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  1. As a victim who had just lost $400,000 in 14 days, DO NOT DISCLOSE! The “formula” IRS use is on purpose designed to extract the maximum amount of money from your account! As mentioned, if you opt out, you won’t be able to sleep at night. You will never know when they will call and request documents and if you failed to produce, you will be in big trouble.

  2. http://blogs.angloinfo.com/us-tax/2013/07/22/residence-based-taxation-interview-with-bill-yates-former-attorney-office-of-associate-chief-counsel-international-irs-2/

    Residence Based Taxation? Interview with Bill Yates – Former Attorney, Office of Associate Chief Counsel (International), IRS
    July 22, 2013

    “Today’s blog post is the second of a two-part interview that provides valuable insight from Willard (Bill) Yates, who recently retired from the Office of Associate Chief Counsel (International), Internal Revenue Service after 31 years of service”….

    …”..I had no part in OVDI, although I was part of a group that reviewed the OVDI FAQs.

    Let’s talk about US tax: What was that like?

    Yates: In the law dictionary where it lists “arbitrary and capricious,” the definition says, “See IRS OVDI FAQs.”

    Let’s talk about US tax: Do you think the IRS will modify future OVDI programs as suggested by the RBT Proposal?

    Yates: I doubt it. Apparently, the program has been successful in bringing in approximately $5 billion in back taxes and penalties. And, believe me no one at the IRS Field level is going to speak up about the inconsistencies inherent in OVDI as far as “accidental citizens” are concerned. I have good friends in the Field that didn’t agree at all with what their managers were telling them to do. They had no choice, other than to do what they were told. These are really talented, fair-minded people who are being marginalized. They aren’t out to “get” Joe Blow taxpayer. They want to get the big guys, the guys with the money who are cheating Joe Blow taxpayer through tax evasion.

    You have to wonder how much more could be brought in if future OVDIs were less draconian. Earlier, I said that the OVDI had made a lot of taxpayers angry. At least, that’s what I heard. Apparently, a lot of taxpayers living overseas decided that the IRS OVDIs were totally unfair and way too risky. So, they decided to take their chances and not come forward at all….”…..

    …..”…What Congress has to realize is that the current citizenship-based taxation creates a serious competitive disadvantage for the United States and that if FATCA remains, CBT for Americans living and working abroad has to go. Otherwise, having a US passport overseas is simply too much of a liability to keep. Over 80% of Americans abroad are long-term overseas residents, married to foreigners, working abroad. Many have dual nationality – some even born with it. Why should they have to continue to double file, double pay when all of their governmental services come from the country where they reside? CBT does great harm to the US because it prevents US corporations from sending Americans abroad to represent US interests. More freedom of movement of US citizens would enhance US competitiveness around the World…”….

  3. Read the comments about OVD and citizenshipbased taxation in this interview with Willard Yates

    http://blogs.angloinfo.com/us-tax/2013/07/22/residence-based-taxation-interview-with-bill-yates-former-attorney-office-of-associate-chief-counsel-international-irs-2/

    Example:
    ….”I had no part in OVDI, although I was part of a group that reviewed the OVDI FAQs.

    Let’s talk about US tax: What was that like?

    Yates: In the law dictionary where it lists “arbitrary and capricious,” the definition says, “See IRS OVDI FAQs.”

    Let’s talk about US tax: Do you think the IRS will modify future OVDI programs as suggested by the RBT Proposal?

    Yates: I doubt it. Apparently, the program has been successful in bringing in approximately $5 billion in back taxes and penalties. And, believe me no one at the IRS Field level is going to speak up about the inconsistencies inherent in OVDI as far as “accidental citizens” are concerned. I have good friends in the Field that didn’t agree at all with what their managers were telling them to do. They had no choice, other than to do what they were told. These are really talented, fair-minded people who are being marginalized. They aren’t out to “get” Joe Blow taxpayer. They want to get the big guys, the guys with the money who are cheating Joe Blow taxpayer through tax evasion.

    You have to wonder how much more could be brought in if future OVDIs were less draconian. Earlier, I said that the OVDI had made a lot of taxpayers angry. At least, that’s what I heard. Apparently, a lot of taxpayers living overseas decided that the IRS OVDIs were totally unfair and way too risky. So, they decided to take their chances and not come forward at all….”

    …”The OVDIs caught up a whole lot of people who were totally unaware of their U.S. filing requirements. How could they have been? And, FATCA is hitting U.S. taxpayers living overseas with unforeseen consequences, such as having their foreign bank account(s) closed….”….

    …..”….What Congress has to realize is that the current citizenship-based taxation creates a serious competitive disadvantage for the United States and that if FATCA remains, CBT for Americans living and working abroad has to go. Otherwise, having a US passport overseas is simply too much of a liability to keep. Over 80% of Americans abroad are long-term overseas residents, married to foreigners, working abroad. Many have dual nationality – some even born with it. Why should they have to continue to double file, double pay when all of their governmental services come from the country where they reside? CBT does great harm to the US because it prevents US corporations from sending Americans abroad to represent US interests. More freedom of movement of US citizens would enhance US competitiveness around the World”

  4. I’ll offer one more thought. Before you even got to questions about opt-out experience (personally, mine is modest) I would see what the lawyer has written about OVDI/OVDP in general. There are lots of guys out there with articles (ads) that would have you believe every single person with an offshore account problem needs to make a voluntary disclosure. If they don’t acknowledge that the question of whether to make a voluntary disclosure is entirely dependent on the particular facts and circumstances involved, they certainly can’t help you with an opt out. If you encounter one of these people, run. Run fast, fun far.

