Form 8854, FBAR and the Fifth Amendment

I am making what you could call a “noisy” non-disclosure. I have stated that I do not plan to file FBAR. I am no criminal, but because I’ve not done FBARs in the past, and I plan never to file one, actually filing an FBAR creates a substantial hazard because of its criminal penalties.  This is the fatal flaw in the FBAR requirement.  If there were only draconian civil penalties, no one could invoke the Fifth Amendment in refusing to file it.

But the problem for someone who has relinquished US citizenship like me is that the Form 8854 reveals too much damning and detailed information about assets, giving the IRS the ability to deduce that the person has financial accounts and how much must be contained within them.  I have learned that while the Fifth Amendment will not allow a person to make no tax filings at all (remember Al Capone went to jail for that), one may withhold information on a tax form, if that information could lead to a violation of person’s Fifth Amendment privilege. Therefore, here is Part V of my 8854 (I’ve blackened the actual declared numbers, which is actually the necessary numbers in order to make it possible for the IRS to determine that I am not “covered”):

So the IRS will be able to see that my assets fall below the $2 million threshold and they can see that I have owed zero taxes for the last five years. I am not a covered expatriate.

But they have no right, under the Fourth Amendment, to an inventory of my assets, and therefore, I will not provide sufficient information to them so that they can charge me with criminal FBAR.  The Fifth Amendment is invoked for the value of all my Canadian assets. For all they know, my house is worth the full amount of the declaration.  As for the categories with zero, it will hopefully show to the IRS that all my assets are already “offshore” and therefore safely out of the reach of their grubby hands.  In any case, all I have in this life has been earned in Canada, and not subject to the jurisdiction of the IRS.

I invite comments.

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113 thoughts on “Form 8854, FBAR and the Fifth Amendment

  1. Petros, this is dangerous territory.

    In order to avoid being considered a “Covered Expatriate” Section 877(a)(2)(C) requires you swear, under penalties of perjury, that you have met the filing and reporting obligations of “this title” (Title 26) for the preceding 5 years. This requirement is found at Question 6, Part IV of the form 8854.

    Willful failure to file a return, supply information, or pay tax is a crime under Section 7203. Likewise, making a false statement on a return when that statement is required to be made under penalties of perjury is a crime under Section 7206(1).

    NOTE, an argument could be made that the obligation to file FBAR doesn’t fall under title 26, but title 31 (31 U.S.C. 3514). This is a technical argument, though, with a large potential downside. I haven’t briefed the issue (and am not offering legal advice and you can’t rely on these statements) but it appears to be something to consider.

  2. If you don’t file at all the statute of limitations does not run. If you have expatriated for purposes of immigration law but that expatriation is not recognised for tax purposes, you may have no useful argument to make before a US court; but your other country of nationality may be bound to “protect” you. There is no concept known to international law of “tax nationality” without right to a passport (simplifying a bit, but I’m not going to write a thesis here). The Fifth Amendment doesn’t help in civil matters, and for what it’s worth enforcement authorities often waive criminal issues in order to make people talk.

    Your argument “one may withhold information on a tax form, if that information could lead to a violation of person’s Fifth Amendment privilege” seems to me to be an urban myth, or worse.

  3. @ punktlich Not urban myth but based on reading in law journal articles. And for that matter, how can the statute of limitations not run out on FBAR? The only case I am aware of is if the person is under indictment. I think you are confusing FBAR statute of limitations with tax filing statute of limitations. I think if your going to present information with such an air of confidence, you need to provide your sources.

    Now please tell me how or why I would ever be in front of US court with no useful argument? Under what circumstances is that going to happen to me?

    Everything you are saying in your argument just confuses the issues. For example, you say the Fifth Amendment doesn’t apply to civil matter. Did I not say that the potentiality of criminal charges in FBAR is actually what creates the substantial hazard? Didn’t I say that that is why I have the right to invoke the 5th Amendment privilege?

  4. @ Roy

    What is so dangerous about this? Yes, I answer the question about meeting my obligations, which I do so under the penalty of perjury. I am providing the information that the US government needs to deterimine if I am a covered expatriate. That is the purpose of the form. I am over $1 million under the $2 million threshold. I have had zero tax liability over the last five years leading up to my expatiration. If anything, the United States government is in dangerous territory of violating my right to expatriate under the Universal Declaration of Human Rights.

    I think, sir, with all due respect: You need to get a pair. What can the US do to me? What could they possibly want to do to me? Why? Do you think I should supply the information so that they can just sit down and write out a civil FBAR penalty for 50% of my assets, knowing that I must have financial accounts? Why should I waive my Constitutional rights, my Fifth Amendment rights, my Fourth Amendment rights, etc. Do you inform your clients that they are waiving all their rights when they enter OVDI or when they file an FBAR? Do your clients know about their 4th and 5th Amendment rights? Do they know that they can voluntarily waive their rights, and that everything that they disclose to the government can and will be used against them (remember Miranda?).

    Of course its dangerous. Is it safer to enter the OVDI and just hand over 27%? Or is it safer to fill out belated FBARs and potentially have 300% fines? Tell me what course of action is safe!

  5. Royaberg is wrong.

    Compliance with Title 26 requirements for the preceding 5 years is what you must swear or affirm to have done in order to escape characterization as a “covered expatriate” under §877A.

    Title 31 (Finance, money laundering, FuBAR, etc.) is not Title 26. Consequently, the obligations under Title 31 and whether you have fulfilled them is of no relevance whatsoever to your obligations under Title 26.

    There is nothing “technical” about it.

    “26” does not equal “31” or “18” or “42” or “10”.

    It’s really that simple.

    PS

    I don’t know whether you are likely to find the following observation/prediction more comforting or annoying but here goes:

    The IRS could not give a rip one way or the other a) whether you file Form 8854 b) what you put on it c) whether you file your FuBARs, etc.

    You are in no danger of attracting the slightest bit of IRS interest.

    What you file will not be scrutinized by a carbon-based unit. It will be digitized and forgotten.

    Forever.

  6. @Petros: You are being argumentative and unfriendly. I am not your lawyer, but I am trying to bring issues to your attention that you can research or have analysed for yourself.

    “And for that matter, how can the statute of limitations not run out on FBAR? The only case I am aware of is if the person is under indictment. I think you are confusing FBAR statute of limitations with tax filing statute of limitations.”

    The SOL will not run unless a Form 1040, Schedule B has been filed. Obviously the SOL is irrelevant if the (non-)taxpayer had no foreign account(s).

    If you think you can avoid filing tax returns because of the Fifth Amendment then I am unable to be of help to you. You might try searching under in a search engine.

  7. @ punktlich, Roy
    I just want to apologize for the harshness of my tone in my comments above. I hit back hard, but that seems unfair to you, since I did invite comments. So I want to thank you, belatedly for making the comments. That they stirred a deep reaction on my part means that the comments are indeed doing what I seek to accomplish on this blog, and that is open and free debate about the best course of action.

  8. @Punktlich, Ok, I admit that it was not a little unfriendly; but my point stands. I am filing my 1040; so there is a statute of limitations because they will have been filed. So your point about 1040 Schedule B is not useful in this case.

    Why don’t you try searching Google yourself? I have done that many times. I am suggesting that you are making very bald claims with a great air of confidence, and yet you offer no proof. So I am offering you chance to substantiate your claims. If you can’t then I think the rest of us can safely ignore them.

  9. @ todundsteuer – the issue is not so clear cut as you think. the HIRE act gave enforcement ability for FBAR to IRS, pursuant to the administrative and enforcement provisions of Subtitle F of Title 26. Does that bring FBAR obligaitons unde the purview of Title 26? I don’t know. i’d certainly brief the issue before I advised a client.

    @ Petros and punktlich11 – Statute of limitations on FBAR is 6 years even if one is not filed. 31 USC 5321(b)

    @ Petros – just trying to help, man. I’ve been doing this for 19 years and have learned that these are complicated issues and caution is always warranted.

  10. @ Petros – thanks for the apology. No offense taken. These are complex, personal issues, and emotions sometimes run high.

    Stay the course, fight the good fight.

  11. @ Roy Thanks for accepting the apology and taking no offense–that shows that you are big person. Yes, it is deeply personal. But not only so, a lot of people are watching what happens. I am one of first in this group of expatriates to exit the system. Sure, there are now already a whole bunch of people in Europe before me, but I am one of the first in an avalanche of Canadian au revoirs. The manner that the United States decides to punish me for my audacity (isn’t President Obama an expert in audacity?) will force the Canadian government to put its money where its mouth is. Will it stand up for me, the way that the United States stood up for its own naturalized citizens in the War of 1812 and in the Expatriation Act of 1868? Or will it just turn patsy and let the United States have its way?

