A real life story of a “US Person” chased out of the US

I believe this is the worst story I have heard yet. Unbelievable. I don’t know if this person will be available for contact but I am replying with our website in case he/she would like to talk with all of us.

Courtesy of Phil Hodgen site:

http://hodgen.com/irs-chases-another-person-out-of-the-usa/

I am a foreigner that lived and worked in the US under a work permit. (Not even a green card)

I struggled the past years to make a living, because I was self-employed under an employee that had few jobs, and under the rules of a work permit, you can legally work only under your US employee, in the US.

In 2009 I learned via the Internet about the fbar requirements, and the vdpi.

My tax accountant that I contacted about this said that it would have nothing to do with me, as I am a foreigner and not an American citizen.

I learned again through another Internet article, that also America “persons” are required to voluntarily disclose.  I checked the definition of an America “person” and realized, that is me.

I emailed my tax accountant again, forwarded again the article online, and he said that as long as my home money was just sitting there. That I don’t need to file myself to the programme. He was also the one that had never checked the box in my income return that I had assets in my home country. He had never asked me if I have one.

I called the IR to verify, and filed myself voluntarily, after they said I must do so, to come ‘clean”, and after they promised that a person like me would not be what they are looking for and I would be treated fairly.

Since than I went through hell. I learned that they would take 20% of the highest amount of my assets I ever had on my home countries’ bank account (which I opened when I was 20 years younger) away from me. And an additional 80 000 Dollar for the 8 years I hadn’t filed the fbar. Even so I was not aware about any of these requirements.

I was also not aware that in the vdpi it didn’t matter that I had that money on my home account before I even put a foot in this country, and that this money was mine, as I had paid all taxes due, in my country, where I had earned that money with hard work!

It also didn’t helped that I could proof that even my tax accountant had no idea about these requirements.  So how should I know, not an expert in tax law?

I learned that in the vdpi each sub-account back home was defined as an account, counting again with it’s highest value.

In my case, I had over the years many sub-accounts, for better interest rates,  at the same bank, upon advise from my bank to cover the bank fees (interest income tax for that filed in my home country). Those sub-accounts amounts went back, for example after 2-3 month being fixed, back into my main account Meaning, even so I had only 50 K in its entire, in some years it counted as if I had 250K, because I had “several (sub) accounts” that are considered by the IRS as individual accounts. So, in on year my assets have been as high as 250K. 20% of that I was to pay to the IRS.  Even so I had only 50K in savings in reality.

I went through psychological torture and hell because of the following:

– I found nobody to advise me.

– I was poor, because I had for 2007-2009 no real income because of the economic crisis that started earlier than 2008 in my job-field, (remember it was illegal for me to work elsewhere and not under my employee that provided for my work-permit, but had no jobs to forward to me)

– The assets I once had back home on my account I had long time already wired to my US account and had lived from it, paying rent, and food and transportation.

– I spend 12 hours per day, distressed, desperate, for 2 years to search on the internet for help and information, to find CPA’s, and Tax lawyers

– I tried to find others in my situation, help groups, forums that share real information, only to learn that there wasn’t any useful, and those few with email addresses that I contacted seemed to be too scared to be “investigated or caught “ via the spying tools of the powerful US / IRS mechanisms that we all know violate privacy rights. That was the response that I got, if at all.

– I didn’t had the 20 to 30 000 retainer fees the Tax lawyers demanded to take on my case

– The lawyers that I consulted gave me information where I knew after 10 minutes that I knew more about the vdpi and penalties than they do. I had to pay them, even so I would not know where from, my last savings dwindling

– The IRS had no information, cruel and heartless I was left alone and scared

– I was offered to opt-out. I researched about that, and realized that people in similar situations like mine had been hit even harder with more penalties and costs than under the vdpi.

At the end, I realized one thing. I am poor. I can’t pay lawyers. Didn’t find lawyers anyhow. This is too big for me to handle, the costs would ruin me to a point that I would never ever in my old age recover. That I am not willing to pay for penalties so absurd, so unfair and therefore in my view really criminal.

