IJ’s Opt Out Resolution

Some of you will remember IJ from Brock.   IJ has had a good “Opt Out” resolution with IRS.

IJ is a Canadian who moved to US and was not aware of his requirement to file FBAR for his Canadian RRSP and other Canadian assets.  IJ’s Great Opt Out Result is posted at Jack Townsend’s blog.

Could it be there really are some “good willed” folks at IRS, as Steven Mopsick likes claims?

 

18 thoughts on “IJ’s Opt Out Resolution

  1. Christophe

    There was a comment on Jack’s blog from another person whose facts were similar to ij’s situation, opted out, and the IRS maintained the inlieu of penalty. Bottomline, the incertainty is definitely there and a lot of it is luck. I would be so interested in getting data on people getting audited without having gone through OVDI. Are they treated worse or similar to opt outs like Jack seems to infer.

    http://federaltaxcrimes.blogspot.com/2012/09/a-great-opt-out-result-irs-gets-good.html#comment-680343170

    FinishedAtlLast

    I finished my OVDI opt out process, received my result and signed my closing form 1-2 weeks back. My background is likely not very different from ij, immigrant to the US, small accounts (about the same size as his), small offshore income, no entities, perfect tax record otherwise etc. In fairness, I have lived for a greater period in the US and possibly have a few more negatives than him. My examiner did recommend no penalties for me, but it was rejected by the opt out committee (or at some level of the hierarchy). My original penalty was not that large (small account sizes, but just > 75K). There was one particular item that I disputed in the in program penalty, but they could not adjust it within the program. On my opt out, that particular item was removed (it was not a lot of money). Taxes, interest for closed years are also refunded (again, not a lot of money). The rest of the in lieu penalty stays. My resolution was clearly not as satisfactory as ij’s, but here are my general comments

    The IRS was not draconian. We all know that the non willful penalty is ridiculous if applied per account/per year. Even the 10K/year penalty would have been higher than my final penalty. On the other hand, they were not too generous either, since they did apply the rest of the penalty minus the disputed items. Outside the program, there is some flexibility, but there is not much extra transparency. My examiner was very inexperienced with FBAR matters. Its possible that his inexperience contributed to his recommendation being rejected. I cannot say that their rejection of reasonable cause was totally unjustified, but it does seem like they simply thought I would be content if the disputed item were removed and left it at that. I could possibly have continued in Appeals, but the legal costs and time and energy were not justified for the amounts involved. Indeed, some might have said that my initial decision to opt out (largely occasioned by annoyance over the disputed matter) was somewhat quixotic.

    My advise to people considering opt out is to be hopeful, but also realistic. A lot depends on how good your case is, but there is likely to be some aspect of luck of the draw either. And you have to know when to fold them. But for people facing the kind of ridiculous situation that Just Me did (whole house included in penalty), this is an option.

    Reply
  2. jefferson d. tomas

    This result of IJ is another example of how arbitrary the process can be. There are not one or two clear paths through the maze. Despite the results of IJ, I believe that many will remain in the shadows, unsure of what will happen to them.

    Reply
  3. ij

    Thanks all, the process in opt-out was surprisingly fast. IRS gives 30 days to make a final decision. In my case, it only took IRS less than a month to resolve.

    My OVDI process was about 10 month after first contact by an agent. There was a 3-4 months pending top level ruling on RRSP. Another 2-3 months for IRS to check my calculation on PFIC. So over all, the process seems faster — because my case was very simple.

    Reply
  4. Cornwalliscal

    The first priority of a civil servant is to cover his/her ass. The second priority is to preserve his/her job. The priority of a higher up is to increase the work/no. of employees in his/her sphere. That way he can justify an increase in pay grade. Why wouldn’t anyone in the IRS milk this for all it’s worth.

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  5. Sally

    Yes, there are good-willed people at the IRS. The agent I dealt with was nice and reasonable, but for a long time was not permitted by management to treat me fairly. And the person from the Taxpayer Advocate office who helped, was an ex-agent and certainly good-willed too.

    I think the upper level management was just desperate for a “success” and did not care a whit about us minnows. We just padded the numbers of the “15000 felons” they were bragging about catching. Essentially politicians.

    They were also initially totally unprepared for dealing with “furriners”: at the beginning the people handling our cases were unable to place calls outside of the +1 countries (US and Canada). Not very professional for a group supposedly dealing with supposed crimes occurring outside the US. (It was when I learned that that I began to worry. If the Keystone Kops are after you, things may not go well…)

    Reply
    1. SwissPinoy

      This is mad. It’s insane! If one wants to communicate with people in the world, then one should, at the very least, be able to call them! For this, the US government should make an official public apology to the American people, apologizing for its own endless stupidity.

  6. saddened

    So happy for Ij, what a terrible time he must of had. He should be paid back $$$$ for all his agony and mental suffering..Actually we all should..

    Reply
    1. SwissPinoy

      I don’t ask for much. I would be happy if my “representation” responded, showed concern or took action to improve the situation for Americans living abroad, such as accepting our address where we live. Yet, sadly, they can’t even do that. 🙁

  7. Hazy2

    I was happy to hear of IJ’s successful resolution.

    It appears to me that the policy makers at the very top of the IRS have blinders on that so limit their vision that are are incapable of seeing the larger picture i.e. that a vast amount of time and resources are being wasted on the overwhelming humongous majority of USPs abroad who owe little or no tax and whose omission of FBAR reporting was due to pure ignorance of the requirement rather than a willful attempt at tax evasion. The top IRS people just can’t seem to design an efficient method of only catching the whales with no by-catch.

    Reply
    1. SwissPinoy

      The question that I have here is if it is the top of the IRS which is the problem, or are they being pressured by Congress, or are both pressuring each other, or is it the top of both which is the actual problem? Who is actually responsible for this and what can be done, if anything, other than renouncing?

    2. bubblebustin

      @SwissPinoy
      Klausterfokken. Ron Paul and Libertarian candidate Gary Johnson have the right solution: abolish it.

  8. bubblebustin

    Well, if there are nice people at the IRS (and I do believe there are) they aren’t those making the amnesty rules and don’t represent the face of the IRS. No matter how nice they are, the damage has been done, and continues to be done with things like the new streamlined compliance procedures. As long as the IRS takes the stick approach in encouraging compliance they will never achieve their objective. The ‘terrorize and switch’ approach is a quite bizarre, and is indicative of a organization that’s in conflict with itself, or at least has the appearance of being. Neither is good for inspiring trust and confidence in them.

    Reply

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