Monday, July 16, 2012

Tax Justice for Americans Abroad

My recently published article in Tax Notes Today





The potential for IRS overreaching in its enforcement of the Bank Secrecy Act (FBAR's) and FATCA has created a firestorm of fear and anxiety in the world-wide American expatriate community.  The IRS has done a good job with its various offshore voluntary disclosure initiatives since 2009 by presenting an opportunity for people with real reason to fear an IRS criminal investigation to get right with the IRS. But it just makes no sense for Americans in name only, who have been living abroad, with no real economic connection to the United States, to be required to come up with eight years of financial statements, “delinquent” tax returns and delinquent FBARs, a whopping 27.5% tribute payment to what expatriates consider a “foreign government”, and a small fortune in attorneys and accounting fees, to spend three or more years maneuvering through an IRS administrative maze, to “opt out” of the program. Our office has been waiting for the assignment of a revenue agent for too long in some cases after receiving the preliminary clearance letter.

The IRS has warned everyone to avoid quiet disclosures but it has forced  practitioners into a huge funnel under OVDI apparently with the end closed off. We can only assume the IRS bit off more than it can chew after frightening the whole world about “what it could do” to anyone who thought it was just joking about causing almost everyone “to go through the program” with the exception of a very narrow range of cases. (see the June 26 IRS pronouncement regarding low risk cases.)

The practitioner community has been quick to point out that the “one size fits all” approach of the OVDI program simply makes no sense in a large number of cases simply to allow us to get to the point of arguing  before an IRS Compliance manager or an IRS Appeals Officer, that the FBAR  mitigation provisions of the Internal Revenue Manual should be applied instead the almost extortionist 27.5% tribute program under OVDI.

This article does not attempt to cover all the factual scenarios which do not fit into OVDI, but the facts of  Adams family in the article should be a “no brainer” for the IRS. The purpose of the article is to suggest a common sense facts and circumstances approach for front line IRS troops to free Americans abroad from the fear of enforcement of statutes which were never intended to punish and destroy them economically.  For these Americans abroad, the United States is about as far away from their lives and minds as anything could be.



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