This vdpi was a high price for me to pay,  my true love for this beautiful,  special land,  and it’s people,  remains intact, but my faith in the state is broken. I turned my back to the US.

I left the US, and will never go back. Now I am still in stress, because I don’t know how save I am from the claws of this country.  So, my life has been partly ruined, because I lost my live in the US, many dreams, and now I am feeling as if I am still not save, even outside, and again I search for information, and it is difficult, again I seek advise in regards to what the US could now do to me, might do based on my case, and what best I should do to be protected from them.

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50 thoughts on “A real life story of a “US Person” chased out of the US

  1. @nobledreamer,
    1. This should put to rest, once and for all, the commonly held idea that if you come to the US on a work visa, even though you do not become a green-gard permanent resident, all of these US tax rules will apply to you.

    2. This should be obligatory reading for any person contemplating seeking a work visa in the US. A tax trap awaits them.

  2. I don’t think these offshore tax rules apply to non-citizens, regardless of what the IRS says.

    Second, he should know to keep his mouth shut regarding offshore income and assets.

    It is not just a problem with the ridiculous laws, its also the problem that some naive people follow them.

    So naivete is to blame here, as in most of these minnow cases.

  3. @M

    With all due respect, the statement “I don’t think these offshore tax rules apply to non-citizens..”, is simply not accurate. Immigrants who live and work in the US are among the largest communities negatively affected by FBAR, FATCA. Simply because they have accounts in their home countries. And as Roger as pointed out, many of those coming to the US are completely unaware of the “tax trap that awaits them.”

    Why do you feel “he should know to keep his mouth shut…” People are entitled to their honesty (and respected for it) and to expect a government (with the reputation of the US, as compared to say, North Korea, Russia, etc) to have reasonable laws and policies. Some parts of the world are not yet infected with the sort of cynicism that pervades many of the so-called “advanced” countries.

    There is nothing criminal about being naive. In fact, the large majority of the people on this site knew nothing of these rules either. I do not have the impression that most of these people are naive and the unifying factor is sympathetic support.

    Even though I am no longer a USC, I am ashamed of the way “my” government has treated this person. There is no excuse for it.

  4. @Roger

    This site largely exists due to the resistance demonstrated toward a few posters who felt a responsibility to warn those at a related forum, of the tax implications they would incur upon arrival to the US. I often wonder, what else we can do to help those who are in our shoes, but this adds a whole separate dimension.

    @all, sorry for the many typos.

  5. @noble

    If you were surrounded by thieves, would you be “honest” about how much money you have?

    Use some common sense please.

    The fact is that the world if full of thieves and the US govt is no different. To blame the thief for stealing your money is secondary to you being ignorant that he is a thief and you being stupid for telling him you have money.

    There is a proverb:
    Fool me once, shame on you.
    Fool me twice, shame on me.

  6. @M

    Here in Canada, we are not accustomed to thinking of the government as a thief. Maybe that’s because the Canadian government does not behave like a thief. We pay high taxes but we’re also well taken care of.

    Assuming that the so called greatest nation on earth would at least be equal to Canada in terms of honesty is probably our biggest mistake.

  7. @M

    Perhaps you could offer some compassion rather than berate a person who clearly has been taken advantage of.

  8. Yes M we offer compassion and comfort here to people who’ve been victimized by the US government. If they want to be berated there’s a million other websites they can go to.

    By your standards we are all naive and deserve what we get. Your world view may protect you from the predatory US government but it also has limitations. Not being able to trust can cause you alot of problems in life and will limit your growth potential.

  9. I do have compassion. I have been counseling these immigrants for many months now “pro bono”.

    That the IRS is a thief is easy to understand. To make them act accordingly is much harder.

    There are some very deep cultural barriers why they cannot follow my advice.

    I think Indians see the US as a colonial overlord, which they are required to pay tribute to, regardless of whether they are thieves or not. After all the British were thieves too. To contradict it meant punishment so they avoid it.

    And Chinese have a centuries old Confucian respect and obedience for authority which underlies everything they do. To not obey is to deny their identity and culture as Chinese.

    Latin Americans have no problems. They already equate “La Migra” with SS Nazis. Besides, 1/2 the US was theirs to begin with. All the place names are already in Spanish.

