Taxpayer Advocate: Most Serious Problems & Recommendations

In her Annual Report to Congress for 2014, National Taxpayer Advocate Nina Olson addresses certain issues (her "Most Serious Problems") and makes certain Legislative Recommendations specifically related to overseas taxpayers.

We need actively to support her recommendations that seek to alleviate both the loss of access to IRS service abroad and the excessive burden of our mandatory filing of a Foreign Bank Account Report (now using FinCEN Form 114).

Most Serious Problem #1 concerns IRS budgetary allocations that prevent it from providing the optimum service that could increase compliance.

Most Serious Problem #3 concerns the elimination of a functional geographic presence, with IRS employees understanding the needs and circumstances of a specific geographic economy.

Both of these issues relate directly to FAWCO’s concern with the closure of the last IRS offices abroad.

Most Serious Problem #7 once again charges that the IRS Voluntary Disclosure Programs violate taxpayers’ rights.

Most Serious Problem #15 concerns the delay in implementing and maximizing Virtual Service Delivery to enhance taxpayer services.

For the global community, now losing its last effective access to IRS support and services, VSD represents one of the best opportunities to assist overseas taxpayers.

In addition, Ms Olson makes specific recommendations that could vastly improve the situation for both US citizen and Non-Resident Alien taxpayers abroad:

Legislative Recommendation #3 calls for the development and implementation of Virtual Service Delivery.

Legislative Recommendation #6 addresses ways to reduce the burden of FBAR filing.

You can add your voice to hers!

Write to your legislators (Representatives can be found at and Senators at in support of one of these recommendations - remember that it is said that 1 email = 10 voters; 1 phone call = 50 voters; 1 letter = 100 voters!

The entire report can be accessed here.

Tax Seminar 202 -- 2015

AARO held its Tax Seminar 202 on March 17, 2015 at its new headquarters, Reid Hall. The room was packed with more than a hundred attendees. Lucy Laederich, AARO president, introduced the speakers, John Fredenberger and Tim Ramier.

The meeting was not so much about how to go about filing your taxes as an update on where we stand.

John started with a brief recap of our recent Overseas Americans Week in Washington. As he said, DC was frigid, due to both the snow and the relationship between the IRS Commissioner John Koskinen and the Ways and Means Committee Chair, Paul Ryan. The IRS budget has been cut down to the 2000 level and the service must make do with less and less. They have announced that 50% of all telephone calls will go unanswered and all the foreign offices will be closed by the end of the year. For the estimated 8 million Americans abroad, he wondered if they weren’t sending the wrong message. Where was the service that could improve compliance?

Tim, who was unable to attend the meetings in Washington this year, thanked the association for the work it is doing and then dove right into tax matters.


Otherwise known as FBAR (foreign bank account report), the online FINCEN 114 form is functioning well, now, after some glitches the first year. E-filing is a requirement. The deadline is still June 30. The filing threshold is still $10,000 aggregate in all accounts held outside the US. The penalties for not filing are still $100,000 or half the amount in the account, whichever is greater.

Streamline Program

For those who have not been reporting foreign bank accounts or filing tax declarations in ignorance of the law, there is now a streamlined program to come into compliance. Some call it the 3 + 6 program: 3 years of back tax filings and 6 years of back FBAR filings. Tim passed out a copy of the forms.

Once people have come forward with these back filings, they are expected to continue their annual filings.


John presented his handout “FATCA for Dummies” and described, briefly, the two anti-FATCA actions currently underway: Senator Rand Paul has introduced legislation to repeal most of FATCA and James Bopp, lawyer, is bringing suit in Federal Court against FATCA as being unconstitutional.

The Franco-American IGA

France ratified its IGA on January 2 and the next day, January 3, 2015, it was published in the Journal Officiel. The US Senate does not need to ratify the IGA because it is not a treaty. It is a "Model 2" agreement: Banks will not report accounts under $50,000. They also will not report on certain types of accounts; the full list is in the Annex of the IGA.

