Toronto Star’s Michael Lewis, Saverin article: It’s about “Benign Actors”

Michael Lewis at the Toronto Star covers the Saverin story and quotes me from an Isaac Brock Society comment.

See, Facebook co-founder Eduardo Saverin’s taxing connection to U.S.-Canadian dual citizens

Lewis also cites Nina Olson (emphasis mine),

U.S. National Taxpayer watchdog Nina Olson in a public letter warned that the IRS is driving “benign actors” underground with draconian penalties and a byzantine international tax reporting regime.

I googled this term, “benign actors” and found the March 5 letter from ACA to Douglas Shulman, Commissioner of the IRS:

In one of Ms. Olson’s communications to you, she explained that the OVDP “attracted both bad actors and benign actors who made honest mistakes. If the IRS had clearly communicated that everyone would be presumed to be a bad actor (or willful violator) as the TAD appeal asserts, it would not have attracted benign actors.” In other words, the OVDP program has treated everyone who entered it as a tax cheat, actively hiding funds overseas, whereas many who came into the program were Americans living overseas who had no idea they had to make a tax declaration to the United States. By doing so, the IRS has adopted a camouflaged policy of taxing assets of Americans abroad through penalties, when in fact the United States officially taxes only income and capital gains.

Lewis, however, writes the anonymous IRS response to Nina Olsen:

The IRS in response said “measures are in place to prevent taxpayers from being subjected to financially devastating penalties.”

Really?  Is that why some of us can’t sleep at night?  The IRS threats to devastate the wealth of US citizens outside the USA remain.

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15 thoughts on “Toronto Star’s Michael Lewis, Saverin article: It’s about “Benign Actors”

  1. “In December, the IRS confirmed it will waive penalties for not filing old tax returns if the taxpayers owe no U.S. tax. It has also promised to publish new procedures to help dual citizens meet reporting requirements.”

    I assume that these “new procedures” will be attached to every passport application, promoted in pamphlets at every US consulate and broadcast through numerous public media? No, of course not, since informing people of their obligations would ruin the ability of the IRS to continue to milk the gravy train of terrified expats and collect ruinous penalties.

  2. Wilderness – good article – nothing about all Americans overseas being rich tax evaders – thank goodnes. 🙂

  3. Are we going to make posts for the 2 articles? I think Atossa’s article is spot on, especially the last paragraph. Right now, I’m thinking that the US passport ranks at the bottom of the list in terms of attractiveness (if you never plan on living there).

    If I could, I’d trade my US passport for an Angolan passport.

  4. It would be really good if Brockers can make some comments on the two articles above and make reference to the IBS website.

  5. hehe and an Angolan passport actually wouldn’t be too bad considering all of the economic growth going on there now. Lots of Portuguese are emigrating there…and I guess some Brazilians as well?

    As bad as the US passport has become, I still think that you could manage to trade it for an EU, Swiss, Canadian, New Zealand, HKSAR or Singapore passport easily since there is always somebody who wants to move somewhere else – Aim high. Personally the only passports that I would be interested in trading for would be a Swiss (due to them not listing place of birth and it being a really nice place to live) or a Canadian (due to being impressed by the Canadian government resistance to FATCA and actually defending its residents and citizens).

  6. @all- for the IRS to condition the avoidance of penalties on whether or not taxes are owed is self serving. The IRS KNOWS that the vast majority of people who have been unaware of their reporting requirements will owe taxes because that is the way the system is designed.
    People like Monalisa1776 who in her own words, went native, will have innocently violated IRS reporting rules with regards to investing in PFIC’s but all without the intent of avoiding taxes.
    If the IRS were sincerely intent on assuring expats that they would not suffer penalties then the criteria should be whether or not there was intent. Going native is not intent. It is just living your life according the rules of your country. Anyone who is in good standing with the tax reporting regime of their country of residence should be presumed to be without intent and there only obligated to pay any taxes that are owed.

  7. I like this comment after Atossa’s article:

    “Citizenship in the U.S. is like being bound to a dying animal”.

  8. Don, there appears to be a sort of clique with the Portuguese speaking countries, in some regards. Brazilians have worked for years in Angola and Mozambique (Portuguese too). Even now I read about the 2 African countries trying to attract Brazilian farmers, ranches, and other businesspeople.

    When I was checking on a Mozambique(an?) passport yesterday I saw on the embassy’s website that Brazil has given a huge loan to Mozambique, I don’t remember how many millions of US Dollars (why not Euros or Swiss Francs!!?). So there appears to be a certain amount of cooperation between the Portuguese speaking countries, even though Brazilians need a visa to go to Mozambique, but everyone does.

    Notice I said “cooperation”. I don’t recall seeing that with the US. Usually a country does it the US way and that’s the only way. I’m so sick of that arrogant country that thinks it has right to you, your money, and your accomplishments for the rest of your life, even when you move abroad and want nothing else to do with that place.

  9. @geeze – you’re right about Portuguese speaking countries, there is a clique by language. My grandfather’s family came from Portugal. Other ex-colonies included Macau (next to Hong Kong), Goa (west coast India), parts of Indonesia, and Cape Verde islands. Also Portugal owns islands in the Atlantic (the Azores and Madeira). Obviously Brazil was the big prize until their indepenence in the 1822.

  10. Why not offer a true amnesty, one without penalties for a start? Even then when people know about the shifting-sands-over-a-mine-field-in-an-earthquake-zone nature of being a compliant US non-resident, there will not be the numbers they might hope for jumping on that compliance train.
    @Don, as far as the Canadian government goes, the fat lady has not sung, but there’s still hope that when she does it’ll be the Canadian national anthem.

  11. @Recalcitrant, while I suspect that the IRS were annoyed that I made a quiet disclosure instead of OVDI, I also hope that they will be happy enough to have got about $12,000 to $15,000 in extra taxes and me fully compliant going forward. If I hadn’t gone native and invested in PFIC’s, I wouldn’t have even owed any US taxes which is why I agree their at least official stance of only being freed from potentially draconian penalties if no taxes are owed is such a narrow interpretation. After all, there are mega-wealthy people out there and the most I’ve ever been worth was around half a million if you count my share in our home.

    I would hope they’ll focus on rich expats and obvious tax evaders rather than people like me who through their naivity got themselves entangled in this mess. I suspect that most of the expats England are poor students; or if well-off, keep most of their investments in US-based brokerages or have savvy financial advisors who steered them away from pFiC’s…so was an anomaly.

    My accountant said that she believes that the IRS contacts she knows will feel sorry for me and realise it was far too messy of a f**k-up to have been intentional. And with 600 pages of amended returns, they aren’t likely to want to go through a lengthy audit when it’s obvious she’s dotted all the i’s and t’s. Not enough money in it for them.

    But if they turned nasty, I’ve warned my parents that if necessary, I’d never cross the border again. But fi.gers crossed, it will go smoothly…it’s been almost a year now since the amended returns were submitted.

  12. Actually they were closer to 800 pages or around 190 pages per year!! My 2011 return will be more like 250 pages, what with 8938 as well…But with 2012 being my first consolidated year, hopefully the return will be under 60 pages though that’s still very long and complicated.

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