The Little Red #FATCA Book – Review, Identify & Report on U.S. Persons How #FATCA affects the non-US World

reposted from the citizenshipsolutions blog

As many of you know, the long-awaited #FATCA hearing will take place three weeks from today. This is exciting and followed by the news that Congressman Mark Meadows will reintroduce his repeal FATCA legislation. Closely matching is the effort of Nigel Green & Jim Jatras. The recent letter, endorsed by major think tanks, etc is here . We still await the hoped-for tax reform. The fate of those who have not yet chosen whether to become compliant and/or renounce hangs in the balance. Regardless of the outcome(s), our direction will become much clearer in the next little while.

There are so many aspects to #FATCA and how it affects the lives of expats, I suspect it is impossible to be aware of them all. One of the best things we can do, as “ambassadors” is to make sure we are thoroughly conversant with all aspects of it as we discuss it with our family and friends, on online articles and blogs.

j fatca forumJohn Richardson has long been writing about this and has re-organized his “Little Red FATCA Book.” It is likely the most complete account anywhere. I will be reposting it on all the appropriate websites, blogs and Facebook Groups/Pages. Please, share this as widely as possible. Convincing Homelanders, as impossible as it seems, will go farther than perhaps anything else, in garnering support from Congress to rectify this horrid situation. Please, don’t give up, go out and comment everywhere and make sure you know your facts!
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The “Little Red FATCA Book” is a collection of posts that I created over an 18 month period. I have decided to collect the individual posts and organize them in one place. I have grouped the individual posts into three broad chapters which I will call Chapter A, Chapter B and Chapter C. This is a “work in progress”. Some of the posts are incomplete.

FATCA which is essentially the enforcement mechanism of U.S. “Place of Birth Taxation” is a controversial topic. Feel free to post your thoughts and comments.

John Richardson

More at….. citizenshipsolutions blog

Shu Yi Oei: The Offshore Tax Enforcement Dragnet via Allison Christians

reblogged from Allison Christians’ Tax, Society & Culture with permission

Shu Yi Oei (Tulane) has posted an important new paper on U.S. offshore tax enforcement, of interest. Here is the abstract:

Taxpayers who hide assets abroad to evade taxes present a serious enforcement challenge for the United States. In response, the U.S. has developed a family of initiatives that punish and rehabilitate non-compliant taxpayers, raise revenues, and require widespread reporting of offshore financial information. Yet, while these initiatives help catch willful tax cheats, they have also adversely affected immigrants, Americans living abroad, and “accidental Americans.”
This Article critiques the United States’ offshore tax enforcement initiatives, arguing that the U.S. has prioritized two problematic policy commitments in designing enforcement at the expense of competing considerations: First, the U.S. has attempted to equalize enforcement against taxpayers with solely domestic holdings and those with harder-to-detect offshore holdings by imposing harsher reporting requirements and penalties on the latter. But in doing so, it has failed to appropriately distinguish among differently situated taxpayers with offshore holdings. Second, the U.S. has focused on revenue and enforcement, ignoring the significant compliance costs and social harms that its initiatives create.
The confluence of these two policy commitments risks creating high costs for the wrong taxpayers. While offshore tax enforcement may have been designed to catch high¬-net-worth tax cheats, it may instead impose disproportionate burdens on those immigrants and expatriates who have less ability to complain, comply, or “substitute out” of the law’s grasp. This Article argues that the U.S. should redesign its enforcement approach to minimize these risks and suggests reforms to this end.

The paper provides a thorough review of the panoply of offshore enforcement programs and mechanisms and documents the harms of their dragnet approach, especially on the most vulnerable and least likely targets. A significant contribution to the literature.

 

Collective psychotherapy – U.S. citizens outside U.S. – Not what they take from you, it’s what they leave you with

cross-posted from renounceuscitizenship blog

Going back to a general thread from a few weeks ago – on law and morality – this post speaks more to the effects of the law when it is not rooted in morality. On one level, an apologist might claim that “doing one’s duty” and “paying one’s share” is moral and is necessary to maintain funding and order in a society. However, when such a law is applied to those who live outside that society, as we all know from experience, unexpected conflicts, resulting punitive actions and penalties tend to denigrate the quality of life. We are not talking about “quality of life” amounting to physical comforts or financial wealth. By “quality of life, what is referred to is mental stability, emotional trustworthiness and the ability to move through difficulties with a sense of direction and confidence. When these parameters are stifled by confusion/lack of clarity of what is expected, and ridicule and negativity is directed toward those affected, the result is a not an issue of lack of compliance but rather, wrongly imposed requirements that simply make people anxious, immobilized by fear, depression and a general inability to adjust to the situation. How this can be justified when those same people ARE compliant in the society where they live, strikes many as simply being immoral.