  5. True.

    The OVDI vs. opt-out decision is not easy. The OVDI, at least, offers certainty. The opt-out strategy means uncertainty.

    When I was doing these cases I told people to look at the worst-case, best-case, and likely outcomes from opting out. What are the expected dollar costs of these outcomes in terms of penalties?

    Then as a discrete next step, figure out which outcome you are likely to get? Are your facts so bad that you risk the “worst-case” outcome? Is is reasonable to expect the “best case” outcome? These are judgment calls. They should be made by a lawyer who has had a lot of experience and can compare your situation against his/her experience. Hint: most people fall into the “likely” category. Life is a cabaret bell curve and usually it is rational to guess that you are in the middle of the bell curve. But get a professional’s judgment on this.

    Compare the penalty cost outcomes. OVDI vs. your best guess for outcomes on an opt-out. OVDI will be higher. The expected savings in penalties is what you are buying. Uncertainty and risk is the price you are paying. You now make a gut call — can you live with uncertainty and risk during the audit that follow an opt-out?

    As I said, our experiences have been (on the whole) positive for the taxpayers. But every day brings new revelations of tremendously skanky behavior at the IRS for political reasons. The stench of corruption continues to spread upwards at the IRS.

  6. I think the big concern that CDF and everyone else has regarding optout isn’t whether it’s possible to get a better result or whether that possibility is 10% or 90%; the big fear is that penalties might end up being much higher, and no one seems to know how much higher or under what circumstances.

  7. @CDF, Several people, 2 immigrants as well as one americans living abroad have extensively documented their opt out procedures and reasonable cause arguments.
    That should be all you need for an opt out.
    If things turn bad and they still impose unreasonable penalties, you can involve the national tax payer advocate.
    Their screen names are moby, ij and not that lisa
    http://isaacbrocksociety.ca/2012/03/10/moby-opt-out-update/
    http://isaacbrocksociety.ca/2012/09/16/a-minnow-opts-out-of-the-irss-ovdi-and-gets-the-correct-result-a-simple-warning-letter/
    http://isaacbrocksociety.ca/2013/06/16/an-irs-ovdi-ordeal-with-a-happy-ending-an-opt-out-success-story-as-told-by-not-that-lisa/

    Hope this helps.

  8. Check TAX NOTES, July 15, 2013. I am sure you subscribe. There is an article entitled “The Personal Impact of Offshore Enforcement”
    By Marie Sapirie — msapirie@tax.org

    There are several Opt Out stories there that might be of interest to your readers. It is copy righted.

  9. Most lawyers don’t want to choose opt-out because they are afraid. They are afraid of being sued for malpractice. By you. 🙁

    I don’t know the particulars of your case, so I can’t tell you what you would get in an opt-out situation. But as I said in the blog post, we did a few dozen opt outs (I forget the number) and on the whole they went well. The taxpayers experienced evenhanded treatment from the Revenue Agents in the opt-out cases I handled. The Revenue Agents are obliged (it’s in the procedure manual!) to yell “Scary Monsters! Run Away! Run Away!” at you. Understand that they are working from a script.

    The evenhanded treatment of the Voluntary Disclosure Program–which looks approximately like a guillotine to me.

    If you want to find someone to help with the opt-out, and you can’t find someone who will say–out loud–that they’ve done a lot of opt-out voluntary disclosure cases (as I have), find a lawyer who has taken on criminal tax evasion cases of any type. This will be someone who is not afraid to look into the fog of war and say “Let’s march forward.”

  10. Phil, I am the one who asked the question.

    First, thank you very much for writing a whole blog post about this.

    In my situation the original money came from outside the US and foreign taxes were paid on it, I just left the money there. I did not report the interest on my US return, but the total back taxes for the past 8 years were a little more than 3% of the high balance. I also paid the accuracy penalty and interest. That much is fair, I’m not complaining.

    But I also didn’t have shell companies and I didn’t send money to or from the foreign account and the US, so I think 27.5% is not fair.

    Finding a lawyer who did a lot of OVDI cases is easy. What’s hard is finding someone with optout experience. My lawyer’s firm has done hundreds of OVDI cases but less than 1% of them have opted out, the slam dunk ones, like so0meone with dementia. After spending $20K on legal fees the only answer I get is “Dunno, you could get a 50% penalty, or 0% or anything in between.”
    The optout process appears to be extremely subjective with no clear guidelines and a lot seems to depend on chance (that is, whatever agent you happen to be assigned to.)
    Also if I opt out my file gets transferred to a different IRSoffice with a different agent than the one who did the certification so even if he wanted to the agent who did the certification can’t give me even a hint.

    I know I’m not unique, lots of people are in my shoes.

    As to renouncing I haven’t given it much thinking, since I plan to leave for personal reasons.

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Tax laws change over time, and the information in this post above may be less accurate today than it was at the time of the last revision. This post is not tax advice for your specific situation. Please contact an international tax professional to get personalized advice for your situation.