    I think a very vocal, loud and triumphant exit is the safest possible way to exit the system. No more lurking in the shadows for me, when I made my decision to go public, based on the assurances of the Canadian government that it would not collect FBAR penalties. When Canada said that now that I am a citizen, it will not collect for the IRS against me. Thank you Canada, and thank you Mr. Flaherty. Now I want all Canadians everywhere to stand up for their rights and not allow the IRS to take away their ability to sleep at night.

  12. @Petros: “I am suggesting that you are making very bald claims with a great air of confidence, and yet you offer no proof.”

    I make no “claims” because I am not your attorney. As for “confidence” I have provided citations where I thought useful. And I always provide copious footnotes for my law review articles.

    While I have not researched the issue myself today, others state online:

    “What is the statute of limitations for assessing civil penalties for violations of the FBAR requirements?
    “Civil penalties can be assessed anytime up to six years after the date of the violation”
    http://www.taxmeless.com/FBAR%20Freq%20questions.htm

    and I have no reason to doubt that this is correct. (And Form 1040 Sch. B, partially duplicating FBAR, is part of a tax return.) I know from having practised bankruptcy law that the SOL does not apply in the case of nonfiling or where there is a fraudulent filing. Again I apologise for the secondary source but I’m not about to log into RIA for a non-client:
    http://www.wwwebtax.com/audits/statute_of_limitations.htm

    As it happens, I’ve never known the IRS to go back beyond 6 years even for long-term nonfilers. But their attitude seems to be hardening and penalties are so draconian today that if there are assets to seize, who knows what they will do. I cited to this tax law journal article (and to the IRS Manual regarding its embassy attachés) in another posting, and its scary:
    http://newsgroups.derkeiler.com/Archive/Alt/alt.politics.bush/2010-03/msg00155.html Even though the IRS rarely tries to pursue those who have absconded abroad with all their assets. On the other hand I’ve seen close-up the mess that US- based heirs have been left with when a tax-hater moved abroad, set up a Liechtenstein trust, and died never having either renounced citizenship or filed a US tax return.

    So, as for “confidence”, all I can say is that what I’ve written is the starting point for further research, that CCH, RIA, Simon’s Taxes and all the other resources I use (and which are not free) ought to have the final word. But so many of the questions asked here have not yet been addressed by the courts so perhaps your guess is as good a mine. And I spent 10 years in the law schools of 3 countries.

  13. @punktlich Claims have nothing to do with whether you are giving legal advice. It is about whether you are right or wrong. This is a blog not a legal consulation. And you tend to write with a great deal of confidence. I appreciate your point of view, now that you have made it more clearly. In the first comment, it seemed that you were indeed confusing the issue between 1040 statute of limitations and FBAR–but as you have now explained, your point was more refined than that, of course, without sufficient explanation until now.

    The problem that the IRS will face with me is that I am just an average person who would be off the radar except for the insanity of the current regime in the US. Only recently, in the last few years, did I even make enough that the IRS could have even have the slightest interest in me. As soon as I found out that my wealth, all of which was earned here in Canada and all taxes have been paid dearly in the Canadian system, was now of extreme interest to the IRS, I realized that I must exit the United States tax system permanently. But I am not a whale, a criminal, a tax cheat or any of the above. I am just an ordinary person who lives and works in Canada.

    When I started to read Phil Hodgen’s blog who published Voluntary Disclosure Program stories, I realized that the United States was unleashing a persecution against expats of unprecedented proportions. Now it had become a financial war against the wealth of expats. I am hoping that we can share what rights and protections that we have in order to fight this battle.

  14. @all- I have personally come to the conclusion that it matters little what you do or don’t do. Either way there is not going to be any justice for those who have lived out of the country for most or all of their lives. The odds are great that you would have engaged in one of the “forbidden” fianancial asset purchases. Trying to reason with the U.S. on this issue is about as producted as it would be to talk about the joys of life with a dead man.
    Fundamentally what we have here is an unjust tax policy that is backed by a conceited government. This is why the young must leave before they can trip any of the “gotchas”.

  15. I have made it this far as a US citizen living in Canada without any contact with the IRS. I have now renounced and so I am no longer considered to be a US citizen. As a Canadian citizen living in Canada what legal right does the IRS have to ask me to fill in any forms. I’m thinking it may be to late, they should have asked me at the consulate.

  16. @TrueNorth, I totally agree. I’ve said as much here: http://isaacbrocksociety.com/2011/12/19/forget-about-form-8854-filing-last-5-years-of-tax-etc-usa-law-establishes-a-right-to-unilateral-expatriation/

    But as yet, I had not decided whether to file a Fifth Amendment 8854 or whether to ignore the requirement. The only advantage that former course of action has, in my view, is that IRS may permit closure. But if you ignore the requirement, they may leave this exit procedure over your head for the rest of your life.

  17. I shouldn’t even try to comment on something that is so legal intensive because I’m not qualified but fools rush in they say. I know that if I abandon my old expired green card I will probably be told to fill in an 8854 too. Like you Peter I have not filed FBAR’s on my individual accounts because I am Canadian since birth, always have been Canadian, and I do not accept the right of a foreign country to extract private banking details from me, something even my own government in Canada does not require of me.

    Note: My husband and I have always filed jointly but only because we have a couple of joint accounts and I didn’t know how to separate things out. Then I didn’t know what to do about my individual accounts so I put the income from those on our joint returns too. We took the standard deduction so I felt all income should be included. So absolutely all of our income has always been there on our 1040 forms all along. We even sent copies of our Notices of Assessments every year.

    Now back to 8854. My assets are way below the $2M mark and my income (interest only) way below the $147K mark. The income part is obvious to the IRS from our 1040’s. It knows about my interest income and also my bank’s name from our Schedule B’s. As for the assets part, I had thought of just getting a signed statement from my bank manager stating that my accounts total less than say $1M (no revelation of account numbers or exact balances). I think I would try to get a signed statement from my bank manager that he will not reveal any of my personal banking details directly to the IRS, just as a bit of insurance (probably not legally binding but worth a shot).

    Do you think that would satisfy the 8854 rules without risk of penalty? I still will not do FBAR’s and not the 8938 either. Same reason for both — far too much information for a Canadian to be sending off to a foreign government. (My husband has to and will do both because he is American until he has a precious CLN in his hands.)

  18. 8854 rules are instituted so that the IRS can assess whether the expatriate is a covered under 877A or not. The letter from the banker is a substantial hazard as far as I am concerned. If he say less than 1 million but does say less than $10,000 aggregate, then you could be (though unlikely) be charged under FBAR.

    As I’ve shown above in Form 8854, the IRS could be dealing with a person whose assets are 99% in his house and RRSP (which is already declared–but let’s see if the IRS will set off a diplomatic incident by charging me 300% fine for my RRSP account which has been declared yearly in my 1040. The RRSP is protected under the tax treaty. So which is the higher law? The treaty or the Bank Secrecy Act? Well according to the Constitution, treaties are supreme law.

  19. @Petros: Article 6, US Constitution: “This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land”

    In fact, “supreme Law of the Land” is constitutional jargon. Except for the Constitution itself, the latest in time to be enacted trumps any earlier. For this reason although treaties need only be ratified by the Senate they are often legislated (as they are in “dualist” countries generally. For the avoidance of doubt.

    Taxes are not intended to “do justice”. (In fact, neither is the law, or the courts: http://uniset.ca/terr/art/dojustice.html ) Taxes are there (1) to raise money and (2) to respond to political convenience.

  20. My take on all this is that Petros is waving a red flag to a bull. Nor do I believe that expats and accidentals were the target for all these FATCA laws and FBAR. I actually believe we’re collateral damage though, especially those who naively or thru bad advice were screwed in the OVDP/OVDI programmes.

    I don’t deny that the IarS saw the unintended revenue potential by introducing the 5% penalty for Uad persons abroad.

    But what I fear is that while top people in the IRS such as Nina Olson and close affiliates such as Steven Mopsick are generally sympathetic to our plight, they could change their minds if we’re defiant.

    It could cause an even worse hardening of attitudes because they too could close ranks. I’m obviously in an awkward situation but intuitively feel that being completely honest and also respectful (even pleading for mercy) is probably more likely to cause them to be merciful than to have a ‘f**k you’ attitude.

    I also made sure I got an accountant who calculated everything correctly so that I could swear that I had paid back everything I owed (quite a lot, in fact).

    Of course it embitters me that if I had simply invested in blue chip stocks, I wouldn’r even have owed any taxes but if I had done my homework, would have learned not to touch foreign mutual funds.

    I agree it’s outrageously unfair and this is what Petros gets the hump about. But what I can’t understand is the extreme extent of his hatred. I honestly doubt if the IRS will hit Canadians with FBAR penalties of %300 for instance.