    European immigrants also have no problems. They are of the same race as the thieves.

    But, like the proverb says:

    When in Rome, do as the Romans.

    Unless the immigrants can find a way to adapt, they will suffer and leave. Some will not be able to make it…

  10. @M

    clearly, the person who wrote this story was an immigrant.

    And, I did tell the IRS/US govt, thieves that they are, what I have via 1040’s and FBARs. To not do so would be to leave my son responsible for paying anything I could owe, after I’m gone. I believe that exhibits common sense.

  11. This is so unbelievably outrageous that I have trouble believing it is true. Assuming that it is:

    1. Some lawyer should step up and take this on pro bono case. Do we have any on this discussion board?

    2. Assuming it is true, it strongly suggest that fair treatment in OVDI is impossible.

    3. Even if this were not true, the fact is that most people believe it. This means that people do NOT believe they can get fair treatment from the IRS. At the end of the day (although it may be a long time), the IRS cannot function with being trusted by the professionals and the taxpayers.

    4. Under its own rules the IRS can’t “double count” $50,000 into $250,000. Hence, the penalty base should only have been $50,000

    5. The whole point of the 20% is to be “in lieu” of other penalties (including the FBAR penalties). So, the $80,000 in FBAR penalties should not be applicable.

    6. This is 2009 OVDP so, as we know, if you didn’t get in before the magical March 1, 2011 date, “reasonable cause” would be considered only on an “opt out”. Would be interesting to know what the relevant dates were for him.

    7. If this is true this would seem to establish a new low, even for the IRS).

    8. Again if this is true, it will certainly discourage compliance.

    This is NOT going to turn out well for the IRS and the U.S. Its citizens will want to renounce and people will no longer want to immigrate there.

    Renounce and rejoice!

  12. @ all,

    Excellent discussion from different perspectives.

    Brings to mind a sign in Ron Paul’s office that reads: “stop stealing, the government hates competition!”

  13. That immigrant’s story is so sad it reminded me of overly dramatic Indian movies our father used to make us watch when we were children.

    Back then Indian movies in Canada were only seen on TV at 2AM on a Saturday. Our father would wake us up to watch them so we wouldn’t lose our Indian heritage. I’d go back to bed crying because they were so sad.

  14. @renounce

    You may have a point. There are changes in the quality of the phrases-some have poor grammar and others are perfect. It never occurred to me as a possibility that it wasn’t real – I figured Phil H. would not put it up if he had reason to believe it was not true. I don’t think there is a way to check as it’s too obscure a situation for snopes, etc.

    The writer said he/she had already left the US (so no need for any pro bono) and also, never really specified actual penalties but spoke of “what he/she learned” and so on (to address your comments about the validity of the amounts mentioned, etc)……by the end, it sounds like no payment was made and the writer left the country, afraid to return to the US.

    The only thing I wondered about was the statement that the funds in the home country had already been moved to the US and spent since there was no employment. I assumed, not given a total time line and the grammar, that it was impossible to understand in great detail.

  15. @Noble

    Whether true or not, the fact that people are quick to believe it speaks volumes about the level of distrust that people have for the IRS and OVDI. This is a significant story in its own right.

    I am not saying that it isn’t true. It’s just that it’s so fantastic, that I would not want to presume it is (but maybe that’s just wishful thinking on my part).

  16. @all: in RE “Chased Out:” he says, “I had only 50 K in its entire, in some years it counted as if I had 250K, because I had “several (sub) accounts” that are considered by the IRS as individual accounts. So, in on year my assets have been as high as 250K. 20% of that I was to pay to the IRS. Even so I had only 50K in savings in reality.”
    FAQ 37 asks:
    “If a taxpayer transferred funds from one unreported foreign account to another between 2003 and 2010, will he have to pay a [x] percent offshore penalty on both accounts?”
    The answer given is: “No. If the taxpayer can establish that funds were transferred from one account to another, any duplication will be removed before calculating the [x] percent penalty. However, the burden will be on the taxpayer to establish the extent of the duplication.”
    Was the person able to show the duplication? Was he able to produce the bank records? If so, someone at the IRS made a real bad mistake.
    I would advise him to cut and paste this whole thread and send it directly to Nina Olson’s office in Washington as ask for advice.
    An outrage like this should not be allowed to stand.

