCA legislation in law. The stage is set for “FATCA Hunt” – the hunt for Americans abroad.
2011 – IRS remakes OVDP as OVDI making it clear there is no “agent discretion” in calculating penalties without an “opt out”.
Tax lawyers, accountants and media encourage innocent Americans abroad to enter OVDP.
OVDI ends in September 2011.
December 2011 – IRS release the infamous December 2011 FS. For the first time since 2009, the IRS notes that “reasonable cause” arguments are available. A Christmas present from the IRS that was ignored by the “cross border professionals”. At this point, it was difficult to know what to do. Americans abroad had a compliance problem and not a tax problem.
January 2012 – IRS brings back the OVDP. Basically the same as the 2011 OVDP with higher penalties (25% to 27.5%). 
September 2012 – IRS introduces the “Streamlined Compliance 1” program for ONLY Americans abroad. People were and continue to be wary of the program. (September 1, 2012 – July 1, 2014)
June 2014 – IRS introduces modifications to both Streamlined Compliance 2 and OVDP. The bottom line appears to be that penalties but not tax will be waived.
October 2014 – IRS “clarifications” to Streamlined 2

Paperwork and Punishment: It’s Time to Fix FBAR

Allison Christians argues that the U.S. Foreign Bank Account Report regime is excessive and offers suggestions to narrow its scope and ease compliance burdens.
http://taxprof.typepad.com/files/76ti0147.pdf

Green card relinquishments since 2010, when FATCA was enacted:

2010: 19,545 
2011: 17,267
2012: 17,775 
2013: 11,185 (estimate)

These statistics would presumably not reflect the number of green cards relinquished by mailing of the card along with a letter of relinquishment to the nearest US consulate or to the United States Citizenship and Immigration Services (former INS) or “informally” abandoned green cards.

Income Tax Return Extension Until December 15, 2014

If you are an American living abroad and sweating the October 15 tax filing deadline for your 2013 income tax returns, there is a possible piece of relief. You may be able to qualify for a further extension of time for filing your tax return — to December 15, 2014.

New IRS Guidance for International Taxpayers

http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-Outside-the-United-States

·         http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures-for-U-S--Taxpayers-Residing-Outside-the-United-States-Frequently-Asked-Questions-and-Answers

http://www.irs.gov/Individuals/International-Taxpayers/U-S-Taxpayers-Residing-in-the-United-States

·         http://www.irs.gov/Individuals/International-Taxpayers/Streamlined-Filing-Compliance-Procedures-for-U-S-Taxpayers-Residing-in-the-United-States-Frequently-Asked-Questions-and-Answers

http://www.irs.gov/Individuals/International-Taxpayers/Delinquent-International-Information-Return-Submission-Procedures

·         http://www.irs.gov/Individuals/International-Taxpayers/Delinquent-International-Information-Return-Submission-Procedures-Frequently-Asked-Questions-and-Answers

IRS Examinations Decrease Due to Staff Cuts

The Treasury Inspector General for Tax Administration (TIGTA) released its annual report on IRS compliance trends on September 12, 2014.
Individual income tax return examinations conducted by the US Internal Revenue Service decreased in 2013 for the third year in a row, falling to USD1.4 million or 1 for every 104 tax returns.
Just over 80% were done by correspondence, with only one of every 541 returns being examined in a face-to-face interview. The number of estate return filings more than doubled, although estate return examinations decreased by 14% .

Just in case if FATCA and FBAR is ruled to be unconstitutional one might want to make sure the statute of limitations for general claims against the Government does not expire so that impediment to having FBAR penalties returned would not exist.

A statute of limitations is the deadline for filing a lawsuit. Most lawsuits MUST be filed within a certain amount of time. In general, once the statute of limitations on a case “runs out,” the legal claim is not valid any longer.  
When you sue a government agency, you first have to file a special claim (called an "administrative claim") with the government office or agency before you file in court. You have to use the government’s form to file the claim. Claims against government agencies: You must file a claim with the agency within 6 months (for some cases, 1 year) of the incident. If the claim is denied, you can then file your lawsuit in court but there are strict limits to when.
After you file your claim, the government has 45 days to respond.  If the government agency denies your claim during the 45 days, you have 6 months to file a lawsuit in court from date the denial was mailed or personally delivered to you.  If you do not get a rejection letter, you have 2 years to file from the day the incident occurred.  But do not count on having 2 years to file your claim.
The statute of limitations for government claims can be complicated to figure out.
Government Code sections 912.4, 912.6.
Government Code section 945.6 (a)(2).

FATCA ‘Tormenting’ Taxpayers, Olson Says

By the time lawmakers and taxpayers have figured out whether the Foreign Account Tax Compliance Act was worth the trouble, it might be too late to undo any damage, National Taxpayer Advocate Nina Olson said October 7.

“However much I’ve tried to figure out what on earth [FATCA] means, and the consequences of it, I have no idea,” Olson told a luncheon audience at the Securities Industry and Financial Markets Association FATCA Policy Symposium in Washington.

“This is a piece of legislation that is so big and so far-reaching, and [has] so many different moving pieces, and is rolling out in an incremental fashion . . . that you really won’t be able to know what its consequences are, intended or otherwise,” Olson said. “I don’t think we’ll know that for years. And by that point we’ll actually be a little too late to go, ‘Oops, my bad, we shouldn’t have done this,’ and then try to unwind it.”

How will the IRS collect tax and penalty assessments against former USCs and LPRs who live exclusively outside the U.S.?

This is a practical problem for the U.S. federal government who has laws that extend far beyond its borders.  See, for instance, HUGE NEWS – China has “Reached an Agreement in Substance” for a FATCA Intergovernmental Agreement (IGA) – its Affect on USCs and LPRs Living in China and Hong Kong
However, the limits on the enforcement and collection of taxes overseas, beyond U.S. borders is more problematic for the government.  Some of the tools at its disposal are as follows:

• Enforcement at the entry at the border (e.g., at points of immigration entry at U.S. airports and border crossings in Canada and Mexico).  See an earlier post that discusses the TECS database and its usage by the Internal Revenue Service in U.S. Enforcement/Collection of Taxes Overseas against USCs and LPRs – Legal Limitations

• Limited enforcement authority via income tax treaty.   For all practical purposes, it has been nearly impossible for the federal government to use tax treaties to enforce U.S. civil tax judgments against overseas assets of individuals who also reside outside the U.S.

More on this topic will be discussed as case law and policy develops.  For now, this may be the weak link in the global enforcement efforts of U.S. law that imposes worldwide taxation on worldwide assets of U.S. citizens residing overseas.
http://tax-expatriation.com/