    If anything, I feel that I could be a perfect case for being made an example of, and yet, I still feel a duty to do the ‘right’ thing and put it right. I’m doing the complete opposite and making a full disclosure and praying for their humanity, though also realise that Peter Dunn has used his name openly on here.

    I pray there will be reform but in the meantime, i fear that overt defiance could cause reprisals.

  21. @punktlich11- if taxes aren’t there to do justice then why does the U.S. government have the concept of “horizontal equity” which it uses as the rational for being able to restrict the financial activities of citizens outside of the country?
    Taxes can’t just be a “naked fact” that we all subscribe to without knowing or asking why. I know that that is the way that the U.S. wants to play the game because then they don’t have to face any opposition. But the doesn’t that make the U.S. government no different than a monarchy, absent the monarch? Basically the argument is the same as “the divine right of kings” argument of long ago.

  22. @Petros

    Here is my advice. Don’t do anything in terms of form 8854 yet. I believe there are STILL a couple of months left to file it(I think we will know more by June). Second if you want to fight this requirement my best advice is to contact CRA’s Competant Authority Services office in Ottawa. CRA CAS in the entity responsible for dealing with tax treaty matters with the US. I have been meaning to do a post on CRA CAS for weeks because I think the advice they give is awfully relevant and important. Another option is to do what 50% of people in the past have been when renounciating simply file your last return and forget about form 8854.

  23. All I can say was my grandfather the US Tax Court Judge was one of the most honorable people I’ve ever kmown…I want to honour his memory by doing all this correctly. Obviously, I have convoluted and mixed feelings about the consequences of my US citizenship. It’s a love-hate relationship. I feel torn between choosing expediency or honour to country. Not easy decision

  24. @punktlich Your view that the latest law trumps earlier law is not consistent with the ability of the United States Supreme Court to annul laws on the basis of their unconstitutionality. Certainly, the Constitution remains supreme when this can happen, or rather, the Supreme Court’s interpretation of the the Constitution.

    That the United States government craps on treaties is nothing new. It shows the bad faith of the United States government.

  25. @Tim I only intend to ask for the CRA to rule or to get involved in the matter when the IRS decides that I owe something or when they issue a warrant for my arrest. Until then, I stand on the encouragement of Flaherty to resist FBAR because the Canadian government will not collect it. My reason for filing is as I said–I am hoping that in this manner, I might put closure to the situation. if the IRS refuses to recognize and acknowledge my 4th and 5th Amendment rights, I doubt seriously that I am any worse off than if I do not file it. In any case, I am not a covered expatriate–provided I file the idiot 8854.

  26. @monalisa1776
    I do appreciate your patriotism for your birth country but I hope you can also appreciate that Canada is my country of birth and if it came down to it, even in my dotage, I would take up arms (or assist Canada in any way possible) against the USA if it were to attack my country as it has attacked so many other sovereign nations. (My ancestors were United Empire Loyalists.) I owe no allegiance to America as you do and I have to draw a line somewhere. My bank accounts are not fair game to the USA (every penny in there gained in Canada). I don’t believe Peter’s so-called defiance will in any way affect the outcome from your comply and complain decision or anyone else’s decision and neither should mine. If we Minnows are so insignificant that we could not stop the IRS from setting up its Whale net which snared us too then we should be insignificant enough for the IRS to “pay us no never mind” (if you understand that phrase) when it comes to how or if we file a particular form which tries to extract information which is none of its business. This is not about hatred of the USA, it is about having rights as citizens of our own, non-USA, countries and trying to find as non-confrontational a manner as possible to exert those rights. You can pray for reform but the USA seldom if ever backs down and I don’t see it happening.

  27. @Petros

    The reason I suggested going to the CRA is they have the ability to submit the form 8854 filing requirement to binding arbitration with the US.(I believe no one has actually approached the CRA over expatriation). No other country other than Canada can submit tax treaty issues with the US to binding arbitration so by going to CRA you would possibly have to possbility to make “tax history” in a fairly inexpensive way. Read my new post.

  28. @ Tim Good idea. But we should find a covered expatriate who would do this. Since I am not covered, at least if they accept my Form 8854, I would not at all be the best person to challenge the exit tax.

  29. “Justice cannot be for one side alone, but must be for both.” Eleanor Roosevelt
    http://www.gwu.edu/~erpapers/abouteleanor/er-quotes/

    http://www.peterwall.net/2009/05/02/law-vs-justice/
    ………….
    “it has been argued, by Lon Fuller in a famous debate with H.L.A. Hart (Harvard Law Review, 1958), that a jurisprudence which generates outcomes offensive to justice doesn’t deserve the name of law. It may come fully equipped with procedures, tests, distinctions and all the other marks of law, but it isn’t law because, at its heart, it isn’t good. The question Fuller and Hart debated is whether Nazi law was law. The positivist Hart said that law and morality are two distinct registers and that a system of law could be procedurally legitimate and at the same time rest on an immoral foundation. Fuller replied by distinguishing between “mere order” and “good order,” and declared that a legal system “which clothes itself with a tinsel of legal form can so far depart from . . . the inner morality of law itself that it ceases to be a legal system.”………….

  30. @em- U.S. citizens increasingly have few rights vis-a-vis their government. Expats have even less rights than resident citizens.
    The U.S. looks upon citizenship more like a license that a person has to operate his/her franchise under the franchisor’s name.
    Like in any franchise arrangement the U.S. government as franchisor, retains all of the rights, property, in the title and therefore can dictate the rules under which you operate. You, the citizen, have no rights to define the content of ctizenship.

    Typical franchise rules dictate hours of operation, means of advertisement etc. The pertinent franchise rules under these circumstances are those which relate to the sourcing of inputs or in our situation financial asset purchases and the associated licensing fees or taxes.

    As most of us already know, all franchise operations are authoritarian in nature and have steep penalites for violatations of the franchise areement. Although it is clearly evident in contract law that the franchise arrangement is a “property” arrangement and that the relationship of the U.S. citizen to his/her government is a similar the U.S. is not willing to acknowledge this truth.

  31. @Petros

    I believe there is a case alone based on the simple filing requirement imposed on renounced citizens. The real screwup Congress made was in your case imposing the filing requirement as of April 2011 after you were no longer under the law a US citizen instead of Febuary 2011. Thus after Febuary 2011 you are no longer a US Citizens instead you are a Canadian citizen tax resident in Canada under the US Canada tax treaty. If want to go down this route all the way to binding arbitration you probably need to get a good Canadian tax lawyer. However, you might find one interested for the novelty if for anything else.

  32. @ Tim We used to say in pick-up basketball games, “No blood, no foul”. Since I am not covered, I think we should wait and see how the IRS responds to my case. But surely, there are many others who are covered under the exit tax law (877a). Thus, we should encourage a covered expatriate to do exactly what you are saying because so much more is at stake. I mean, all I can do is laugh with scorn over this if the IRS were to make me a test case. The requirement of filling out the form took me about an hour to do, so it is is not particularly onerous. However, I agree with you: what truck do I have with the United States now that I am no longer a citizen?

  33. @ recalcitrantexpat
    Sounds like another way to state that the USA is a corporation and it’s misnomered “citizens” are in fact corporate chattel. I am well aware of that.

  34. @Petros

    One thing I do agree with you on is you are right to be suspiscious about the whole FBAR thing and how its applied thus in some ways there is a certain degree of uncertainty as to how form 8854 relates to FBAR. That’s why I suggest holding off on doing anything for now. You have a very particular case of renouncing just before the what is it form 8893 filing into effect. Everyone after you just about is going to have to do 8893 on their on their final return so the relationship between FBAR and 8854 is somewhat mute in the future. Just from what I have seen very few expert tax lawyers even understand FBAR

  35. Interesting thread…I would stand somewhere between the stalwart defiance of some here and what monalisa is doing. Basically, I will renounce asap, file the 8854 and an FBAR and be done with it. Do I like giving them this information or do I think that they have any right to know any of this? Of course not, but I also want to know that that CLN really means a complete termination of my former citizenship and I don’t want to have to worry for my my whole life that the US will track me down in 20 years for some unfiled form and harass my country of residence to collect absurd penalties for refusing to supply it.

    I think that I am also the odd man out on the site as I am literally at the beginning of my career, so I don’t have any accumulated assets or complicated mutual funds, etc. Just simple banking accounts that are worth hardly anything…so fine away for all I care, IRS. But once you’re done good riddance and don’t let the door hit you on the way out 😛

  36. @ Don Pomodoro
    I think that is a good decision for you given that you are younger and handing the IRS the keys to your bank accounts via FBARs and 8938s will not have any significant effect on you. Getting that final and total release is imperative. You can even switch banks in the future and suffer no recourse. Sadly, for some of us it is more complicated. Good luck to you!