The first year, in September 2015, the banks will report the account holder’s name and address, the bank and account information, and the balance on Dec. 31, 2014.

In 2016, the banks will add income to the report.

In 2017, the banks will add capital gains to the report.

The banks must find their US person customers and the first indication is birth in the US. If a customer was born in the US, the bank will presume US citizenship and require a Certificate of Loss of Nationality if the customer claims not to be American. Banks may require American customers to file a W-9 form with them. For people uncomfortable with giving their Social Security Number to a foreign bank, John suggests that one might leave out the Social Security number, or just fill it in partially, or even use a US passport number, which has the same number of digits.

Same Country Exception

Short of repeal, the same country exception, also called “safe harbor” in Washington, has been AARO’s position concerning FATCA. The idea is that we are bona fide residents of another country than the US and the accounts in that country are our domestic accounts. We would like the US to consider them as domestic accounts and not foreign accounts. To do this would require regulatory change in Washington, which, given the frigid relationship alluded to before, will not happen without congressional mandate. It would also require the banks where we live to agree to it.

Worldwide Bank Data Exchange

The OECD has published its version of bank data exchange, the Treaty for the Mutual Assistance in Tax Matters. So far, over 40 countries have signed it, but not the US. It would have to be ratified by the Senate. This treaty allows for exchange of information on request, automatically, spontaneously (if country A suspects that a person might be in fault regarding country B, it may report spontaneously to country B), or even simultaneously (some kind of joint meeting of the countries’ tax offices about a person).

Foreign residents of the US

There was a guest in the audience, Mr. Damien Regnard, representative of the Louisiana region (includes several states) to the French Assembly of French Citizens Abroad (Assemblée des français de l’étranger). During the Q & A, he addressed some of the issues we have in common concerning  bank discrimination and the difficulty of correct filing.

Q & A


When reporting a capital gain, report the gross amount of the proceeds; when reporting the value, report the “montant de cession”.

Assurance Vie

Report the cash surrender value. The account must be reported on the FBAR and 8938, if the thresholds are met, and the income is reported as interest on Schedule B.

Excluded accounts from FATCA reporting

The question was about the PERP. Yes, it is excluded. The full list is in Annex II, part III of the France-US IGA.


If the person is a US citizen, then use the Social Security number. If the person, a foreign spouse for example, does not have a Social Security number, then get a TIN (tax identification number), in order to benefit from him or her on your return when “married, filing separately”.

W-9 forms

For the moment, it appears that banks are handling W-9 forms in their own specific ways and not all know what to do with them.

FFIs on the FBAR and form 8938

Our obligations are not the same as the banks’. If we meet the thresholds ($10,000 aggregate for the FBAR and $200,000 for form 8938, or $400,000, if filing jointly) then we must declare all the accounts, no matter if they are not reported by the banks or how little the account may hold. It’s the aggregate amount that counts.

Signatory Authority

The question was about association treasurers. If you have signatory authority over the account you must report it. FINCEN has defined signatory authority and given extensions for filing:

Tax-free Money Market Accounts

If you live abroad, they may not be tax-free. And, of course, what is tax-free where you reside is not tax-free in the US.


The US is not ready, yet, for reciprocity. It is scheduled to take effect in 2017. We should expect that US financial institutions will be reporting on residents in France, whether they are US citizens, or not.


This was not addressed during the meeting, nor was there a question about it, but it did come up later. This reporter has found some information.

If you spent 330 days or more outside the US or were a resident of a foreign country for the entire year, then you are not required to have health insurance in the US.

1 - Being a bona fide resident abroad, or having physical presence outside the US for 330 days gives you an automatic exemption. Nothing extra to file.

2 - To claim your exemption, include Form 8965 with your declaration and complete section III for each member of your household In Column C, use Exemption Code C. If you were abroad the entire year, check the box in Column D that states ‘Full Year’.