  17. @Noble

    Also, even if this particular account is not true, there have been many stories of people having been taken advantage of in OVDP and OVDI. So, there are probably elements of the story that are true for sure for different people. One is the inability to get legal help without being able to front lots of money. To the extent that there is any justice here (which there isn’t), it is out of reach for those who can’t come up with lots of cash.

  18. @Noble

    For those who don’t know who Phil Hodgen is he is a “friend” of the site and the former head of the Tax section of the California State Bar Association. I suppose anyone can be “taken” having said that I don’t think Phil Hodgen would rank high on that list.

  19. @renounce,

    I guess I didn’t think twice about posting it because everything you have mentioned is exactly what I believe about the IRS since I came to know about all of this last fall.

    One of the reasons I renounced is the expense involved in filing – with the very real possibility of making a (costly) mistake. I also cannot afford xborder accountants or lawyers. I thought my returns were so simple that it wouldn’t be necessary. Lo and behold I realize the day before it is due, Form 3520a ($10k penalty if not done on time etc ad nauseum). I had to spend an entire day trying to figure it out, all due to TFSA being a “trust.” All the old fear and anxiety about fines etc came up again. It just isn’t worth it and since I am now used to not being upset about it, I really resent even one second feeling like that.

    So good to know that only a few forms remain and I will, as you often say, “be free!” (renounce part already done 😉 )

  20. @Noble
    @Tim

    I second what Tim says about Phil Hodgen. He is a friend of this site and has been of enormous help to those dealing with “compliance questions”. He is clearly a “class act” and I, along with others, hold him in the highest regard,

  21. There are some 30,000 minnows in OVD programs. I’ve read many of their stories on Jack Townsend’s blog, and they sound similar to his. The IRS can make up any rules they want, all in their favor, and they usually do.

    Some points:
    1) The OVD program is voluntary extortion. You can always so no to their proposed “fines”. You can always leave the program, ie “opt-out”. The problem is that you’ve given them 8 years of bank records, which they are not going to give back to you, so they can always come after you for something.

    2) And people who are meek enough to voluntarily pay fines to authorities, are not suddenly going to turn courageous and say no, to the same authority they’ve submitted to a short while ago. It is not psychologically consistent.

  22. As I said previously here….and I feel compelled, now reading this, to repeat it…

    http://isaacbrocksociety.com/2012/03/25/video-robert-wood-speaks-with-scott-drake-on-loss-of-u-s-citizenship/

    The Immigrant side of this problem and the harm that is being done them really bothers me almost more than what happened to me. Maybe it is because I have an Australian wife who has a greencard, and understood why the US system of taxation was so incomprehensible to her when I tried to explain what I had discovered back in 2009.

    I think of immigrants arriving in this country with fresh hope for the American Dream and having no idea of the tax complexity and problems awaiting them. There is no one explaining to them of the foreign reporting requirements for family trusts and joint accounts they have left back in their home countries. They have never been provided even the most basic advice about FBARS, foreign income reporting rules and now the IRS via the OVDI is quite happily taking significant portions of life savings from them, without regard to its failure to provide even the most rudimentary educational outreach. John Doe has done an excellent job pointing this out in very complete detail in this blog thread…

    http://federaltaxcrimes.blogspot.co.nz/2012/03/opting-out-2-3212.html

    Over the past year, I have heard their agony and pain of discovery many times at Jack’s blog, and while we as Expats, have ACA which tries the best they can to represent our interests with direct lobbying efforts with Congressman, I have often wondered who speaks for them? The answer, no one!

    The Expat story has had some limited journalist attention, but there has been nothing in the press about the immigrants problems. Theirs is the bigger untold and unheard story, I would bet.

    Now, you will see ij, Anon123, Moby and John Doe occasionally show up here, and one or two others to comment once in an while. But they are on the fringes mostly, and there are probably many others lurking, reading, trying to gather information on what to do, but too bashful or afraid to comment.