  37. I can certainly understand Roy not wanting to shoot from the hip. Having said that, I find it very difficult to believe that one could reasonably consider the FBAR a Title 26 obligation since it’s clearly imposed under Title 31. I understand that the IRS has been charged with enforcement, but that cannot (certainly, it ought not) transmute the FBAR into an obligation arising under Title 26. Some truly shocking authority would need to exist in order for me to conclude that the failure to file an FBAR precludes an expat from certifying as to compliance with all Title 26 obligations, for the applicable 5-year period, as required for purposes of IRC sec. 877A.

    Even if a court reached the seemingly indefensible conclusion that the FBAR somehow IS a Title 26 obligation, to convict a person of perjury (or some similar offense) for taking the straightforward view that Title 26 and Title 31 are different things would seem ludicrous. I would, of course, caution readers that I have not researched the issue, and you never do know what you might find!

  38. @Don: I wouldn’t call myself young (late 30s) but like you I have a very simple financial situation. The only thing I “own” is my home but we’ll be paying off the mortgage on that for the next 30 years. Like you I want closure and to be done with it. We are trying to have a child; I’m sure that when this hoped-for child gets older, he/she will be annoyed at me for not transmitting US citizenship to him/her. But I want myself and my child out of the clutches of what is essentially, for us, a foreign government. And if something happens to me I want my husband to NOT have to deal with this crap. I want to be able to set up savings accounts for my child without having to think about insane trust forms. I want to be able to start saving seriously for my retirement without having to worry about tax treaties and tax credits and what-have-you. One governmental bureaucracy is bad enough; US citizens abroad have to deal with two bureaucracies and, well, life is too short for that. So yeah, I’m going to file my returns as normal this year and file the 8854 next year and be done with it. I need to be able to visit the US and not worry that I’ve broken any laws (many of my family and friends are there and despite everything I still love visiting).
    @Petros: you are a brave man. Invoking amendments seems to be one of those things that REALLY pisses the IRS off; I would think you’d stand a better chance just giving them the numbers. Even if someone actually decides that you should have been filing FBARS I can’t imagine them doing anything about it. But then again, if you plan to never cross the border again I doubt they have the resources to try and do anything no matter what you write.

  39. @rødgrød: “I’m sure that when this hoped-for child gets older, he/she will be annoyed at me for not transmitting US citizenship to him/her.”

    Nothing you can do at this point (other than for the child to be born in the USA) is likely to affect its nationality since for a child born in Canada of one US parent all that is relevant is the requisite prior US residence for a certain number of years at certain ages; or in the case of nonmarital births one year at any age. (Birth in American Samoa/Swan Island or Puerto Rico yields different sorts of nationality and tax obligations respectively.) Registration with a US consular office is only evidentiary and does not affect the fact of citizenship; but of course an unregistered Amcit will be unknown to the State Dept and to the IRS so the fact of a law violation in crossing the border will be unnoticed, unless a curious immigration officer asks for the facts.

    I lectured once in Toronto and once at the Université de Montréal and b both times Canadians came up to me after the lecture to remark that they were dual nationals but that their American citizenship was irrelevant to their lives. Apparently there are one million Canadians like that. I suppose that some of those living in Stanstead QC don’t even speak English.

    These days my only relationship to Canada is getting a few hundred dollars a month from the QPP so what do I know. I get even less than that from US Social Security. As I don’t expect to check in much more on this site I will offer a few points of advice:

    — Be careful about filing a joint US tax return if there are discrepancies over foreign assets, as the benefit of possibly lower tax may be outweighed by putting the innocent alien tax-return signor at risk of joint and several liability.

    — The “automatic” penalties of $10,000 and more (for not filing such forms as 5471 and 3520) are so draconian, so disproportionate that one has to wonder what the Congress was thinking. I know these forms are read closely because I have filed them and over the years I’ve made many technical errors and each time the form has been bounced for correction. Despite the dollar amounts listed being tiny.

    — The “right” to expatriate (vs. perpetual allegiance) was the basis for considerable argument between Jefferson and Hamilton. There are a few countries that do not permit expatriation, Eritrea and Iran among them; also there were some Eastern European countries that used not to allow it, hence the old Bancroft treaties that allowed their expats in the USA to visit those then-Communist countries on their US passports. Curiously “allegiance”, transmuted into “citizenship” is not only an Anglo-Saxon concept but an Islamic one, although in the latter case all sovereignty is said to belong to Allah. The Christian concept is to separate sovereignty from religion in the form of nationality. And the Jewish one, based on the Diaspora, is to ignore it. Then there are the Jehovah’s Witnesses who went to prison in Canada during the War because they, like the Muslims, thought sovereignty belongs only to God. What the latter think of the Crusades I have no idea.

    Here in Switzerland the USA is coming across as the big bully on the block. It can get away with that because its economy and its market are essential to the rest of the world. Thinking of what E.L. Doctorow wrote in the NY Times the other day ( http://www.nytimes.com/2012/04/29/opinion/sunday/unexceptionalism-a-primer.html ) that may not last too much longer. I doubt that the US will ever stop thinking of its expats (government employees, missionaries and certain business representatives excepted) as quasi-traitors and apostates, but foreign countries may be of less assistance. Information exchange is useful to the IRS only insofar as it has the means to enforce collection. Unfortunately some exemptions and exclusions depend upon their being claimed before the IRS makes an arbitrary assessment. And I remember after the 1976 law American English teachers in Nigeria making, say, $25,000 plus accommodation and car, in the absence of a foreign earned income exclusion and with an overvalued exchange rate suddenly owed more in tax than they earned.

    — Finally: there is no point in blaming the IRS for policy. That is Treasury’s responsibility. IRS depends on self-policing by taxpayers, and it uses “in terrorem” provisions to frighten. I suppose that for Canadians proximity to the border creates its own risks. Think of Ronald Anderson http://uniset.ca/other/news/wp_ronaldanderson.html The vast database of worldwide information made available to the IRS under FATCA and through the NSA to Treasury (although “sources and methods” rules make the latter difficult for the IRS to use it) is really too large to be processed. And it is unlikely that the IRS will spend much effort on expat Americans without US assets and income. Unless they are also drug barons (or, in the case of one IRS attaché I spoke to many years ago, notorious pornographers or McDonalds heirs). One’s main concern has to be over eventual repatriation of assets (at death, say), and over “transferee liability” whereby a donee or trustee or heir is liable (up to the amount received) for unpaid tax of the donor, settlor or testator.

    I don’t think I can add anything to that.

  40. Two things… first, if we are 7 million American Abroad how come just a small percentage of us are so distressed by what is being demanded from us and threatening to us? Is that the silent majority do not know about this? Or perhaps they are employed people with less than 10.000 accounts and have just to file 2555?
    I fail do understand. Then, I thought it was strange that I was able to reach the IRS through a House Representative and after explaining my particular situation which seemed impossible to survive, I got advise from the IRS to renounce the citizenship and file form 8854.That form scared me. But I amnot thinking about renouncing. I don´t know how to take this advice: “America love or leave it”? or, the IRS really felt that in my situation this was the best advice they could give? But then…should we accept that this is the best that can be done for a American Abroad who is trying to do the right things but is falling through the cracks? To be truthfull I felt kind of hurt as an American by choice(dual citizen).

  41. @markpinetree
    The 6-7 million is an estimate, no one knows how Americans are living overseas.
    The 500 renunciations reported quaterly are those which meet criteria from Sections 877 and 877(a), I and most people on this site will not be listed, so that number is low.
    Only those born in the US or who have exercised US citizenship will need to renounce or relinguish.
    Anyone born outside the US can go stealth and ignore the IRS and travel on their birth country passport without attracting scrutiny
    It is easy to think of the IRS as unemotional glob, but is was a person who answered your call and gave a human response to your compaint.
    As a Vietnam era veteran, I sympathize with your hurt, but my emotional attachment to the US ended many years ago.

  42. I see. These things are complex. And not enough data. But I would think that more Americans Abroad would be member of ACA for instance. But time will tell. I also don´t want to demonize the IRS. They are doing a difficult job and yes in my experience they are too impersonal. But they are human beings like us trying to do a job. Nom I did not talk in person with someone from the IRS. I wrote a letter to a Representative from the State where I last resided in the USA relating my difficulties complying with the demands and he sent my letter to the IRS (without revealing my name). They first rsponded by a signed letter in a very formal way. I then answered calling the attention to some difficulties I was having in a more specific way. The same way, the Representative sent my response to the IRS. And then I received a signed letter through the representative saying that if things were so difficult for me I could renounce the citizenship. At first I felt king of hurt but then I start considering that perhaps they wanted to be hekpful pointing out the best solution. But isn´t this a little odd? To be truthful I don´t want to draw hasting conclusions on the signer motivation on this sensitive matter. I always try to understand the other side when I am debating something. I can´t believe that people want to do harm others, especially public servants trying to do a job for us, taxpayers.

