Comments on: Why the Voluntary Disclosure Program is off the rails and how to fix it

By: peter

peter — Mon, 04 Apr 2011 11:55:07 +0000

Phil

Noted!

Will check sources.
and report back.

Peter

By: Phil

Phil — Fri, 01 Apr 2011 22:38:23 +0000

@peter – yes the big question is whether a transfer can be done under pension rules. Traditionally the employee has a vested right to receive pension benefits at some point in the distant future, and that right cannot be (easily) transferred, if at all.

By: peter

peter — Fri, 01 Apr 2011 20:47:08 +0000

Phil

As I see it, where one person is UK or non-US, it might be possible to transfer the fund into the hands of spouse, leaving the US tax payer with no interest. This would remove the pension trust from reporting.

Assuming this is possible under Pension Rules.

This would keep the future pension in the hands of the family and out of the clutches of US.

Also it is possible to give up US citizenship and not have to report again.

For many, this might be a relief.

By: Amy

Amy — Sun, 30 Jan 2011 00:28:27 +0000

I just received form 906 and they are asking for more than 60K in penalties for a wrong figure on form 4549-A. I’m trying to see if this number can be fixed. I can’t understand why they are doing this to regular people. I’m already 75 years old and at this point I can sleep, nor eat properly due to this letter.

I sincerely don’t know what to do. I wonder though how this will effect the economy, who will go shopping thinking that one might have a large penalty waiting to be collect.

This is truly unjustified because we are being penalized, for something that even till date, some tax professionals are still unfamiliar with, let along a person who does not understand the tax law and was never advised.

I hope something can be done to change this.

By: yann

yann — Thu, 22 Apr 2010 18:50:52 +0000

I’m an immigrant from France, an I also went into the program for an account I have there, that had been opened 20 years ago (and credited) by my parents. This account had a small interest rate (2%) and I suppose I should have paid interest on this…so I’m trying to get that done.

What bothers me the most is not so much the penalty, than the IRS propaganda that offshore accounts are a major cause of missed revenues, and that “people should be prosecuted to the full extent of the law”.

The IRS openly states that the tax gap is 14%, meaning that in average, people voluntarily pay 86% of the taxes they owe. If you try to put the good guys on one side and the bad guys on the other, this seems like the best criteria. So my question is, can you justify imposing hefty penalties on someone who paid 99% of their dues, and the remaining 1% is due to the (undeclared) interest of an offshore account ?

When the IRS claims an 86% tax gap, it already tells to all the people who pay more than 86% : “You are been robbed by the others”. Yet because of your offshore account, we’re going to make it look like you’re the bad guy, and take a bit more from you.

The thing is, if everybody paid 99% of their dues, the tax gap would be 1%, and the IRS probably wouldn’t bother going after the remaining 1%.

So I’m wondering about the real meaning of “In God we trust”, written on every bill. I suppose, as Elwood said, that He works in mysterious ways…

By: Carol

Carol — Thu, 25 Feb 2010 19:30:38 +0000

Phil, I have some suggestions for anyone in the “Program”-WATCH your
lawyer-I had to fire my first one-Their hourly rates I found to be very high.I did a lot
of the work directly with my revenue agent and I think that I saved some fees. If you
don’t cooperate they will tell you”you can simply leave the program”. Then what
option does one have-not a very good one. I went ahead and had my amended
federal and state returns done by a CPA-watch that too. I paid my amended state
taxes due plus interest and penalties before my case was settled. Also I had to
file a #1116 Foreign tax form to recoup some of the taxes I had paid to Switzerland.
The best I can say is “just settle” if you are in the program. CB

By: Phil

Phil — Thu, 25 Feb 2010 17:49:06 +0000

@fred – I don’t have the skill set to answer this. However my general sense is that the courts defer to the bureaucrats when the bureaucrats impose penalties. As long as the penalties are within the approved range the courts go along with them. The exception is at the extreme: death penalties for parking tickets. This is where you would get an ACLU type of organization involved.

By: fred

fred — Thu, 25 Feb 2010 04:13:10 +0000

Can tax laws which may potentially be discriminatory be challenged in court?

For example, the ACLU has successfully challenged other laws.

By: Phil

Phil — Wed, 24 Feb 2010 15:58:09 +0000

Carol, since you have finished the program I think you should consider being loud and public about the treatment you received. It is a complete abomination. By publicizing what the IRS is really doing you can help drive a wooden stake through this vampire.

Your comment about the revenue agent’s hands being tied — absolutely. This is not a problem at the revenue agent’s level. This is a failure of leadership at 1111 Constitution Avenue. It builds career at the expense of public policy. It callously and unnecessarily damages individual lives.

By: Phil

Phil — Wed, 24 Feb 2010 15:54:27 +0000

@Fred, if you look at people with money in pension plans (like you) there is a basic problem with the IRS approach. Technically the pension plan is a foreign trust and you are the beneficiary of the foreign trust, with all of the IRS paperwork that is spawned by that characterization. The penalties are staggering. You can’t get at the money because it is a pension plan. The IRS figured this out for Canadians with RRSPs a few years ago by publishing Form 8891. They still haven’t figured out that the same concept applies to people with money in ISAs (the U.K. analog to American IRAs or Canadian RRSPs). As for “normal” pension plans? Good luck. The U.S. tax system can’t figure those out.

And yes I have seen exactly what you describe — people have money stashed quietly and safely somewhere for entirely non-tax reasons. Holocaust. Fleeing the overthrow of the Shah. Eastern European confiscation as you have described.