    They have been caught out by this IRS offshore trap, and are fearful of the financial pain that awaits them with no easy way to become compliant. I wished there was someway to better help them, but sadly, some have even lost even more of their savings by taking bad advice from practitioners whose charges to “help them” become compliant has doubled the cost as they struggle to understand and come current with the tax complexity requirements. I often wonder how many skilled immigrants are voting silently with their feet and walking down jetways and heading home as the IRS jihad continues unabated. They don’t have to renounce, and it is much easier for them return home without all the complications that Robert Wood talks about for US Citizens.

    Knowing what you and I know now, would you ever recommend to anyone to get a Greencard now, or become a US citizen? I certainly would not, unless you are truly a refugee with nothing left in your homeland, and no desire to ever reside overseas again.

  23. @Just me
    I’ve made it my job to warn those considering a move to the States of what will be expected of them. In fact, among my sphere of acquaintances, I think I’ve made more people aware of their tax filing obligation than the US government has. They should be paying me a finders fee!

  24. @Tim and renounce,

    I also respect Phil Hodgen which is one reason I posted it without questioning. I recall finding his site on the day I had the “This can’t be happening” experience.

  25. This is an unbelieveable horror story. It is hard to believe that the IRS would behave this way towards a defenseless person. I wonder if all the alien residents (green carders) in the USA are reporting the accounts that they left back hoime. And how they are doing it.

  26. @Everyone

    I just put a post on Phil Hodgen’s website asking about something called the “Sailing Permit” which I believe will be the next FBAR and will effect a LOT of Canadian who have lived temporarily in the US as resident aliens.

  27. It is interesting to notice that I am in a group of Democratic Americans Living Abroad. They all lived in Maryland before. There are 66 of them. I aksed about GBARs and FATCA e got no answer. They don´t seem to be concerned about it. Any reason why? I was expecting a lot of answers expressing distress and revolt…

  28. A Sailing Permit

    http://www.irs.gov/businesses/small/international/article/0,,id=97256,00.html

    Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits) must obtain a certificate of compliance. This document, also popularly known as the sailing permit or departure permit, must be secured from the IRS before leaving the U.S. You will receive a sailing or departure permit after filing a Form 1040-C (PDF) or Form 2063 (PDF)……

    Don’t see any listing for penalties; I guess they just assume people will be afraid and comply. And people have to swear an oath to be free of a greencard and USC’s……..and on and on it goes.

  29. One more point. The US media does not respect those who don’t fight the IRS, especially those of some means.

    Therefore this subject does not receive the media attention it deserves.

  30. @ nobledreamer

    When I left the States on my sailing boat back in 1989, there was a lot of talk about getting one of these Sailing or Departure Permits, but none of the boats that I knew of did, other than one I think who was worried that it would be something the Mexicans Port Captain might want when you arrived at your first port in Mexico. Of course, as we found out the Port Captians could care less, and no one asked to see that you had cleared out of the US, so never gave it another thought.

    However, when we went to leave Acapulco heading for the Galapagos, I was required to get the Mexican equivalent of the Sailing or Departure permit, called a Zarpa (I am not sure of the spelling), so we jumped through all the hoops to do it, as we heard again, that we would be required to submit it at our next port of call. Of course, now I have a beautiful certificate, suitable from framing, that I legally departed Mexico in compliance with all laws and taxes, but no port every asked to see it.

    You mentioning that makes me think and wonder if that is now a practice that is more closely adhered to. Wonder if Moby got one when he left. Humm..

  31. @Just Me

    I know nothing really, about this. I posted the link since Tim mentioned he thought it might be the next disaster.

    Am curious how the Mexicans determined you were compliant with all their laws and taxes?

  32. The original story doesn’t quite ring true to me. It sounds like the worst case scenario rather than actual penalties assessed.

    The penalty amounts are worded similar to ones I’ve read in newspaper articles. I truly hope it is not true but if it is, I have immense empathy for the person.

    Regardless of whether it is factual, it raises a good question of what would happen if an immigrant had the money previously but spent it as that poster said. The IRS cannot get money where there is none but would they be kicked out of the US?

