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FBAR delinquency and VDP

FBAR delinquency and VDP

Old Oct 19th 2010, 7:27 pm
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Default FBAR delinquency and VDP

I'm a dual UK/US citizen. Born in US to British Parents and lived my whole life bar the first 9 months or so in the UK until January 2010.

Got a US PP for the first time late last year and was told that as a US citizen since birth I should have been filing US tax returns and FBARs.

Entered Voluntary Disclosure Programme (VDP) in good faith and sent in all my account information. As expected, my tax returns showed I don't owe any US tax for any period.

HOWEVER, I am now being fined 20% of my highest bank balance on my 'foriegn' bank accounts (UK accounts) for failing to tell the good old IRS that I had money in a different country. I am only being punished for failure to file FBARs, I would not have owed them any money if I had known to file.

Has anyone on here been in a similar situation and fought it? It seems absolutely ludicrous that the US can expect people that have never lived or worked in the USA to know that they have filing requirements and then fine them, despite the fact that if they did file them at the time, they would not have owed ANY money.

My faith in American justice has just taken a massive blow.
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Old Oct 19th 2010, 7:41 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by Bink View Post
I am only being punished for failure to file FBARs, I would not have owed them any money if I had known to file.
There is a "reasonable cause" exception to filing FBARs. I suggest you hook up with an attorney familiar with tax issues and fight this... nothing to lose!

Ian
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Old Oct 19th 2010, 7:49 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by ian-mstm View Post
There is a "reasonable cause" exception to filing FBARs. I suggest you hook up with an attorney familiar with tax issues and fight this... nothing to lose!

Ian
Thanks Ian. I've been blocked on the 'reasonable cause' exception and am at the point of seeking legal advice.

The reason I was blocked on the reasonable cause, and I quote the conversation

"You are a US citizen and as a US citizen you know you have to file."

That was pretty much the end of the conversation.

Completely failed to understand, I didn't know I was a US citizen as I was brought up as British despite being born in America, and that even if I did know I was a US citizen (I didn't so this is hypothetical) how would I have known that I should have been filing US tax returns and FBARs. No other country is backward as America on tax to the best of my knowledge.
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Old Oct 19th 2010, 8:40 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by Bink View Post
Thanks Ian. I've been blocked on the 'reasonable cause' exception and am at the point of seeking legal advice.

The reason I was blocked on the reasonable cause, and I quote the conversation

"You are a US citizen and as a US citizen you know you have to file."

That was pretty much the end of the conversation.

Completely failed to understand, I didn't know I was a US citizen as I was brought up as British despite being born in America, and that even if I did know I was a US citizen (I didn't so this is hypothetical) how would I have known that I should have been filing US tax returns and FBARs. No other country is backward as America on tax to the best of my knowledge.
Who was that conversation with and have you gone any further than that, or just took what was told to you?
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Old Oct 19th 2010, 9:02 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by meauxna View Post
Who was that conversation with and have you gone any further than that, or just took what was told to you?
Conversation was with the IRS Criminal Investigation agent assigned to my case. I have been told it has been reviewed by senior management and declined. Now looking for advice and options... I have to-date, not submitted the offshore penalty worksheet calculating the penalty as I'm afraid as soon as I do, the IRS will take that as admission that I will pay that penalty amount.

I have been told I can appeal only upon final declaration of the IRS of my penalty.

I am regretting being honest and coming forward, I think this was the wrong choice as I was under the impression from a CPA that I would be given leave under the reasonable cause exception.
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Old Oct 19th 2010, 9:09 pm
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Default Re: FBAR delinquency and VDP

Wow.. well, I've never heard of anyone getting snagged for this, particularly a dual like yourself who had never had a US passport etc.
This seems like the sort of thing I would prefer to have legal help with, if it were me. I'm sorry you've got the extra trouble, but I'm hopeful it can be resolved. Let us know what you find out!
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Old Oct 19th 2010, 9:21 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by meauxna View Post
Wow.. well, I've never heard of anyone getting snagged for this, particularly a dual like yourself who had never had a US passport etc.
This seems like the sort of thing I would prefer to have legal help with, if it were me. I'm sorry you've got the extra trouble, but I'm hopeful it can be resolved. Let us know what you find out!
Thanks. I'm reluctant to get legal help as I'm fearful it could prove prohibitively expensive. Based on my accounts and reading of the penalty structure, I estimate I will be fined ITRO $10k. The agent has also confirmed this is their understanding although they want my calculation sheet of the penalty before they'd commit an amount.

Although this amount is painful and completely unfair (IMO) it will not bankrupt me but does have a significant impact on my finances. If I seek legal advice and add lawyers fees to that though, it could double and there's no guarantee I'd win...
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Old Oct 19th 2010, 9:27 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by Bink View Post
Thanks. I'm reluctant to get legal help as I'm fearful it could prove prohibitively expensive. Based on my accounts and reading of the penalty structure, I estimate I will be fined ITRO $10k. The agent has also confirmed this is their understanding although they want my calculation sheet of the penalty before they'd commit an amount.

