Tacova,
I think IRS has rejected late deferral tax election (usually they accept late filing f8891 outside OVDI). This is a bad news for all of in OVDI with RRSP.
Now, if you did open your RRSP before you becoming a US taxpayer, and you have never withdrawn more than $1000 from the account each year, this account should be subjected on 5% penalty instead of 25%. This is in OVDI 2011 FAQ. Can you ask your attorney to make this argument ?
IRS won't impose penalty on RRSP inside OVDI
Moderator: Mark T Serbinski CA CPA
-
calgary-alberta
- Posts: 36
- Joined: Fri Jun 03, 2011 4:38 pm
Calgary,
You agent will contact you if he needs something from you. In my case, he asked me to sign a consent form for year 2008 which I had done already when submitting my package. But I did it again anyway. Then he asked me to send all the offshore financial records that have been used in my amend return. And I did it again.
So you do not know who is your agent until he/she contacts you with some specific request. It is possible that your case goes well that your agent does not contact you until the final stage with the penalty assessment.
You agent will contact you if he needs something from you. In my case, he asked me to sign a consent form for year 2008 which I had done already when submitting my package. But I did it again anyway. Then he asked me to send all the offshore financial records that have been used in my amend return. And I did it again.
So you do not know who is your agent until he/she contacts you with some specific request. It is possible that your case goes well that your agent does not contact you until the final stage with the penalty assessment.
Tacova,
If you send RRSP statement to your examiner upon his/her request, it is like you do not want to use tax deferral election. That will make your RRSP same as your other non-RRSP. And if they are in mutual fund, you may have to do PFIC to figure out income. The worst is base penalty.
Since you already sent f8891 and made a late tax deferral election (which is using 9100 relief), so you should ask your examiner to respond your request -- that is you will ask them to send a letter to deny your request. Then you can take this letter to TAS for help. It is so wrong IRS deny your request while they often grant the same request either via QD or PLR (private letter ruling).
Also, if your case is simple with no bad facts (like using entity to hide your Canadian assets), you should consider opt-out -- pay all the tax due, plus interest and accuracy penalty -- you can ask for much less than 25% penalty on your total balance.
If you send RRSP statement to your examiner upon his/her request, it is like you do not want to use tax deferral election. That will make your RRSP same as your other non-RRSP. And if they are in mutual fund, you may have to do PFIC to figure out income. The worst is base penalty.
Since you already sent f8891 and made a late tax deferral election (which is using 9100 relief), so you should ask your examiner to respond your request -- that is you will ask them to send a letter to deny your request. Then you can take this letter to TAS for help. It is so wrong IRS deny your request while they often grant the same request either via QD or PLR (private letter ruling).
Also, if your case is simple with no bad facts (like using entity to hide your Canadian assets), you should consider opt-out -- pay all the tax due, plus interest and accuracy penalty -- you can ask for much less than 25% penalty on your total balance.
Thanks Tsanaha for yours advices,
It all make senses but it looks like in OVDI sense doesn't seem to matter.
Opt-out will mean full examinations(likely 6 years because of FBAR) and potentially bigger penalty depending how successful one is for getting none willful negligence. It looks like the "I didn't know anything about that paperwork requirement" is everybody excuse.
The 5% penalty(faq 52) could be a possibility since the accounts were created before I become a US person and all the other requirements are more then met but that situation is not mention. It is still something to try. I'll let you know.
It all make senses but it looks like in OVDI sense doesn't seem to matter.
Opt-out will mean full examinations(likely 6 years because of FBAR) and potentially bigger penalty depending how successful one is for getting none willful negligence. It looks like the "I didn't know anything about that paperwork requirement" is everybody excuse.
The 5% penalty(faq 52) could be a possibility since the accounts were created before I become a US person and all the other requirements are more then met but that situation is not mention. It is still something to try. I'll let you know.
Tacova,
Opt FBAR penalty is also a negotiation process. You can set your penalty rate like $500/year after full tax and related penalty being paid.
If IRS does not agree, they will have to take the case to DOJ, and DOJ will take the case to the court.
Are you really someone they want to get money ? If you are minnow, that does not make sense at all.