  33. @nobledreamer
    Well, it was pretty simple actually, as I was only in Mexico on a cruising permit for a fairly short period of time, ~4 months, They were primarily concerned that I had paid all port fees, and any duties that might have been required. There biggest fear was that I would sell the boat to some Mexican and they would not get their import tax, but since I was leaving on it, that was obviously not a problem. It was not a rigorous process, but the Mexicans sure like their forms, and love to stamp documents! They made you feel you had to do it, but when I tried to show it to the Galapagos Port Captain, he had no interest. I did get to keep a nice certificate!

  34. @ Just Me

    “Wonder if Moby got one when he left.”

    Funny this topic should eventually come up. Prior to leaving the US, and in the midst of my FBAR OCD/paranoia, I found out about the sailing permit. I was not amused. I did not fancy having to ask the IRS for permission to leave the country, particularly given that the FBAR shakedown had turned out to be much worse than anticipated. I asked Deloitte; they said that the sailing permit didn’t apply to greencard holders and the IRS “doesn’t care about them”. I didn’t file for one.

    Looking back I see no basis for what Deloitte said; the requirements seem to apply to greencard holders as much as to anyone else. I guess I can add it to the list of things the US govt can come over to NZ and pry out of my cold dead hand. I think the sailing permit is a prime candidate to be the next shakedown tool. There are no penalties as far as I can see, but they can deny you the right to leave the US. Sounds crazy but the Hong Kong govt has done something very similar: http://bit.ly/H4PSL2 . Given the US govt’s demonstrated willingness to dust off decades-old and never-enforced laws for the purpose of shaking down immigrants, I wouldn’t be surprised if they do this too eventually.

    If they could get their exit/airport IT systems and processes organised they might just do the following:
    1) Ask every “alien” leaving the country for sailing permit, at the same time look up their (lack of) FBAR history.
    2) Then, have airport-based IRS agent do on-the-spot examination, to find out if the alien has non-US accounts (inevitably they do). Schedule full examination (to determine FBAR penalties), bar sailing permit issuance based on now outstanding tax obligations, possibly impose FBAR penalties on the spot.
    3) Immigrant is now trapped in US with large fines they must pay in order to leave.
    4) Rake in the cash!

    Is this farfetched, unlikely and a bit paranoid? Probably. Someone doing some forward looking speculations (say, 10 years ago) about how the FBAR could be used to shakedown immigrants might think the same. Remember from my opt-out docs; Deloitte didn’t consider the FBAR to be an important requirement for immigrants to know about. Those same accountants are saying the same thing about sailing permits. Just another reason to stay the hell away from the US.

  35. @Moby…

    Thanks for coming back here… You are right about those “Sailing Permits”. Right now, in some Carl Levin amendment buried in some bill, is a provision to add a 10K non willful penalty for failing to obtain a Sailing Permit! I can see it happening…

    btw, good response to Jack on the OVDI penalty structure. I could feel your ire rising.. 🙂 And you were absolutely correct… Good reply.

    For those who didn’t read it…. Here it is…

    MobyMar 22, 2012 12:03 AM
    @ Jack…. you said…

    “You are mistaken if you think this is an initiative to get the weak and the powerless who have no political power. Its principal aim is to get major tax cheats and the penalty structure is designed to incentivize them to come in.”

    I must strongly disagree with this point. FAQ 52 of the 2011 OVDI specifies the 5% penalty for people that were unaware of their US citizenship. This is ***THE*** smoking gun that the IRS is intentionally shaking down the little guy. There can be no one on this planet who is less culpable in this matter than someone who is not even aware of their US citizenship. Rather than let these people of the hook, the IRS specifically called them out for application of penalties. This sets the baseline culpability:penalty ratio for the IRS effort. The most-innocent-of-innocent get the 5% penalty; people who are “less innocent” (recent immigrants, unsuspecting expats) obviously must pay more.

    There was a time that the IRS could have claimed the moral high ground on who the targets were for OVDP/OVDI. They could still have claimed that they were targeting the bad actors. That time ended around the close of 2009 when they would have become fully aware of the true nature of the participants after they sifted through the stack of 2009 OVDP applicants. They could have (and should have) given all the benign actors an immediate and proactive pass on the penalties. Instead they chose to double down by further specifying which subgroups within the benign actor classification would be targeted for penalties.