Although this amount is painful and completely unfair (IMO) it will not bankrupt me but does have a significant impact on my finances. If I seek legal advice and add lawyers fees to that though, it could double and there's no guarantee I'd win...
I don't think getting decent legal advice on this matter will cost you $10k, though the cost of pursuing it may add up.

Surely a good lawyer experienced in such matters would be able to tell you whether your case was worth pursuing and be able to give you an estimate of the cost of doing so?
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Old Oct 19th 2010, 11:24 pm
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Default Re: FBAR delinquency and VDP

A consult for a couple hours shouldn't be more than a couple hundred, well worth spending if it'll save you $10K...and you'll know better what your chances are and if it is worth pursuing...

Also if you're a bloke, have you filed for the SS as well? That's another thing that snags people and the way your lucky is going

Good luck!
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Old Oct 19th 2010, 11:44 pm
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Default Re: FBAR delinquency and VDP

I agree with the other posters here- definitely get the help of a tax attorney; this is absolutely not an area for trying to do it yourself!
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Old Oct 20th 2010, 12:02 am
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Default Re: FBAR delinquency and VDP

Originally Posted by Bink View Post
Conversation was with the IRS Criminal Investigation agent assigned to my case. I have been told it has been reviewed by senior management and declined.
I'd just like to point out, in case you aren't aware, that it is perfectly okay for US government employees to lie to you to get what they want. The US Supreme Court has confirmed that you can NOT rely on, as accurate, anything said to you by a government employee.

I should also point out, that unless you plan on entering the US for a visit or to live here, you can probably ignore the IRS request.

Ian

Last edited by ian-mstm; Oct 20th 2010 at 12:04 am.
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Old Oct 20th 2010, 3:16 am
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Default Re: FBAR delinquency and VDP

You might want to check out the mirror of this site, which is for US expats living in the UK. They have a special messageboard for tax related issues relating to Americans living in the UK

http://talk.uk-yankee.com/index.php?board=11.0

They might also be able to recommend some accountants/lawyers to consult.
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Old Oct 20th 2010, 7:41 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by Bob View Post
A consult for a couple hours shouldn't be more than a couple hundred, well worth spending if it'll save you $10K...and you'll know better what your chances are and if it is worth pursuing...

Also if you're a bloke, have you filed for the SS as well? That's another thing that snags people and the way your lucky is going

Good luck!
Yeah, when I got my SSN I had to admit I'd never been enrolled in SS... I'm over the recruiting age now though and haven't heard anything regarding that so am hoping that one doesn't rear its ugly head...!

For my SSN I had to prove that I'd been living in the UK since a baby, so doctors records, school records, employment history etc which covered 28 years of life in the UK. The IRS isn't interested in any of this.

What really gets me over all of this is the assumption that because I was born in America, I automatically know all about the intricacies of the US law and tax system, despite being raised by British parents in the UK since I was a baby.

I know a fair few American's who are living in the UK and only 1 of them knew about the FBAR requirement. The majority of them aren't even aware that they should continue to file US taxes each year either.

I've been trying to look for lawyers who specialize in this kind of case, but I'm struggling to find any that I can see have experience in situations such as mine.
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Old Oct 20th 2010, 7:43 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by Peter Newton View Post
I agree with the other posters here- definitely get the help of a tax attorney; this is absolutely not an area for trying to do it yourself!
Pete, have you got any contacts you can recommend?
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Old Oct 20th 2010, 8:06 pm
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Default Re: FBAR delinquency and VDP

Originally Posted by Bink View Post
What really gets me over all of this is the assumption that because I was born in America, I automatically know all about the intricacies of the US law and tax system, despite being raised by British parents in the UK since I was a baby.

I know a fair few American's who are living in the UK and only 1 of them knew about the FBAR requirement. The majority of them aren't even aware that they should continue to file US taxes each year either.
I am sympathetic with your plight so please do not take my comments the wrong way.

There is a saying that ignorance of the law is no defence and it seems to me that the IRS is using this principle to punish you. In one of your other posts you seem to suggest that until quite recently you didn't know you were American. If that is correct my argument would be that until that date you could have had no way of knowing you needed to comply with US tax law so therefore you should have "reasonable cause" up until that point. After that date I guess the counter argument could be you should have taken steps to find out what the responsibility of being a US citizen entailed. How your counter that I'm not sure.

The argument that there are US citizens living in the US who don't know they should file taxes is a red herring. They should know. They should have taken the steps to find out before they left the US. My wife did when she came to England and it was very easy to do. Expecting the IRS to be sympathetic to reason and what others do is a lost cause they respond only to hard and fast facts. I hope you achieve the result you are looking for.
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