the highest aggregate balance of the year

tsanaha · Post by **tsanaha** » Fri Jun 03, 2011 6:27 pm

rrsp 50K, non-rrsp 68k. if taking off rrsp, i will be 12.5% penalty -- i am fine with that --even though tax paid to IRS since 2008, before to CRA through withhold.

if rrsp included, it would be 25% penalty -- that would leads to 30K penalty... i would rather donate rrsp and make it disappear

tsanaha · Post by **tsanaha** » Fri Jun 03, 2011 8:44 pm

There is no incentive for taxpayers not to file f8891 other than pure ignorance/negligence

Howoever, there is an evil intent for IRS not to grant taxpayers who failed to make an election a relief -- that is to rip off taxpayer with huge FBAR penalty...

nstudent · Post by **nstudent** » Sat Jun 04, 2011 9:42 am

FBAR was originally intended for wealthy US citizens who moved their money abroad. But now it seems to be used as a revenue generating tool and the targets have been extended to anyone with a foreign account.

nelsona · Post by **nelsona** » Sat Jun 04, 2011 12:11 pm

FBAR was also at tool to prevent and detect money-laundering, and a way to exact HUGE fines on criminals, mor easily than it would be to convict them of a crime.

nstudent · Post by **nstudent** » Sat Jun 04, 2011 9:19 pm

The updated FAQ in irs website has a few new items:

1. you can ask for an extension of 6 months with clearly stated reasons

2. you can opt out VD . If you have good reasons, the penalty can be reduced to zero

tsanaha · Post by **tsanaha** » Sat Jun 04, 2011 9:33 pm

i don't think opt out is a good choice for most, it is uncertain and rules are only interpreted by IRS... for example..

f8891 -- what happens if they don't let you back file to make an election.. that would be 10K for year penalty..

if i ask for 5% penalty becuase it fits all the condition for 5% penalty for RRSP that has never been cashed/touched for these years.. then IRS wants me to prove that these RRSP source fund had been taxed by US -- even it was long before I became US person. How could I provide receipt from banks over 14 years ago ? Logically, nobody would be so stupid to put money inside RRSP unless it was income as Canadian resident --- would IRS use that logic to believe these money were not subject to US tax ?

In a tax criminal prosection, the burden of proof is on IRS/DOJ side --- in OVDI/VD civil matters, the burden is on the taxpayers to get reduce penalty..

calgary-alberta · Post by **calgary-alberta** » Sat Jun 04, 2011 11:01 pm

tsanaha, thanks for sharing your story. I do not think there should be any penalty (not even 5%) if you back filed 8891 for your RRSP account.

tsanaha · Post by **tsanaha** » Sun Jun 05, 2011 6:07 am

hi calgary-alberta,

back file of f8891 to make a defer tax election usually gets approved by IRS ( we have never heard a case of rejection).

we just do not know how ovdi treats RRSP, i do think there is a good chance of getting a rejection from IRS on back filing f8891 --- so they can impose huge FBAR penalty on RRSP and legally they can...

I will expose the ruling from IRS so folks wiill know the truth...

nelsona · Post by **nelsona** » Sun Jun 05, 2011 10:22 am

Since ovdi more concerned with underreporting of income and tax due, and RRSP is by election not considered income, there will be no tax, or penalty on unreported RRSP as long as you initiate the 8891s and not IRS.

Period.

tsanaha · Post by **tsanaha** » Sun Jun 05, 2011 12:10 pm

nelsona,

thanks, and i like the way you think regarding RRSP f8891 election initiation. i hope this is also the view of IRS ---as what they usually do grant request for back filing (view taxpayer's initiation as in good faith).

calgary-alberta · Post by **calgary-alberta** » Sun Jun 05, 2011 9:04 pm

Those wealthy people opened oversea accounts to evade tax on purpose. They are the big fish that IRS should go after. It seems it is difficult for IRS to catch the big fish out there. I do not think many big fish would join the ovdi as they did tax evasion on purpose.

nstudent · Post by **nstudent** » Sun Jun 05, 2011 9:20 pm

IRS is probably after the small fishes who have underreported just 1 dollar in the past. There is no de mimimum for which ovdi penalty will not apply, as clearly stated in the FAQ on the IRS website.

tomcat197 · Post by **tomcat197** » Sun Jun 12, 2011 11:41 am

tsanaha, if you apply to OVDI, do you have to pay the penalty in advance ?
Thanks.

tsanaha · Post by **tsanaha** » Sun Jun 12, 2011 12:05 pm

Yes, I do. It is required by IRS as a complete submission that includes
tax due, interest, 20% accuracy penalty.

It is not clear if FBAR related penalty (as 25% on max total balance) should be included, but I did send the big check.

I undertand that IRS will do its own calculation -- so it may send money back if it is overpaid or ask more

tsanaha · Post by **tsanaha** » Sun Jun 12, 2011 12:15 pm

tomcat,

three steps for OVDI

1. fax to IRS CI to get pre-clearance (so you are not currently under investigation, otherwise you are exposed to IRS more for troulbe)

2. apply for OVDI to get formal acceptance into the program

http://www.irs.gov/compliance/enforceme ... 09,00.html

see detail here..

You don't need to send any money for penalty

The last step is to submit the whole pacakge -- by Aug. 31, 2011 -- this time you should include a check to cover "tax due, interest and penalty"