    As far as I am concerned the IRS have fully clarified their position on the benign actors and it is a disgraceful position. I have been fortunate in my opt-out result and I hope that others follow suit and get the equivalent treatment. However, I will always be wondering what my opt-out result would have been if I wasn’t living outside US jurisdiction, making the assessment of any penalties irrelevant.

  36. 5% penalty for people that were unaware of their US citizenship?

    That is a good one.

    How a about a penalty for people who were unaware of penalties?

  37. @M
    “…….I do have compassion. I have been counseling these immigrants for many months now “pro bono”.”

    How about posting a bit of your track record here?

  38. Well, this was a bit of a shock to read because I thought that only green card holders, permanent residents and citizens were affected by this. Since this is just determined by a residency test, does this also mean that all of the hundreds of thousands of foreign students who come to the US to study at the university level technically have to file FBARs as well? If so, I foresee a major shift in students towards the EU, Canada, Australia etc once word gets out.

    I expect the US to lose lots of other immigrants like the OP as well if they keep this up. Everyone agrees that the penalties are insane and the tax system is broken, but what bothers me the most is that the US government seems to do ABSOLUTELY NOTHING to inform expats or residents about any of these rules.

    I just received a pamphlet in the post from the Italian consulate about Italian cultural activities in the area in April. Would it kill the US do make an effort to contact its citizens to inform them of their life altering tax penalties or to at least provide a pamphlet with all of the info each time that you renew a passport or apply for a US visa? Its criminal that they dont make an effort in my view.

  39. @Dan
    Most people in one branch of the US govt don’t know what the other branches are doing (nor necessarily have to agree). Witness the Ambassador to Canada (Department of State) telling Canadians to sit still, ie to not comply with IRS made up rules.

    These are monstrous bureaucracies with a life, a will, and a greed of their own.

    @ Uncle

    I am the guy in the Isaac Brock banner urging the soldiers to fight. You are the soldier. Compassion has but a small role in the middle of a war.

  40. I agree the situation described is outrageous. So is a whole lot of the results of FATCA and FBAR. I hope this situation gets resolved sanely. The sanest resolution might well be for the affected individual to stay out of the US, and to tell his story to everyone he knows so that other prospective victims can avoid the same experience. As others have noted, some of us got booted out of Expatforum when we started or contributed to a thread that suggested to prospective immigrants to the US that they might want to think twice, thrice, and more before proceeding … I guess Expatforum is only for “good news” stories and not reality.

    That being said: someone asked Steven Mospick for a reaction, and he gave one (see above). No one subsequently has thanked him for that, at least if they have, I missed it in my quick scroll-through.

    Steven, thank you for replying. I would like to believe that your suggestion of copying this thread to the TAS office might make a difference. I hope it does. I won’t hold my breath on that, but nonetheless I agree that outrageous examples such as this one need to be publicized and corrected.

    There is a serious disconnect between public statements of leniency with “reasonable cause” and how the automotons in the IRS bureaucracy actually seem to be functioning. Nothing that I’ve heard so far about FBAR, FATCA, or the IRS definition of citizenship “for tax purposes” bears any resemblance to what I consider reasonableness. Obviously, my education about “reason” was very different from that of some people in Washington (actually, probably most people in Washington, these days).

  41. @Don

    Welcome to the issue I have been observing for over 3 years now. I identified the problem in my first letter to Commissioner Shulman.

    When you look at the universe of those who technically should be filing FBARs to include all immigrants and Expats, and then compare to the number of FBARs actually filed, you see that compliance rates are extremely low. And, with the much trumpeted success of the OVDP/OVDI programs and the 30,000 participants, the IRS has barely moved the needle when it comes to actual compliance.

    That said, I think I have made the mistake of thinking that compliance was the goal, and so have criticized the approach on that basis. If you really want compliance, you start with a full out education program, and a real amnesty with no penalties. You create educational materials for every new visa applicant to inform them of obligations that come with residency. The IRS has done NONE of this.