  43. Thanks for your interesting, useful views, commentary and participating in this forum, punktlich11.

  44. @ Markpinetree: As long as we fail to see the demonic activity of the IRS and name it as such, we will continue to make excuses for them. Let’s be straight: there is no excuse for tyranny. Saying that you were just carrying out orders or that you were just doing your job does not exculpate the tyrant or his minions. Thugs who have orders from the king to pillage citizens are evil just like the king, for no king without such thugs can ever carry out aggression against his people. The minions empower the beast.

    The whistle-blowers, the men or women who stands against the system, will pay a high price for their stance. They will lose their jobs. So the typical IRS agent will not stand against this tyranny. But saying that they are just carrying out the will of Congress, of the commissioner or the Treasurer is no exoneration for the suffering that they have caused upon the people. President Obama himself has claimed the right not to enforce laws that he thinks are unconstitutional. No one could stop him if he ordered Geithner not to enforce FATCA, FBAR or extra-territorial taxation on the expat community. This evil is done with the intention of finding a source of revenue that will not affect their voter base. The IRS workers are complicit and they receive a pay cheque for their efforts; so they have their personal wealth at stake. So this is my view: if they want to come and take my wealth through FBAR fines, they are evil, because they will carry out orders and unjust laws, and they have caused us to suffer, only so that their own personal comfort will not be affected.

    Please stop making excuses for the evil of the IRS. What if it were the Soviet bureaucracy (note: this is not a violation Godwin’s Law), which came to take your possessions and lock you up in the Gulag. Would you say the bureaucrat is just doing his job then?

  45. Hi, rødgrød.

    Good luck on that hoped-for child and your being able to get on with your and your husband’s life in Denmark. You are going to do fine in your new country with all of your wise planning — at your young age (as compared with my retirement age). I am so glad you are not going to face so many obstacles of many of us older and too late wiser “Brockers”.

    It is my feeling that by cutting loose from that US citizenship, you will provide your child much more opportunity in the world by the time he or she grows up than the perceived benefit of being able to claim a US citizenship.

    Good work — all the very best to you and your family!

  46. I agree the minority that many of the problems are not the fault of the IRS but Congress and the US Treasury tax policy branch. However, there are a few suggestions I would make to those involved with the US political.

    # 1. Have the IRS move international processing activities from its Philadelphia processing center to its Andover Massachusetts Center(Yes Andover as in Philips Andover. Rich, Cosmopolitan Andover, Massachusetts). The IRS really DOES have a processing center in Andover and I used to stay on business in a hotel right across the street from it. From my casual knowledge of the area in the past the employees in Andover always thought the were a cut above the rest of the service and had the performance statistics to prove it. In general New Englanders always think their a cut above the rest of the United States and quite often there right.

    2 #. Have some any public discussion of the matter. All of these rules are basically put in place by omnibus legislation.

  47. @ Tim In reading the Bank Secrecy Act, it is very clear that Geithner can exempt classes of people from FBAR.

    (b) The Secretary may prescribe—

    (1) a reasonable classification of persons subject to or exempt from a requirement under this section or a regulation under this section;

    (2) a foreign country to which a requirement or a regulation under this section applies if the Secretary decides applying the requirement or regulation to all foreign countries is unnecessary or undesirable;

    (3) the magnitude of transactions subject to a requirement or a regulation under this section;

    (4) the kind of transaction subject to or exempt from a requirement or a regulation under this section; and

    (5) other matters the Secretary considers necessary to carry out this section or a regulation under this section.

    If the Secretary has this discretion, then he could waive the FBAR requirements for expats. His decision to force expats to do this requirement shows that they have violated the intention of Congress in creating the law in the first place: to monitor money laundering, terrorism, and criminal tax evasion. Finally, even when confronted with the knowledge of the tyranny that he is creating the tax-cheat Treasurer does nothing, and his minion Douglas Shulman does nothing. Or do you think that they did not get Nina Olson’s memo?

  48. Petros:

    I agree with you that Obama and Geithner have many perfectly legal options under US law to change the implementation both FATCA and FBAR and as of yet have refused to do so. I have heard third hand in particular in the case of FBAR not to blame the IRS but in fact the US Treasury on that one.

  49. @Petros

    I only brought it up because I heard that Nina Olson told a bunch of people if they were unhappy with FBAR to take it “upstairs” so to speak to the US Treasury Department. I don’t at all let the IRS off the hook for the way they have handled the OVDI etc which is VERY much in their control. I actually though we would have had some additional news on this whole issue today but I guess not.

  50. Tim said: “I agree with you that Obama and Geithner have many perfectly legal options under US law to change the implementation both FATCA and FBAR and as of yet have refused to do so.”

    This administration doesn’t seem to be fond of legal options to solve problems. They’d rather waste their time engaging in other activities which are bound to be overturned by the Supreme Court anyway i.e. their fight against Arizona’s attempt to control illegal immigration and Obamacare.

  51. @Tim

    I want to reiterate your point about OVDI beginning under the complete control of the IRS. This has nothing to do with Treasury or Congress. On January 9, 2012, when they reinstituted OVDI, they promised procedures for U.S. citizens abroad to come into compliance. The IRS has NOT published these procedures. Of course, we are well into tax time. I wonder how many peoples lives have been destroyed by this.

    Furthermore, the IRS is perfectly aware that the “cross border professionals” are encouraging people to enter OVDI. They are doing nothing to distinguish the “minnows” from the “whales”.

    The unwillingness of the IRS to address the issue of U.S. citizens abroad and OVDI, given that they have knowledge of the problems, means that the IRS is perfectly content to use OVDI to destroy the lives of U.S. citizens abroad. Although expats and immigrants may have started out as collateral damage, they are now intended targets.

    @Petros

    When it comes to FBAR either Treasury or Congress can exempt U.S. citizens abroad from FBAR. Neither has and there is no indication that either well.

    The point is that problems can be solved by the Executive
    Branch of the U.S. government. There is no way that the buck can or should be passed to Congress.

  52. @markpinetree- I honestly that he was giving you the best and only real possible solution to this problem.
    I sometimes wonder if the U.S. now doesn’t see non-resident and dual citizenship Americans as a security risk that they would rather not have to deal with. It is much easier to deal with things if you either are or are not a citizen.
    Since the Federal government can no longer make people give up their citizenship when the become the citizen of another nation, this leaves the only option of forcing renunciations. And the only legitimate tool for doing that is the tax code.

  53. I see your point Petros. We can´t be soft with people who are unfair r to us and who show no understanding or wish to be helpful. I will take this in consideration. How about my other considerations? Do you have a view on those? And another question are the IRS agents paid a percentage of the moneythey collect? Do this affect their careers?

  54. @Recaltrantexpat, it would be a huge relief if I learned that the US would prefer us to renounce. I’d always assumed that we’d be considered essentially traitors by doing so.

    I’ve spent over half my life in England and it’s where my heart is….my mixed feelings are more out of a sense of loyalty but life would be so much simpler if I just had the British passport. I have been embittered by all this and definitely know I’m going to remain in the UK forever.

    I am crying as I write this. I will never be able to fully forgive the US for all the financial losses and especially anxiety I’ve experienced. But I hate how I may be forced to become exiled from my homeland just to be able to lead a normal life.

    I’m sorry if I’m a postwhore but it really helps being able to vent on here…

  55. @monalisa1776,
    You are not alone. I feel similarly, and I’m sure that there are many others. Now I wonder, was it ever my ‘homeland’?

  56. @monalisa1776- we were already deemed to be traitors when we left. The naming and shaming is just the U.S. being able to get the last word in on our treachery. The publishing of the names of those who have renounced is purely gratuitous and unnecessary. It put those who renounce in the same league as “johns” or “drunk drivers”, “drug addicts” – eg. those whose behaviour is a threat to the fabric of American society.

  57. @monalisa1776: Post all you want. We need to support each other. I had a great talk with the consular when I renounced. He wished me the best of luck. He didn’t make me feel at all like a traitor. A few loudmouthed ignorant congressmen may have created this “name and shame” list but those aren’t the Americans who matter. If you choose to renounce then you are renouncing the bureaucracy, not the people.

  58. (If you relinquish, you retain the ability to buy firearms and be federally licenced to transport hazardous materials.)

    After months of studying these issues I still can’t read the phrase “transporting of hazardous materials by renunciants” with a straight face.

  59. I lived and worked 30 years in the USA and I love d the Country as much as I do Brazil. Sometimes more. I always saw the USA as a fair Country a place you could trust. I have my two daughters and son in the USA. Never brough one cent I earned there to outside the Country. I have assests there. I go to vist my family once or twice a year and I unless I see no way to be able to cope with the dual citizenship, I will not resign.

  60. Punktlich wrote:

    Your argument “one may withhold information on a tax form, if that information could lead to a violation of person’s Fifth Amendment privilege” seems to me to be an urban myth, or worse.

