Mediaboss Marketing

A group of U.S. expatriates has written a letter to IRS Commissioner Doug Shulman to complain he has not responded to a directive from the National Taxpayer Advocate objecting to the way taxpayers who came forward under the 2009 Offshore Voluntary Disclosure Program were treated by IRS examiners.

Nina Olson

Last December, National Taxpayer Advocate Nina Olson described her concerns in her annual report to Congress and later sent a rarely used Taxpayer Advocate Directive to Shulman (see Taxpayer Uncertainty Prompts Citizenship Renunciations). Olson, who heads the Taxpayer Advocacy Service, argued that IRS examiners treated some taxpayers unfairly who had come forward under the 2009 program to voluntarily declare previously undisclosed bank accounts to the IRS. She said the IRS had subjected them to a one size fits all regime and rescinded some of the claims midstream that would have qualified for reduced penalties by way of reasonable cause (see Groundhog Day for IRS Voluntary Disclosure Do-over).

Olson issued a rare Taxpayer Advocate Directive last August, only the sixth in her office's history, according to Tax Notes, to try to force the IRS to change its audit procedures by revoking a memo from last March that directed IRS examiners to stop accepting less than a 20 percent penalty and assume that a violation is not willful unless proven otherwise. IRS Commissioner Doug Shulman has not yet answered her request.

Advertisement

The expatriate group, American Citizens Abroad, has now written to Shulman to express its concern that Shulman has not responded to Olsons directive. The ACA noted that tax information publisher Tax Analysts has reported that IRS Commissioner Douglas Shulman has no plans to respond in writing to National Taxpayer Advocate Nina Olsons Taxpayer Advocate Directive (TAD) on the IRS Offshore Voluntary Disclosure Program (OVDP) despite a statutory requirement that taxpayer advocate recommendations be responded to within 90 days.

In the TAD and in her report to Congress, Olson said that IRS examiners treated some participants in the 2009 OVDP unfairly, and she ordered several IRS divisions to take various steps to correct this treatment, including allowing taxpayers who had paid penalties under the OVDP to request a reduced penalty. In her report, she used the term bait and switch to describe the change in OVDP policy that the IRS implemented a full two years after rolling out the program.

In a Sept. 22, 2011 memorandum after her August TAD, Olson explained why she instructed the IRS to change such practices. In the memo, she noted that the IRS harmed taxpayers seeking to correct honest mistakes, and the IRS retroactively changed the terms of the OVDP to eliminate the possibility of examiners reducing penalties for overseas filers who had no idea they had to file, the ACA pointed out.

The memo further explains that the OVDP penalty structure assumes all participants are tax evaders hiding money overseas, when in fact, the IRS steered many people into the program who made honest mistakes.

Many participants in the OVDP program have been Americans living overseas who had no idea they had to make a tax declaration to the United States, which is the only country in the world, besides Eritrea, which taxes on the basis of citizenship instead of residence, according to the ACA. In her memorandum, Olson said of the OVDP, A more effective initiative would have prompted even more taxpayers to come into compliance without leaving those who did come forward feeling terrified, tricked, or cheated.

The rest is here:
Expats Protest IRS Treatment of Citizens Overseas