    However, I now think compliance matters not, and only is given lips service, because no one asks the real questions about it. Even in the latest Hearings with the Ways and Means Committee oversight, Shulman is not questioned or challenge at all about his banal triumph.

    This effort, is about using penalties to produce revenue, pure and simple. Compliance hardly matters. Just take the penalties as you can. It is easy picking, considering the fear the program creates. Minnows are too afraid to Opt Out and so pay up! You couldn’t create a better shake down than the OVDI.

  42. @Don

    Among a few other types of aliens, students who qualify do not have to obtain a sailing permit.

    You are a student, industrial trainee, or exchange visitor, or the spouse or child of such an individual. To qualify for this exception, you must have an F-1, F-2, H-3, H-4, J-1, J-2, Q-1, Q-2, or Q-3 visa. Additionally, you must not have received any income from sources in the United States other than:
    *Allowances covering expenses incident to your study or training in the United States (including expenses for travel, maintenance, and tuition),
    *The value of any services or accommodations furnished incident to such study or training,
    *Income from employment authorized under U.S. immigration laws, or
    *Interest on deposits, but only if that interest is not effectively connected with a U.S. trade or business.

    You are a student, or the spouse or child of a student, with an M-1 or M-2 visa.
    *Income from employment authorized under U.S. immigration laws or
    *Interest on deposits, but only if that interest is not effectively connected with a U.S. trade or business.

    To see the others who qualify:

    http://www.irs.gov/businesses/small/international/article/0,,id=97256,00.html

  43. @Don

    I am actually of the belief that foreign student’s DO have to file FBAR’s give the separate implementing law for FBAR’s is written so vaguely. I still for one believe it is an open question whether technically Canadian citizen truck drivers who cross the border on a regular basis have to file FBAR’s also.

  44. @Just Me

    Very good point about compliance no longer being the goal of the IRS.

    With regard to the IRS’ attempts to educate, these points are taken from a Dept of Treasury, Office of Tax Policy report to the Ways and Means Committee in 1998. The report was to focus on the compliance of taxpayers and how to improve such compliance.
    The word “education” appears repeatedly and demonstrates exactly what you have said, “the IRS has done NONE of this.”

    http://www.treasury.gov/resource-center/tax-policy/Documents/Income-Tax-Compliance-US-Citizens-and-Residents-Residing-Outside-US-5-1998.pdf

    From Section V Conclusion and Recommendation:

    It is therefore Treasury’s recommendation that upon the completion of the IRS demographic study, IRS appropriately allocate its resources to projects and initiatives that properly balance the goal of efficient revenue collection with the legitimate privacy and other interests of Americans living
    and traveling overseas. Based on IRS’ experience in its Middle East Compliance Initiative and other successful compliance initiatives, such efforts should include:

    • analysis of local information sources,
    • local financial news media
    • DOS and Department of Labor data,
    • identify employers of U.S. citizens,
    • organizations with U.S. citizenship membership
    • education resources used by U.S. citizens or
    dependents
    • to aid in targeting education and compliance projects
    • identification of local tax practitioners used by U.S.
    citizens to provide such practitioners with the
    resources and education necessary to improve
    compliance with U.S. tax laws;
    • identification of local media outlets accessed by U.S.
    citizens and
    • development of specialized media releases to educate
    U.S. citizens regarding identified areas of non- compliance
    • development and implementation of market
    segment educationand compliance projects
    • conducting outreach and informational seminars
    • pursuing appropriate individual examinations and
    investigations

  45. @Moby

    As to the original point about the “sailing permit” how will it be enforced on Canadian Citizen departing resident aliens travelling across the land border and non US/Canadian citizens departing the North American continent by driving across the border and getting a flight off the continent out of Pearson. The US has already acknowledged they don’t have the resources or the infrastructure to do outbound exit checks at land borders and thus are relying on Canada to provide information sharing on who is “leaving” the US but what obligation does Canada have to actually demand sailing permits from border crossers especially Canadian citizens with the right of abode in Canada.

  46. @nobledreamer

    Thanks for that link. I had it once, and then misplaced it, so will save it this time.

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