Yet another comment on the FBAR program, from a real person.
From reading your blog and from my own situation and some friends’, wonder if there’s a way to communicate to the IRS that this process is very stressful and expensive, and therefore having the opposite incentive from what the IRS wants, for 80% of the people who are going into the program. Understood that it’s designed for people who’ve been evading taxes with millions of dollars in Swiss accounts and complicated structures, but clearly a lot of regular small fry overseas Americans and resident aliens also have had low awareness historically of these filing requirements.
The IRS really should have a separate process for those “regular” folks to come into compliance that’s not so invasive and stressful. Don’t know what’s the right way to communicate this to them, but from the anecdotal evidence of me and my friends, it is having the opposite effect of what the IRS wants. Regular folks who are happy to come into compliance are looking at the hassle and expense of the program and saying, no way. They’re also scared of filing their back returns because of the IRS’ threats that they will be picked out of the pile and prosecuted.
If the IRS simply said, amend your returns and pay the back taxes + a 20% penalty, file the back FBARs and we’ll leave you alone, I think they’d get a lot more small folks come in. They can still have the VDP for the big whales, but it’s just plain inappropriate for folks who have <$50 in back tax liability to have to pay ‘000’s of dollars to attorneys / CPAs and go through a long, expensive and very stressful process to become compliant. Honestly, almost no-one I know who is a regular way American living overseas or a US resident alien has had high awareness about these requirements, and now that they are aware, want to do the right thing. But the IRS has made it super scary for us, especially if we’re balancing immigration considerations.