All, you have shown good faith, and come forward to correct errror, the punishment does not fit the crime.
You can do all opt-out yourself
Opt FBAR penalty is also a negotiation process. You can set your penalty rate like $500/year after full tax and related penalty being paid.
If IRS does not agree, they will have to take the case to DOJ, and DOJ will take the case to the court.
Are you really someone they want to get money ? If you are minnow, that does not make sense at all.
All, you have shown good faith, and come forward to correct errror, the punishment does not fit the crime.
You can do all opt-out yourself
Tacova, here is what a former DOJ Tax Div prosecutor has to say
"I also think there is an important distinction to be made between proving that a taxpayer willfully failed to report income and that a taxpayer willfully failed to file an FBAR. The FBAR was a form few practitioners heard of pre-UBS. To prove a taxpayer’s knowledge of the FBAR and his obligation to file the form will not be an easy task for the government as few accountants told their clients of their FBAR obligation. Additionally, the FBAR is a penalty that arises out of Title 31 of the United States Code and not Title 26 (Internal Revenue Code). As a Title 31 penalty, the IRS can assess the penalty but it cannot collect it under the Internal Revenue Code with lies and levies and other IRS collection tools. Instead, the IRS is treated just like any other creditor. To collect the FBAR penalty, the IRS must make a referral to DOJ’s Tax Division, which then must seek a judgment in US district court against the taxpayer. Once in court, the taxpayer may assert a lack of willfulness as a defense and have his day in court. "
And, the fact is that if we file our returns based on what we believed -- how could that would lead us to know FBAR -- even if most professionals did not know until USB case. I am sure you learned this FBAR rather recently so that you joined OVDI. It is not you knew FBAR and did not fill the form -- and now you come forward to correct it -- So, for minnows, if there is no cover up (entity, and keep money in tax heaven), there is no need to worry about FBAR penalty -- you can not be punished for something you do not know --- and even most professionals do not know.
"I also think there is an important distinction to be made between proving that a taxpayer willfully failed to report income and that a taxpayer willfully failed to file an FBAR. The FBAR was a form few practitioners heard of pre-UBS. To prove a taxpayer’s knowledge of the FBAR and his obligation to file the form will not be an easy task for the government as few accountants told their clients of their FBAR obligation. Additionally, the FBAR is a penalty that arises out of Title 31 of the United States Code and not Title 26 (Internal Revenue Code). As a Title 31 penalty, the IRS can assess the penalty but it cannot collect it under the Internal Revenue Code with lies and levies and other IRS collection tools. Instead, the IRS is treated just like any other creditor. To collect the FBAR penalty, the IRS must make a referral to DOJ’s Tax Division, which then must seek a judgment in US district court against the taxpayer. Once in court, the taxpayer may assert a lack of willfulness as a defense and have his day in court. "
And, the fact is that if we file our returns based on what we believed -- how could that would lead us to know FBAR -- even if most professionals did not know until USB case. I am sure you learned this FBAR rather recently so that you joined OVDI. It is not you knew FBAR and did not fill the form -- and now you come forward to correct it -- So, for minnows, if there is no cover up (entity, and keep money in tax heaven), there is no need to worry about FBAR penalty -- you can not be punished for something you do not know --- and even most professionals do not know.
Ikeaidea,
Here are key points...
1. Canada is not tax haven -- we all know CRA and IRS exchange info all the time.
2. No entity to hide money in the first place --
3. Come forward (even doing QD) to correct should be considered as in good faith
No court in the name of justice will find a person with these good facts willful or criminal.
IRS will be more realistic what kind penalty they can get in the court of law...
Basically, opt-out will put a taxpayer in an equal position to negotiate a deal..
Likely RRSP will be treated with some decency --
Here are key points...
1. Canada is not tax haven -- we all know CRA and IRS exchange info all the time.
2. No entity to hide money in the first place --
3. Come forward (even doing QD) to correct should be considered as in good faith
No court in the name of justice will find a person with these good facts willful or criminal.
IRS will be more realistic what kind penalty they can get in the court of law...
Basically, opt-out will put a taxpayer in an equal position to negotiate a deal..
Likely RRSP will be treated with some decency --