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The Wisdom of Moe Levine Moe Levine (not that I ever met him) was considered to be one of America’s greatest trial lawyers. Although he died in 1974, his wisdom lives on his book (appropriate called) “Moe Levine on Trial Advocacy“. He (legend has it) was a master at delivering the closing statement in his jury trials. When arguing for a severely injured plaintiff he (according to the commentators of his time) would tell the jury (referring to a badly injured client):

“It’s not what you take from them it’s what you leave them with.”
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What Lessons Can Be Learned from the Sad Stories of “IRS Compliant” Australians Shaun and Mary?

cross-posted from Brock

by Stephen J. Kish

Karen, on her fixthetaxtreaty.org blog, just posted the sad stories of Australians Shaun and Mary, who did their best to be tax compliant with a foreign country (United States) and then ended the relationship by renunciation of U.S. tax citizenship.

The emotional and financial damage done to these Australians was a direct result of their decision to enter or maintain tax compliance, to the best of their ability, with a foreign state.

We have heard similar stories before, but are there any lessons to learned regarding, for example, whether citizens-permanent residents of countries outside the U.S should ever enter into “IRS tax compliance”?

If Shaun and Mary could go back in time, would they still have entered into the IRS tax system? Is $50k plus emotional distress (post-traumatic stress; stress exceeding that of chemotherapy) a reasonable tradeoff for the renunciation of, divorce from, US tax-citizenship?

What would they now recommend Australians to do in the same situation?

For those persons abroad who do want to become IRS compliant, how could they ever find a trustworthy tax compliance expert? Can tax compliance persons purporting to be cross-border experts be taken to task for their incorrect advice? Does this ever happen?

Is it really possible for any human living outside the U.S. to become IRS tax compliant?

Is it ever ethical (e.g., in this post) to advise the unknowing of their tax “obligations” to a foreign state and by doing so cause them harm?

USCitizenAbroad comments: “It is painfully obvious that Shaun would have been far better if he had NEVER entered the U.S. tax system. This is hindsight. He could never have understood where this was going…” and “…this story is a sad sad reminder that those who have been most hurt by the predatory and immoral practice of U.S. “place of birth taxation” are the ones who tried hardest to comply…”

Karen says: “…the majority of the people profiled on the Our Stories page have already renounced/relinquished. Those that haven’t yet renounced likely will, eventually.* From all the people I’ve spoken to here – including some who are not comfortable sharing their story (even anonymously) – the ones who suffered the most were the ones who tried hardest to comply…”

Shaun’s Story:

I have lived solely in Australia for 3 decades. I kept my US Citizenship thinking that there was no drawback from doing so. I was told I had to continue to file US Tax returns and I would just send the US based CPA my Australian Tax Return & they would send me a huge document saying “No Tax Due” & I would sign it. It was incomprehensible to me how the Australian Tax return was converted to the IRS Tax return. I just thought I would never owe anything due to the tax paid in Australia.

This went on for many years until one year the USA Accountant said I had a huge Tax bill. I couldn’t understand this as all of my US Returns never owed a cent, but it seems that they had been preparing my returns incorrectly and all my deductions in Australia were not deductions in the USA. This was the start of my long intense problem that lasted from for several years

I was never told by the USA CPA that my Self-Managed Superannuation account here in Australia was not considered by the IRS as SUPER, it was considered a Foreign Trust and hence had been reported incorrectly; so all of my Super Savings here & interest income in it was treated by the USA as STRAIGHT INCOME and taxed as such going back 8 years. I lost all the benefit of my Super Savings. Then because the US CPA didn’t fill out the single page Foreign Trust Form the IRS Penalised me 30% of the total amount of my Super Balance. I had hired very good tax lawyers in the USA to handle all my dealings with the IRS & instead of getting me a fair result they were predatory in their billing & let things drag on & on.