    Based on Garner v. United States, Jacqueline R. Konovitz writes, about a hypothetical taxpayer named Sam:

    Sam must file a federal income tax return and pay his taxes just like the rest of us. He may, however, refuse to answer specific questions on the form that could incriminate him, such as the nature of his occupation or the source of his income.

  61. Punktlich wrote:

    The SOL will not run unless a Form 1040, Schedule B has been filed. Obviously the SOL is irrelevant if the (non-)taxpayer had no foreign account(s).

    7a At any time during 2011, did you have a financial interest in or signature authority over a financial account (such as a bank account, securities account, or brokerage account) located in a foreign country? See instructions

    My Answer : “YES”

    If “Yes,” are you required to file Form TD F 90-22.1 to report that financial interest or signature authority? See Form TD F 90-22.1 and its instructions for filing requirements and exceptions to those requirements

    My Answer: FIFTH AMENDMENT

    b If you are required to file Form TD F 90-22.1, enter the name of the foreign country where the financial account is located:

    My Answer: FIFTH AMENDMENT

    There you go; the statute of limitations can run out because I’ve filed the 1040 and I have not committed fraud.

  62. @monalisa,

    Don’t ever think you are a postwhore or whatever you called yourself. It will be a day of celebration for me when I can see that you out of everyone on this blog might accept the fact that the US is not your friend (our friend) and you can make decisions to move along in your life.

    When it comes right down to it, it is true what has been said by many that we can really change no one but ourselves. What makes us think we are going to change the way the US thinks and acts, especially with such a dysfunctional Congress? We can work on ourselves and the way this affects our lives and how we are going to solve US abuse in our lives. We can also continue to petition the governments in the countries we live in to protect US persons in each of our countries. In the end, we must protect ourselves — life is too short. Hopefully, we are on this earth to do better things than bow in supplication to such abuse.

    [I am also glad when I see an abused wife (or husband) has the guts to get out of a relationship that is deadly and move on. One usually gains respect all around, including from our family members, when we have found the courage to do so. I know a little bit about that — I’ve been there.]

  63. Not to foment the already high emotions running on this entry, however, readers must be extremely cautious when using the 4th Amendment or 5th Amendment as a defense for not filing returns. Section 6702 of the Code imposes an additional $5,000 penalty for arguments that it has deemed frivolous.

    Examples 9.d, e, and f of Notice 2007-30 http://www.irs.gov/pub/irs-drop/n-07-30.pdf deem arguments based on the 4th or 5th Amendment to be frivolous, thus resulting in the $5,000 additional penalty.

    The Section 6702 penalty applies only to returns required to be filed under title 26 and FBAR is required to be filed under title 31. It is possible, however, that the filing requirement for FBAR could be drawn into title 26 by virtue of the administrative provisions under the HIRE act. This could be a stretch, but it is something to be considered.

  64. @ Roy Again, I am just trying to get this filing obligation out of the way, without at the same time revealing information that could incriminate me; the information that could incriminate me is privileged under the Fifth Amendment, and therefore I will not waive that right under any circumstances.

    Now, my returns are not frivolous. I have withheld only such information that could lead to criminal charges. I have not withheld any tax owing or any information that the IRS needs in order to assess what I owe. I have withheld only incriminating information that is not necessary to assess my tax obligation (1040) or information that is unnecessary to determine if I am a covered expatriate (8854).

    I have in any case a firewall if the IRS decides to make an example out of me. That firewall is my physical presence in Canada, and Canadian government that will neither extradite me nor collect FBAR penalties.

    My question is this: Do you warn your clients as sternly when they file belated FBARs that they could potentially face criminal charges and potentially steep FBAR penalties? Or do you warn them not to enter the OVDI if they would pay $5000? I think my approach is reasonable. I am filing in keeping with the obligation, and I am withholding information that incriminates me based on my Fifth Amendment rights. Do you really consider this approach more hazardous than actually giving the IRS and the Treasury department a full inventory of your financial assets? Consider the fact that these assets are, and will remain in Canada. Do you trust the IRS not to use the information in FBAR to assess fines to filers who are belated? After the OVDP of 2009, I do not believe the IRS is worthy of trust.

  65. Renunciants are in a strange situation, as they are no longer subject to US law when filing back taxes.

    Form 2555 asks for the identification of my Canadian employer who does not want this information given to the IRS. It would be a violation of Canadian privacy laws to do so without his permission. Since this information does not affect my income or taxes due, I will simply state that it is a private party.

    Which applies? My current status at the time of the filing and signing of the document or my status duting the reporting periods of the back tax returna?

  66. Hi Roy: Also consider that the IRS has three years to assess back taxes due and ten years to collect. So I figure, I’ll be able to visit the United States again in 2025. By that time, the Caribbean tourist industry will have made tens of thousands of tourist dollars off me and my wife, and the United States share will be a big fat “ZERO”.

  67. @ Rivka, the answer to your question depends on who you ask. The IRS would like to think that it still has jurisdiction over you and can boss you around and force you to provide information on the 8854. But as far as I am concerned, I don’t even have to file the blasted form at all. I have the CLN. I took it to TD Waterhouse when I opened up new accounts–I showed it to them and they took photocopies of it. As far as the bank is concerned, I am no longer a US person. The only thing I have to worry about now is the 15% withholding tax on US dividends, which I will never have to deal with because I am no longer investing in the US ever again. So if the IRS wants to hound me with $5000 fine for this and a $5000 fine for that, then they are wasting their time, just like they made me waste my time filling out a dozens of useless forms because I don’t owe them anything and they will never ever be able to collect from me.

  68. The IRS is in an no-win game. They can not ask for the form 8854 before you renounce, that would clearly be a violation of your right to renounce. Once you have renounced they have no right to ask you to file anything. That may be the way they want to play the no-win game, they just hope most people file. Anyone that does file the 8854 has done so voluntarily, and can not claim they were forced to.

  69. @Petros

    I have seen some discussions some place over the legal requirement to file from 8854. I wil try to find them again. As I suggested earlier I would hold off on 8854 for a while as I suspect even in the next month or two we will find out more information. I know there have been proposals to use the Reid Amendment against those who don’t file 8854 however there is no actual law in place to do so.

  70. I’d still like to know what notification obligation the IRS thinks recent, back-dated, pre-1986 relinquishment cases have or don’t have. There doesn’t seem to be any concrete information available about this scenario. I plan to do nothing else after I receive my CLN, based on what I’ve gleaned so far. We already know that State is supposed to inform the IRS internally anyway. The IRS is now so far behind on its guidance that it might as well be running backwards.

  71. The IRS text that Roy cites as a warning about taking a frivolous, refers to two warnings regarding the Fifth Amendment (emphasis mine):

    e. Income taxation, tax withholding, or the assessment or collection of tax is a “taking” of property without due process of law or just compensation in violation of the Fifth Amendment.

    f. The Fifth Amendment privilege against self-incrimination grants taxpayers the right not to file returns or the right to withhold all financial information from the Service.

    Please note that point e regards “due process”; this is not the part of the Fifth Amendment that I am invoking. Point f, however, is. But note that it says “not to file returns”; I am definitely filing the forms, so this is not frivolity. Point f also states, it is frivolous to claim the right to withhold “all financial information”. Now see how carefully this is stated? It says “all financial information” because the IRS is well aware that the Fifth Amendment may be invoked to withhold some financial information, such as the source of the funds, provided that the tax payer reveals all income and all tax liabilities. This I have done. I have revealed the information that they need to assess my taxes.

  72. @ Tim: I could take an automatic extension to June 15, but alas, I am weary with this process. I was going to send 2010 too, and this one is already late. If I wait, they could assess a tax liability to my 2010, then I won’t be able to answer the question of satisfying all tax liabilities, making me a covered expatriate. Also, I can send it in one package together and save some money on stamps. Let me think about it.

  73. @ Petros, we take our clients on a case-by-case basis. we make recommendations only after considering all of the surrounding circumstances.
    my reason for participating in on the blog is to remind folks that that these are complicated isues.. even when they seem rather straightforward.. and caution is warranted

  74. One suggestion is to just put a final number on the net worth line of 8854 and be done with it(Not putting anything under 1 or 3). If anyone ever comes back to ask and I highly doubt they will, you can say you forgot. I don’t really know what the best solution. I think your concern over FBAR is warranted. I actually think question 3 is the problem more than anything question 1 is fairly vague.

  75. @ Roy Thanks. The comments from you and Punktlich have made me think about my position, and I think it is stronger now. This is what I see as my two options:

    (1) File nothing except the 2010 taxes (to get some American trades cleared as to tax liability).

