Decline of American Civilization, Form 8938 Edition
We’re working on a tax return project. It involves a 2012 Form 8938 (PDF).
Forty-six (multi-word obscenity deleted) pages long.
That’s how long the Form 8938 is, in draft form.
And we ain’t done yet, pardner. This here thing might be getting’ biggerer a’fore we’re done.
And of course there’s the FBAR that goes along with this project.
This is how American civilization dies–one spectacularly ill-conceived idea at a time, (ahem) emitted by Congress and the Treasury Department.
Let’s just bury the world in useless paperwork, shall we?
Note to Concerned Immigrant
A reader who nicknamed himself/herself “Concerned Immigrant” left me a message from the Contact page of this site.
Hi Concerned Immigrant. I sent you am email in response. It bounced because you gave an obviously fake email address.
Perhaps you just wanted to vent your anger at the FBAR stuff your parents face.
Anyway. Here is the gist of the response I tried to send you.
(1) Do everything correctly for 2012. Don’t miss this deadline.
(2) Get some competent advice about how to handle the past years. If the advice is OVDI, then stand up and walk away, swearing the mightiest oaths that a drunken sailor could swear.
(3) And yes. The IRS and its Streamlined Procedure. It is a steaming pile of . . . . Ahem. I digress. The Streamlined Procedure is useless. I will stop there. I’m heavily jet lagged and might ^H^H^H^H^H would probably lapse into ill-advised profanity if I continue.
Greetings from Heathrow Terminal 5, BA’s lounge. Monday morning, after leaving Riyadh on a 12:40 am BA departure. I got off the plane singing Willie Nelson’s “Bloody Mary Morning” (YouTube) to myself.
It is an orange juice morning morning for me. I will see my own Mary later today. I’m happy about that.
Yet another FBAR minnow to the guillotine
I have permission to post this anonymously.
With regards to the US Government/IRS/FBAR/OVDI witchhunt/shakedown, I fit the mantle of victimhood at the hands of our so-called government for the people, of the people and by the people to a T.
Whether stupidly or not, I came forth this last March, because I did not disclose two or three of my [Country] savings accounts (I’ve lived in [Country] for almost 20 years) over my covered years (2003-2010).
I got a letter from the OVDI people in [recent month], to ask me to submit 1040X’s, submitted FBAR’s and their paperwork. The latter is essentially asking me to provide the rope to hang myself.
Tallying the results? I owe [under $200] in aggregate back taxes to the IRS, yet will very likely end up paying the 27.5% FBAR penalty of around $80-$90,000.
There isn’t much more I can say about the unfairness of all this. I am still reeling emotionally. My friend asked me to please control my anger, so I am doing it to keep this civil.
If there is a class action suit against the US Government, I would like to consider joining.
NB. Not our client. I don’t know his real name. The email is edited to disguise identifying facts. Why? Here’s my correspondent’s first followup email to me:
I am reluctant to use my real name at this time for fear of retribution. If they want to use any info I am to provide, as trailers for a witch-hunt, I am sure they will find things to make my life miserably – no matter how trivial or irrelevant to their supposedly mission of uncovering money laundering or unpaid tax [under a couple of hundred] dollars.
Then the second follow-up email:
I further changed it to say “under $200″ rather than an exact figure. I am that paranoid.
The paranoia is justified. A government speaker at the California State Bar Tax Section’s annual meeting said that Criminal Investigations is following up any inquiries they can to see if the taxpayer entered the Voluntary Disclosure Program. If not, expect a letter from Criminal Investigations.
From Tax Notes Today, 2012 TNT 215-1:
The IRS Criminal Investigation division monitors the information it receives under the Service’s offshore voluntary disclosure initiatives to ensure that taxpayers who inquire about the programs follow through, a CI official said November 3.
Rebecca Sparkman, CI director (operations policy and support), said that CI checks to ensure that taxpayers who undergo a pre-clearance check for acceptance into the voluntary disclosure programs follow through with disclosure. “Those [taxpayers] are suspect, and we are looking at those who decided not to continue to come through. Will it be Criminal Investigation? I don’t know; it could be a civil audit,” she said at the annual meeting of the California Tax Bar and California Tax Policy Conference in Coronado, Calif.
Sparkman warned that taxpayers who make only partial disclosures or don’t supply all the information about their offshore activity to the IRS will face severe consequences. “When [the taxpayer] is not truthful, yes, CI will come back in,” and the taxpayer may be criminally liable, she said, adding that the same is true if badges of fraud or lies are uncovered during an examination.
“I really believe that we are at the beginning of our work in the international offshore area,” Sparkman said, adding that the information received from the IRS’s offshore voluntary disclosure programs is fueling investigations into new banks and countries.
is this the OVDI tipping point?
This article has more than 300 comments. Finally Mr. Shulman has hit the mainstream consciousness, but not in the way he anticipated.
Canada holds the moral high ground here. This may mark the tipping point at which diplomacy and sanity force Mr. Shulman’s retreat. I hope so.
Oh by the way. You Canadians in the OVDI. Prepare to give Mr. Shulman 25% of your RRSPs. How does that make you feel?
Thanks correspondent D.
Filing late Form 3520’s and the IRS robot
Douglas Shulman thinks everyone knows as much about tax law as he does.* Shockingly, a lot of regular people walking around the planet are unfamiliar with the nuances of the Internal Revenue Code, and so–innocently and in good faith–they don’t know about some pieces of paper that Douglas Shulman thinks they should.
Upshot: we do a lot of remedial tax filings for our clients for obscure reasons.
One item of complete obscurity and hilarity is Form 3520 (PDF). This is a multipurpose form, used for reporting that you received a gift from a nonresident, or an inheritance from a nonresident, or you formed a trust, or you funded a trust, or you received a distribution from a trust, or you got a loan from a foreign trust, and a bunch of other stuff. It cleans your clothes and it rebuilds your carburetor.
The IRS office that receives Form 3520 filings seems–in our experience–to be populated in equal parts by humans and robots.
The Form 3520 robot seems to intercept every late-filed Form 3520 and send out a letter saying (in robot-talk) “Hey! You filed late? Howcome izzat?” Then the letter is full of robot-mumbling about severe penalties if you don’t answer the robot-question correctly.
In many cases we get these letters and call the IRS office and talk to a human. The human listens intently for a while, then says, “Oh. Say no more. Let me take care of something for a minute.” And shortly thereafter the human announces that the robot will trouble our client no more.
I’ll tell you how stupid the robot is. We have a voluntary disclosure program client (from 2009). He submitted a late Form 3520 as part of that program. Got the closing agreement signed. Paid the taxes and the penalties. And two weeks later, what should arrive but a letter from the Form 3520 robot asking why our client sent in the Form 3520 late.
Our country is in the very best of hands. (YouTube)
*Oblig. footnote. I really wonder what happens when Douglas Shulman (“igorance of the requirements won’t relieve you from severe penalties”) sits around that big oak conference table and looks across at Timothy Geithner (“Yeah I’m really smart ‘n stuff but geez I had no idea tax law was this complicated and this $30 computer program I used to do my taxes whilst being a Captain of Industry led me astray.”)