The other large issue was all of the money I gave to Charities in Australia over the 8 years were not allowed my US Tax returns because “They were not recognised as USA Approved Charities”. This is another issue that the US CPA never advised me about. So between losing my SUPER & my Charitable deductions I owed a huge sum to the IRS, then add on USA Tax Lawyers & Australian Tax Lawyers fees.

I was so distraught ( I was also being treated for a blood cancer at this time ) I decided to give up my USA Citizenship & all the hassles that entailed. The day I had to give that final statement I was in tears at the counter at the US consulate in Sydney, I felt I had been betrayed & abused by the US. Then I had to file the final IRS form 8854 which again looks at all your assets as Capital Gains at the value the day you gave up your citizenship.

This whole situation was like having a second full time job, the lawyers who were supposed to help & protect you become part of the problem. If I could have chosen between Chemotherapy & dealing with this legal situation, I would have chosen Chemotherapy because at least you would know when the end would happen & the worst thing would be that you could die. With the legal matters months turn to years & I felt totally helpless that it would be resolved before I died.

I made one mistake & was willing to take responsibility for that & I did but all the above things I mentioned were so unfair that I couldn’t cope with it.

So I feel a huge responsibility to help publicise this situation so that other people don’t suffer as I had to for nearly 5 years. Australia is supposed to be the USAs’ best friend; how can best friends treat each other like this?

– Shaun”

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What do you Think of the Penalties in These Three Cases of Unreported FBARs ?

Ty Warner

Ty Warner
Ty Warner, founder/owner of the Beanie Babies line, was sentenced in July 2015 for tax evasion.The panel of three U.S. District Court judges gave him 2 years of probation and 500 hours of community service. The sentencing guidelines ranged from 46 months up to a maximum of 57 months. He agreed to pay back taxes and interest of $16 million as well as a $53.5 million penalty (the full FBAR penalty of 50% of the balance of the highest account-$107,000,000). According to Melissa Harris (author of this article that appeared in the Chicago Tribune, July 15, 2015) Warner’s sentence was “a punishment that reduces evading millions in taxes to a speeding ticket,” and that the sentence “flies in the face of both reason and justice”.

Warner had an estimated net worth of $2.5 billion, and was the 209th richest American.   According to Janet Novak of Forbes:

He admitted that around Jan. 31, 1996, he flew to Zurich and deposited about $80 million at UBS AG, instructing that no account statements be sent to him in the U.S., and that he kept the account secret until November 2007. During that period he failed to report at least $24.4 million in interest income on the account to the Internal Revenue Service, evading at least $5.6 million in taxes. He also failed to file with the Treasury the required annual “FBAR” report on his foreign accounts

What beggars belief is that Mr. Warner never provided any explanation for:

  • why he opened the account
  • the origin of the funds
  • audits of his books & records show the funds did not come from his company
  • his personal domestic accounts showed no signs of the origin of the funds

In fact the evidence suggested that the funds may have been pre-tax payments of some sort. To this day, the extent of his willful tax evasion is in reality, unknown.

So why did Mr. Warner get off so lightly? Was it because his lawyer Mark Matthews used the Olenicoff Defense?
Was it because his creation, the Beanie Babies line of stuffed toys, was just too cute for anyone to believe he was guilty of such evasion?

Peter Henning a Wayne State University Law School Professor and co-author of ‘Securities Crimes ”said in an interview, “I don’t want to say anything goes,….Clearly you can’t consider race or wealth. But you are looking at character. That is something judges can take into account. The question is how much should it weigh into the decision?”

This is where Mr. Warner hit the jackpot. He received 70 letters of support from friends, employees and recipients of his charity, actions which had nothing to do with the charges and only someone with money could do.

U.S. District Judge Charles Kocoras (of the panel) based his sentence on:

…..a reading of 70 letters, Kocoras found that “Mr. Warner’s private acts of kindness, generosity and benevolence” were “overwhelming,” with many occurring before he was under investigation and, in Kocoras’ words, motivated by “the purest of intentions.” Most were done “quietly and privately.” The judge concluded: “Never have I had a defendant in any case — white-collar crime or otherwise — demonstrate the level of humanity and concern for the welfare of others as has Mr. Warner.”

So a man guilty of many years of tax evasion, who did not even account for the origin of the account nor any records of it, received an incredibly light sentence based upon support from his family, friends and beneficiaries of his kindness. Where is the law here?
 

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