Taxpayers with overseas accounts seethe at penalties
NEW YORK (Reuters) The Internal Revenue Service crackdown on overseas tax cheats is having an unintended consequence moncler outlet sale on American expats. It prompting many of them to pay penalties for failure to file paperwork that may be drastically out of proportion to the actual amount of taxes owed. Holocaust Memorial Museum in Washington June 17, 2009. In phone conversations and emails with more than a dozen moncler outlet online people during the last three weeks, we heard stories of stress, fear and attempts to do the right thing before the latest voluntary disclosure window closed in September. tax obligations were a rarity.
One woman called from Australia on a Sunday night and started crying on the phone; another https://www.cheapmoncler.com said she gotten psoriasis from the stress. A few were considering expatriating as soon as they could get their taxes in order. citizen and permanent resident of New Zealand, is one of those moncler sale outlet caught by the IRS effort. Van Horn, who is semi retired, bought a home in New Zealand with his Australian wife moncler womens jackets more than a decade ago.
Van Horn scrambled to get his paperwork in for the first voluntary disclosure period in 2009. After completing tax returns for a six year period required by the voluntary disclosure program, Van Horn says, he realized he owed some tax, which he had no problem cheap moncler jackets paying. However, he says, penalty was out of proportion to the tax failure. You look for reasoned justice, not mandatory sentencing.
As he went through the process, Van Horn tried to calculate his penalty for failing to file the foreign bank account reporting form, known as the FBAR. figured, my God, it going to cost around $90,000, he says. am not rich, and that not chicken feed anymore. That eats up retirement savings. It hurts.
Worse, when the IRS examiner reviewed his voluntary disclosure file, he says, she wanted to know if he ever rented out his house when he wasn there. Because the answer was yes, she told him, his house would go into the penalty calculation. Van Horn moncler uk outlet was incredulous: said, want to apply the penalty moncler outlet based on my house? So then my uk moncler outlet penalty went from $90,000 to $172,000. I said, is ridiculous. For a tax failure that less than $20,000 over six years and discount moncler jackets a failure to file a form, you want to charge me a penalty of $172,000?
Van Horn contacted the IRS Taxpayer Advocate Service, which agreed to work on his case. After a series of offers and counter offers, he says, the result was a single FBAR penalty moncler outlet prices of $5,000 per year, or moncler sale online $25,000 total. While relieved with the outcome after 26 arduous months, Van Horn wonders: the hell couldn the IRS devise a method to separate the minnows from the whales at the beginning of the moncler outlet store process?
IN A BIG SEA The IRS had no comment for this story, but said in past cheap moncler jackets womens statements that 30,000 people have come forward during the tax amnesties so far, and that it collected a total of $2.2 billion from those who participated in the 2009 program, and an additional $500 million as of September 15 (a number that does not include penalties).
But this may just be the tip of the iceberg. (who face similar issues with overseas disclosure if they have accounts back home). Yet, in 2009, there were just 534,043 FBARs filed, according to a report by the Treasury Inspector General for Tax Administration. wrote that they saw few of the stereotypical offshore tax cheats in their practices. Instead, many had inherited foreign assets from foreign born parents and other relatives (during the first program) or they had lived abroad for years (in the second).
built the program for criminals, and they just can figure out how to deal with all these innocents who been caught up in it, says Matthews, a former top IRS official. program that is a pretty good deal for a criminal is devastating for someone who didn cheap moncler jackets mens really do anything wrong.
Two cheap moncler sale voluntary disclosure programs offered amnesty from criminal prosecution, but the monetary penalties moncler sale were steep. In the latest window, the penalty for failing to report foreign accounts was generally 25 percent of the highest aggregate balance between 2003 and 2010, plus an additional penalty of $10,000 for each FBAR not filed. person with at least $10,000 in a foreign financial account.
Even the IRS may realize there a problem. There is now a special 5 percent penalty for those who owed little or no tax, and an opt out mechanism for those believe they might get a better deal outside the official voluntary disclosure program. taxpayers, and has been the location of intense political maneuvering between the two countries.
Many Canadians, like uk moncler sale Ruth (who spoke on condition that her last name not be used), a 53 year old stay at home mom in Kingston, are struggling to cheap moncler coats mens cope with the rules, wondering whether they might receive some leniency. Ruth was born in the United States; her husband is Canadian. Once she moncler outlet woodbury discovered the rules on overseas disclosure, she felt she had little choice but to enter the voluntary disclosure moncler online store program. citizenship.
comes to Canada to get away from taxes, Ruth says. of us in Canada don owe any taxes to the United States because of the tax agreements in place. But you still owe the FBAR penalties of $10,000 per year, and if you have a checking account and a retirement account, it adds up pretty quickly.
In Canada, Ruth says, there particular anger that the Canadian retirement accounts are included in the overseas asset penalty calculations. She also worries that money her Canadian mother in law gave to her Canadian moncler usa son (who is not a dual citizen) to help pay medical bills could also be included in her penalty calculations. But she won know what the actual penalty calculation will be for some time. the middle class and the retired who are really being hit, she says. unconscionable that we are put in this position where we have to give up our citizenship or put our families under this stress and strain.
Perhaps even stranger is the story of L. (who spoke on condition that her name not be used). citizen, registered her with the embassy at birth. Before she could best moncler jackets even file for voluntary disclosure, she had to cross the border from Vancouver to get a Social Security number. As the rules on citizenship were changed, L. says, failed to tell me about this change, and now they want to take a good chunk of my retirement savings.
She figures she may owe a cheap moncler coats little bit in back taxes, but if the full penalties are applied, they could total $75,000. As she says: single bank account I have is an offshore account for tax purposes, because I am a Canadian.
What next? The IRS will need to process the paperwork filed by all those who filed for voluntary disclosure this year, a painstaking process that will determine a penalty calculation for each filer.
are all sorts of shades of culpability in a program that the IRS couldn deal with when it had to move a lot of people through, says Jack Townsend, a Houston tax attorney who writes on these issues at his Federal Tax Crimes blog.
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