    (2) File the Fifth Amendment 8854 and perhaps completely clear up the exit process. Or watch the IRS make an example of me to the further damage of their own reputation of going after innocent minnows in an attempt to extort taxes form expats.

    Filing FBARs is bull crap. I’m not doing it. So if I do not file the Fifth Amendment 8854, I do not file the 8854 at all, and then I will surely receive a $10,000 fine which I will not pay, and I will become a covered expatriate–though I’m not sure that makes any difference to me, since I have no US heirs.

    In any case, I’m not paying any fines or taxes; and we will then see if the Canada will do anything to help the IRS. So far, we’ve received strong assurances to the contrary. I think that the Flaherty and the Ministry of Finance are inviting all Canadians to take a strong stance similar to mine. You can say that they have encouraged all Canadians to laugh at threats of the IRS. And I do: Ha!

    The only concern to me is if I can end this circus by filing the Fifth Amendment 8854, then perhaps I can visit my dad, an octogenarian, a couple more times.

  76. Petros, Even if you file nothing, there is no reason not to visit your dad. They aint gonna issue an arrest warrant for a measly 10K or so. Not worth the trouble or the bad publicity. They have enough problems with billionaires, fraudulent refund claims and identity theft.

  77. Chester12, however, I might want to check if there are any outstanding warrants for my arrest. I have publicly said that I will not file an FBAR. This is a criminal offense. The reason for the Fifth Amendment 8854 and 1040 is to maintain an information distance between what they know about my finances, giving them insufficient warrant to indict me on criminal FBAR charges.

    Once arrested on FBAR charges, they could send me to prison on obstruction of justice. Conrad Black gets out this week. I doubt that it is worth it for me to risk the kangaroo court of US federal criminal justice.

  78. I hate to say this, but this whole situation of Americans Abroad is beginning to change my views (positive) about the USA. I guess I am naive but I keep hoping that they sooner or later will realize the harm they are doing to innocent citizens trying to live their lives in a country other that the USA. But my question remains: what the silent majority of American Abroad are thinking and feeling? Any guess?

  79. I don’t know but I have a few acquaintances in the US that going to try to find out for me. If you read the US media you hear almost no discussion at all anymore of the whole offshore banking thing.

  80. …what the silent majority of Americans Abroad are thinking and feeling? Can’t guess — it’s a “puzzlement” to me that this is not a huge issue in the media and with all the others who are affected.

    I keep running into people who know NOTHING about this and it is my contention that it really is the case. Many who do know about it are convinced it in no way affects them. This leads me often to second-guess myself — have I blown this whole thing out of proportion? Am I creating my own problems? Am I the one deluded that there is a problem?

    My attempts to explain are not clear and the persons I have communicated with come back to me asking if I have gotten my tax situation resolved (i.e., thinking I somehow owe the US back taxes and I am to blame for not paying what I owe). If they have had even an inkling through some media piece, the whole story is so beyond comprehension that it would have anything to do with them that the entire thing hasn’t registered in their brains.

  81. Hi again Calgary. A friendly confirmation that to some extent you have blown part of this at least out of proportion.

    Your attempts to help others who are unable to renounce for people in their care are very commendable. With respect for your devotion to and love for him
    THERE IS NO WAY THEY CAN TOUCH YOUR SON.

  82. I think video below about Magaret Thatcher poll tax is pretty interesting and weirdly relevant.

    I’ll modify some of the comments made in the video to make them more relevant.

    Who ever came up with this crazy idea that if you were born in the United States and technically were a citizen you had to file a tax return wherever you lived no matter how many years had passed since you lived in the US even if all of your income had never been US sourced.

    We had a problem with wealthy Americans living in the US hiding money in banks in Switzerland. Thus we tried to come up with a system(FATCA) where we could without foreign government involvement by imposing a witholding tax get foreign banks to turnover information on their US clients. It was never intended to go after grandmothers or “accidental” Americans.

    The US Treasury ultimately told foreign banks, US Banks, and ultimately the people of the world your going to get FATCA whether you like it or not and ultimately the people of the world said NO.

    Its terribly depressing to meet constituents who are grandmothers and senior citizens crying who are facing 600% fines under FBAR and OVDI programs.

  83. Thanks, Chester. I agree, if he does not cross the border with me, his mom, he should be safe as his Canadian passport does not identify him. I will make sure that’s the case. I just wish it all to be very legal for all concerned so these people have the same rights as any other Canadian (or any other citizen of whatever country). I know I’m anal on this — it is the principle of it I can’t let go of.

  84. Why would most people be aware of the details of US citizenship, tax compliance requirements, FBAR, passport enforcements, etc.? People have lives. The same lives they have had for a long time. Lives that still work as well as lives ever do. Why would they speculatively go looking for trouble and severe anxiety? A wild guesstimate is that maybe 5% of 750,000 affected in Canada could be compliant.

    Of the people I’ve checked with or observed, many are just lying low and keeping on with keeping on. I sleep well at night because there is the feasible fallback if glitch comes to rule – never enter the United States again. I’m going to considerable nuisance to appease glitch, but ultimately glitch could run off in any direction. That is how irrational the whole scenario is. The more that the US jerks around Canadian citizens who just want some freedom, the sadder that failing state looks. In hindsight, the exit signal was their multiple idiot responses to 9/11. Coulda and shoulda. But didn’t.

    Look at the month-by-month media stats over at USxCanada and see that the peak of the story so far spreads from September 2011 (end of OVDI 2) to January 2012 (announcement of OVDI forever). After that, really not a lot, especially on the Canadian front. Brock hits have leveled at 4000 to 6000 per day.

    Think about the numbing repetition that is the essence of effective advertising. The US may look toward the termination of even the façade of “reasonable cause” defense in light of the media coverage, but that would be just one more idiot technicality. The message really has not gotten across very much.

    The big question is when some precipitating incident will cause hits on Brock to double overnight. I don’t see anything on a near horizon. Maybe if Obama gets a second mandate and one of his flunkies does something super stupid?

  85. ” I keep running into people who know NOTHING about this and it is my contention that it really is the case. Many who do know about it are convinced it in no way affects them. This leads me often to second-guess myself — have I blown this whole thing out of proportion? Am I creating my own problems? Am I the one deluded that there is a problem? ”

    @calgary: I have the same experience and wonder about the same thing. I do believe that I HAVE blown this out of proportion and that the many expats I meet who are not worried will probably never have any problems. But still, I need to be able to sleep at night. 🙂

  86. @ USX I agree with your assessment. I think it is actually much better that the vast majority of people ignore the posturing and requirements of the United States. Let the brockers deal with this problem so that they can carry on their own lives doing what they always do. Hopefully our fight will able to resolve the issues before anyone else has to worry and lose sleep, or worse, do something drastic like send money to the IRS. That’s what I am working to stop. I am trying to get people to listen to what the Canadian government has said. It has said, “Don’t worry about FBAR.” And, your best protection is to become a Canadian citizen, if you haven’t done that already. The defiant stance that I’ve taken, the more I think about it, is exactly what Flaherty wants all of us to take.

  87. @USX Again, I think your assessment of our traffic at Isaac Brock is also right. It always goes up when a Canadian main stream media does free advertising for IRS (which leads to Isaac Brock comments); or our highest day was after the Reuters article and the Peter Dunn interview–but 6500 hits that day was a glitch. So we have a regular traffic, but it is steady. I don’t think that the level of anxiety in the population is not rising. When it does because of something stupid, like a generalized harassment of “US citizens” at the border, then we are primed and ready to go viral.

  88. An article referred to at Townsend’s blog by an anonymous blogger (Criminal Tax Investigations and Current-Year
    Returns: New Thoughts on a Perennial Issue
    pdf) , says there is more than one Fifth Amendment strategy; regarding my particular suggestion here, Scot D. Michel writes:

    The first involves the selective assertion of the Fifth Amendment privilege on the return. It is well established that a taxpayer may assert the Fifth Amendment privilege on a tax return in response to one or more specific line items. The privilege may not be used in response to every question on the return, nor can it be used arbitrarily.

    Most circuits looking at the issue have ruled that the taxpayer must always report the total amount of taxable income, even if the privilege has been asserted as to the source or amount of a particular item. For example, a taxpayer may decline to answer the question about foreign bank accounts or to identify the source of income earned in such an account, and instead may claim the privilege explicitly on the return as to those line items.

    But because the taxpayer generally must provide a total amount for taxable income, the amount of income derived from any source as to which the taxpayer has asserted privilege may be apparent, if only by process of elimination. To be sure, the assertion of the privilege and the inclusion of the income amount could provide important leads to an investigating agent, but providing materially incomplete information risks an allegation that no return was filed. The case law clearly recognizes the validity of an itemized and specific claim of privilege on a return, and such a claim will minimize the damage to a taxpayer under investigation while avoiding new offenses.