National Taxpayer Advocate: Reduce FBAR filing burden

The United States National Taxpayer Advocate Nina Olson has released her Annual Report for 2014 and, in Legislative Recommendation #6, advocates reducing the burden of filing a report of Foreign Bank and Financial Accounts (FBAR) and improving the corresponding civil penalty structure.  She refers directly to the “unintended consequence of the civil FBAR penalty regime, which is designed to address criminal conduct”.

As Ms Olson points out, the penalty for willful failure to file an FBAR was originally aimed at criminals but those it most seriously affects today are what she refers to as “benign actors”.

Her four specific proposals for correcting the situation (page 333) are to:

  • Improve the proportionality of the civil FBAR penalty;
  • Require the government to prove actual willfulness before imposing the penal violations;
  • Treat taxpayers who correct violations early the same as (or better than) those who correct them later; and
  • Reduce the burden of foreign account reporting.

We are gratified to see that certain of her recommendations address problems that AARO and its partner organizations have often deplored when speaking to government officials.

Specifically, as we have all advocated, she would (page 338) “Eliminate or waive the civil penalty for failure to report an account on an FBAR if there is no evidence the account was used in connection with a crime and:

a. The account information was already provided to the IRS, for example, on a Form 8938, Statement of Specified Foreign Financial Assets, or by a third party (e.g., a financial institution);

b. The amount of unreported income from the account does not create a substantial under-statement under IRC §6662(d); or

c. The taxpayer resides in the same jurisdiction as the account.

(Note that this last recommendation coincides with the “same country exception / safe harbor” advocated by AARO, FAWCO, ACA and Democrats Abroad.)

In addition, for delinquent filers, she clearly places the “proof” burden on the IRS and calls (page 340) for “legislation to clarify that the government has the burden to establish actual willfulness (i.e., specific intent to violate a known legal duty, rather than mere negligence or recklessness) before asserting a willful FBAR penalty, and (that it) cannot meet this burden by relying solely on circumstantial evidence.”

Finally, referring directly to recommendations made by FAWCO, AARO and ACA in 2012, she advocates (page 343) reducing the filing burden by raising the FBAR reporting threshold to $50,000 and (page 344) aligning the FBAR and Form 8938 thresholds and deadlines.

We are fortunate to have an ally in the National Taxpayer Advocate (who received an AARO Award in 2014 for her defense of "fair tax treatment of the global American community”).  Letters to your legislators in support of her recommendations could bring her report to their attention and support our longstanding positions!

Write to your legislators and send them the URL for her full Legislative Recommendation #6

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New resource for taxpayers: ACA directory

AARO's partner organization ACA, Inc. (Americans Citizens Abroad) has launched the first-ever online Directory of tax return preparers and others servicing Americans overseas.  After an initial listing of 106 Preparers, the total number stands today at nearly 1800.  This innovative new Directory serves Americans overseas and others needing specialized US tax and similar advice.

The Directory is easily found at, where is it is available to users/taxpayers looking for help and to preparers and businesses that work with preparers.

This year tax filing deadlines fall amid increased IRS and Department of Justice enforcement activities, implementation of FATCA by foreign financial institutions around the world and widespread confusion in the wake of the Loving case, invalidating the IRS’s regulation of tax return preparers.

For the 2015 filing season, the IRS has announced that it is instituting its new voluntary training and certification program for enrolled preparers (IRS News Release 2014-75).  The IRS will open to the public a database listing preparers who have completed the program.  These names will also be accessible through the ACA Directory.

ACA notes, "We know that many taxpayers are desperately looking for help, because we receive calls and e-mails every day. For years, Americans overseas thought little about taxes and many simply did not know about all of the tax reporting and FBAR filing requirements. That has changed! Americans abroad need a comprehensive, reliable source for finding return preparers and similar professional advisors." The ACA Directory fills this void. The Directory is free-of-charge for all users, whether or not they are ACA members.

More information at

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