Bink

That's NOT good!!!

Lets just leave it with, it's double figures

Peter Newton

I know a great tax attorney here in NY, but I think the OP will need to work with someone local....

Bink- if you PM me I'd be happy to pass on the details...

Bink

Thanks Peter. I have spoken to a few lawyers in the past 2 days and the news is not good. They do not believe there is any getting around the 20% penalty as I am already on the VDP.

JAJ

There must have been literally thousands of American citizens/PRs who have "come in from the cold" in this respect and this is the first I have heard of anyone having a problem (in a situation where tax wasn't due).

Probably the mistake was to go into the VDP rather than take the standard route of filing outstanding returns and letting the IRS make any assessment under normal rules.

There is some information in the IRS manual, part 4, section 4.26:
http://www.irs.gov/irm/

Bink

Yeah, in hindsight I would have been better doing a 'quiet' disclosure since I didn't owe any tax. However, I was advised against this as I hadn't filed tax returns. The IRS advice is for people who have filed it on their tax returns, don't owe tax and only haven't filed FBARs. I kinda fit in the middle because although I don't owe tax, from the IRS's perspective, I DO have unreported income (though not taxable due to tax treaty with UK).

Michael

There is a penalty abatement process which allows you can prove reasonable cause to reduce or remove the penalty. I would think that not knowing you are a US citizen would be reasonable cause.

It may be worth it to call this web site to see what they think.

http://www.taxresolution.com/IRS-off...ettlements.asp

The following is the instructions and form to file for abatment.

http://www.irs.gov/instructions/i843/index.html

JAJ

Advised against it by whom? There are lots of US citizens in exactly the same situation as you and I've yet to hear of any having problems when they approached the IRS to catch-up on outstanding returns.

Did you read what it says in the IRS manual about FBAR penalty mitigation? Have the IRS followed their own policies or not?

You've been given some advice in post #36 and I'd also suggest contacting http://www.aca.ch to see what they think and if any others have had the same problem.

If it ends up as bad luck, then perhaps it's the inverse of the good luck you had to be a US citizen in the first place.

Bink

Advised against it by a CPA. I've been told by lawyers in the past week or two that I sit in a very grey area of the law. I've been advised that in order to satisfy the reasonable cause element, I'd also have to have met the reporting element. I.e, if I'd filed tax returns, but didn't know I had to seperately file FBARs, I'd meet the reasonable cause exception.

The problem, is I didn't report any income to the IRS (ever) as I was unaware I was supposed to having never lived/worked in the US. As it is, I have unreported income, but am in a situation where I wouldn't have owed tax.

I have read the IRS mitigation, but I'm on the VDP so it's unclear as to what can be applied to me as the VDP has a 20% penalty unless you meet the reasonable cause. I have recently spoken again to the agent handling my case and have been informed that are considering assessing me on the lesser of the 20% penalty and standard FBAR delinquency basis ($500/event) and this may reduce my fine by 30% which is at least something

Bink

Yes, this does appear to have been my mistake. The IRS is unclear on its rules though if you have unreported income, but do not owe any tax... I entered into the VDP without having had my tax returns calculated first.
They are very keen to point out though that the FBAR filiing requirement is entirely seperate to the requirement to file taxes.

JAJ

You may well have been advised by a CPA to do what you did, but the advice goes against the experience of thousands of others who took the option of filing quietly and had no problems. Did this CPA have experience dealing with Americans overseas?

You need to take this as an expensive "lesson" insofar as that even if you take advice from a professional (in any sphere) you need to do your own research to see if the advice makes sense, and get a second opinion if necessary. Did it not occur to you that there were thousands of others in the same situation?
Also you need to choose the right professional to get advice from.

As to what you can do going forward:

1. Pay up and forget about it.

2. You've already had the suggestion of contacting http://www.aca.ch to see if they can help and perhaps refer you to someone who can help further. Your legal options could include asking for your case to be reviewed at a higher level in the IRS and/or rejecting their proposal, in which case they might have to take you to court.

Bink

Actually, I did do research and there's very little conclusive material. It's a grey area that appears to split lawyers and CPAs. Was I perhaps a little naive that the IRS would listen to reason and allow me the reasonable clause waiver, perhaps...I actually had precious little time to make a decision before the VDP closed. I was also in a position where a CPA knew (because they asked me if I knew about FBARs) that I hadn't filed. There are also penalties in place for CPAs that don't declare that their clients have foreign bank accounts when they know this to be the case.

There may be thousands that haven't filed FBARs but I would disagree that there are thousands of people in my situation.

One must also bear in mind that the IRS is investigating ammended tax returns and those that submitted 'quiet' disclosures are not necessarily in the clear...

I intend to fight it. It's a completely disproportionate penalty.

Bink

Well, the final penalty has been calculated. $6k. They don't exactly give you a lot of time to pay it - 14 days! (oh and from the date on the letter which took 4 days to get to me)

I haven't been fined 20% in the end - I've just got a load of $500 dollar fines. I find this a little easier to stomach somehow even though it's still hefty for what is a paperwork fine.

Could be worse... Still peeved with the whole system but for that amount think I'm just going to pay it and be done with it, much as it pains me to do so.

Onwards and upwards.

shorrock

Treat it as the costs of getting your USC.

Cheaper than having to get visas, greencard and then applying for citizenship

Yoder

Blink

Do the series of $500 fines relate to the several years you have not filed or to the several accounts you had not declared? You got 12 fines of $500 so that is a lot of years or a lot of accounts.

How do they deal with joint current accounts - is the amount considered part of the $10k limit?

How about ISA stocks & shares savings accounts and pensions accounts - do these also count?

thanks

Yoder

Bink

Yoder,

I was under the voluntary disclosure programme so don't know what happens with cases now...

In my case, I was fined for every account I had (ISA's included as well as joint accounts and savings accounts) for every year that it existed in the range 2003-2009.