  89. @Rivka It applies to all forms that must be filled under the Internal Revenue Code. The filing requirements under the tax code are “constitutional” because of the 16th Amendment. FBAR, for now, is not under that code. Therefore, it is still possible to argue that the entire form my be omitted on Fifth Amendment grounds, for the revealing the existence of a account creates a situation in which the filer essentially admits to having committed a potential felony. One court has upheld such an argument. Another court has invoked the Required Records Doctrine, to say that the Fifth Amendment doesn’t apply. But that is a lie. The United States government requires the information for one purpose and one purpose only: to enforce crime. Therefore, I believe and hope that sanity will prevail and the FBAR requirement will be struck down until such time as Congress actually rewrites it to put under the Internal Revenue Code–which may have essentially taken place with FATCA and the 8938 requirement.

  90. @Petros, I believe you’re correct about the 8938 enabling the IRS to more easily collect fines than FBAR because it’s a title 26 vs 31 penalty.

  91. rødgrød, I have the same question. Am I worrying too much about these things? I ask other people, Americans Abroad, Green Carders and they don´t seem to be concerned at all. This puzzles me. When I became aware of FBARS penalties and FATCA I thought that millions of Americans Abroad would protest and become very distressed. Today I went to a site of Democrats Abroad and asked the question directly: are you worried about FBARs and FATCA? So far, after 5 days… no answer. Why? And they are all supporting President Obama as I am too because the alternative is terrible. Let me recapitulate what bothers me. First the paper work that I can´t do by myself (expensive to hire a CPA in the USA). In my particular case, because there is not SS Treaty bertween the USA anf where I am I have to pay SS Self Employment Tax in two countries, withou any return. Then I have to pay US taxes on incomes that are not taxable where I am: pension and savings. Then some difficulties finding data where I am to enter in the IRS Return (takes a lot of time), And now the worse: not knowing what is going to happen in terms of FBARs because I only learned and started filling them in 2009. This is what take my sleep at night. I guess that people who are employed (the great majority) only have to file 1040, 2555 and send FBars if they have more than 10,000 invested. It may be simpler for them and perhaps this is why they are silent. To end this long poster I think I do feel annoyed with all these forms, demands and threats because I don´t understand the need for that. If we have an Earned Income Exclusion and Tax Credits and if the great majority of countries either have the same taxes or even higher taxes than the USA, what is the IRS looking for? I guess it is just for our mistakes and omissions (for not knowing) with their incredible draconian penalties. But again why Americans Abroad are not more annoyed and expressing themselves?… Mystery. Petros, thank you for this Society where we can share our views and concerns.

  92. @Mark, I am equally bewildered. But the more I think about it, the more i believe that there is a lot of posturing, both from the IRS and especially the cross-border professionals making a living from our paranoia.

    I suspect that the majority will continue to be non-compliant and that the IRS will turn a blind eye if they lay low and focus on whales or tax evaders living in US but hiding via offshore accounts.

    In retrospect, I was bludgeoned into complying but now feel duped…I now suspect that with no assets over there, I could have probably carried on living and investing like a Brit and if I had been blissfully unaware, would have never known the wiser.

    But I also felt that once I became aware, to not have rectified it would have then been willful. In many ways I wish I had never found out because knowing means I now have full accountability.

  93. Was anyone else impressed with the list of complaints/issues to be brought up in the Democrats Above presentation posted above by Tim only to be massively underwhelmed by their proposed solutions at the end?

  94. I agree totally. However I feel like those “solutions” may very well be what’s coming down the pike in coordination with a delay of FATCA for one year. My view is outside of the US we need to fight for something better than that. My hunch though is that there is still substantial resistance in the bureaucracy to even some of those items thus this whole mess will continue to drag on. You might also see the requirement of providing a place of birth under FATCA eliminated replaced with just a straight citizenship question(Don’t Ask Don’t Tell).

  95. Raising the reporting threshold for FBAR doesn’t do anything in terms of the complex requirements dealing with RRSP, RESP, TFSA, foreign pensions, PFIC’s etc. all of which are deeply embedded in the US tax code.

  96. PFIC’s were my nemesis…but I should have checked first before the DIY investing. In fact, I’d even suggest that investing might not realistically be appropriate for low earners.

    If I’d done it over, would have stuck to CD’s instead of mutual funds or stocks. Oh well

  97. @monalisa1776- don’t blame yourself. You did the absolutely correct thing. The U.S. government is the criminal here and it is profiting from the avails of its criminal activity.
    They are behaving no differently then the local gang who shakes down honest businesses to pay protections money to them so that the gang won’t burn or rob them.
    It is an example of how the U.S. unjustly cripples expats by treating them as criminals. Expats should be free to engage in any legal investment activity of their country of residence. Once you move away you are no longer of any concern to the IRS.
    They can’t say that their regulations are preventing harm to anyone, not even the U.S. And the prevention of harm is the point of all law.

  98. @markpinetree;
    I asked my local Democrats Abroad the same thing in an e-mail, and I got no reply at all.

  99. The Democrats Abroad must be conflicted like me. Want to work for Obama but can´t deny that his administration is making my life hell. Don´t know yet how I am going to resolve this…

    @monalisa I identify with you. I also have this severe super-ego que forces me to what is right all the time.. Sometimes I pay for this. Now I lay awake every night…

  100. @Tim;
    Re: above in this thread
    May 1, 2012 at 5:21 pm
    “Raising the reporting threshold for FBAR doesn’t do anything in terms of the complex requirements dealing with RRSP, RESP, TFSA, foreign pensions, PFIC’s etc. all of which are deeply embedded in the US tax code.”

    I asked a question related to this issue at
    http://isaacbrocksociety.com/2012/01/13/ask-your-questions-about-us-expat-tax-fbar-and-fatca-discussion-thread/#comment-16303 because Minister Flaherty specifically mentioned FBARs in his public admondishment of the US and IRS, but he did not address the 3520 and treatment of all those you list above – including his proposed PRPPs – which would be treated similarly – precluding our ability to use them for our savings as well.

  101. Anyone ever read that book about the five stages of grief? Denial, Depression, Anger, Bargaining, and Acceptance. That’s just what I’ve been cycling through since hearing about these IRS requirements.

    I am currently at an Anger stage! For my 2007 returms I paid $500 in tax since I had capital gains on US stocks. Now I’m preparing 6 years of amended returns since I didn’t know I had to report foreign interest or accounts. I’ve discovered the tax amount was figured wrong – that you have to base it on what it WOULD be if your worldwide income were taken into account, not based on the actual capital gain amount! That combined with the reporting of an additional $6,000 foreign interest income, means I am suddenly in a new tax bracket and owe $2,500 instead of the $500 the CPA figured. I was confident I wouldn’t owe anything extra, or maybe very little.

    Since I have US savings, mutual funds and stocks which I inherited, and I’m very close to my aging parents and want to be there for them as they get older, I plan to move back next year. This means I have no alternative but to suck it up, cave in, flush this out, then eventually move all my money to the US so I won’t have to deal with this anymore…. then when I retire and leave again, maybe I’ll renounce!

    Meanwhile, Ive really been looking forward to a happy reunion with family and a new life in a beautiful, sunny part of the US (after 17 rainy years abroad)… The whol idea is now taking on some very depressing and stressful dimensions, but I refuse to let these insane rules and regulations dictate my life.

  102. @Howard;
    I understand re: “Denial, Depression, Anger, Bargaining, and Acceptance. That’s just what I’ve been cycling through since hearing about these IRS requirements. ”
    I know just what you mean. And every time I think I’ve even started to address the problem, I find out about another issue. I feel trapped. And that is in the face of absence of US tax liability (as I figure it). It’s all the forms and reporting. I don’t know if I’ll ever get to ‘acceptance’ though.

  103. Let me review and summarize. I don´t mind FATCA because I have nothing to hide. I am sending my FBARS every year now.
    Of course with the Tax Credits I am not concerned with the investments I have in the country where I am living and working.
    Of course I keep wishing that the USA would become like all other countries and spare me having to file Income Tax in two countries. I never did it in the 30 years I worked in the USA. Now what really bothers me: the time and work I have to spend here to get the data for the IRS and to fill the increasing paper work. Having to pay US tax in a small pension I have here that is not taxed here. At my age having to pay SS Self Employment Tax in two countries because they don´t have a SS Tax Treaty. Having to live in fear of what may happen to me for not having known about the FBARs. Having ro hire a CPA in the USA to do my return because of its complexity. .

  104. Wew! That was a bit jarring at times. Learned a lot. Special thanks Roy Berg, Michael Miller and punktlich11. Really appreciate your contributions and opinions / observations. I always learn from the varying perspectives legal practitioners provide. It takes my brain a while to absorb it all. Thanks for taking the time and effort to provide comments. I am not sure you were expecting a vigorous debate, but that is way of our mate Petros. 🙂

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