Accidental Americans Ask France to Block FATCA Reporting

A group representing French-American taxpayers said on October 3, 2019 that it had filed a suit against France with the European Commission, hoping to avoid strict US compliance rules that could see them blacklisted by French banks starting in January.　

The "Accidental Americans" association has been battling for years to be exempt from a US demand that all its citizens overseas file bank details along with yearly tax returns.　

The group says thousands of French and other foreigners are deemed Americans because they were born in the US, even though they may have lived there only a few months or years when they were young.　

There are more than 780 ‘accidental Americans’ spread around France, all they have in common is the fact that they are entitled to American citizenship. Some of them had left America in the days after being born in an American hospital. Some of them didn’t even know they were technically American. Some of them don’t even speak English.　

There are estimates that there may actually be as many as 10,000 ‘accidental Americans’ in France, thousands of whom still do not know that they technically have American citizenship, and up to 300,000 across Europe. While formally giving up US citizenship is an option, it can be long and costly.

They want to be freed from the annual filing requirements with the Internal Revenue Service, and from seeing their banks forced to hand over their banking details to the US taxman.　

In 2017, Washington accepted a partial moratorium on the rule, known as the Foreign Account Tax Compliance Act (FATCA), set up to battle offshore tax evasion.

The FIRPTA exemption expire at the end of this year, and the French banking federation FBF has warned that 40,000 accounts could be closed come January if no accord is reached on the filing requirements. In refusing to hand over information required by the United States, French banks would expose themselves to penalties.　

Accidental Americans considers that a Franco-American agreement from 2013 which allows for FATCA's application in France, "violates EU laws on data protection" by authorising "the transmission and storage of huge amounts of personal data in the United States," it said in a statement. As a result, the advocacy group says French nationals with dual American citizenship face de facto discrimination, even though "most of these people have no links with the United States."　

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TC Helds That IRS Settlement Officer Abused Discretion in Sustaining the Levy to Collect Penalties

The Tax Court has found that an IRS settlement officer (SO) abused his discretion in sustaining a proposed levy to collect unpaid trust fund recovery penalties (TFRPs) after the taxpayer's offer in compromise (OIC) had been terminated due to default. The court remanded the case for determination of whether the OIC had been properly terminated.

Judicial review of a Collection Due Process (CDP) hearing is limited to the administrative record. (Kreit Mech. Assocs., Inc., (137 TC 123 (2011)) The reviewing court determines whether the SO exercised his discretion arbitrarily, capriciously, or without sound basis in fact or law. (140 TC 173 (2013)). An SO abuses his discretion if, among other things, he does not properly verify that the requirements of any applicable law or administrative procedure have been met. (Reg. §301.6330-1(e))

When IRS determines that an OIC is in default, it is required to send the taxpayer a default letter to cure the noncompliance items. If the taxpayer does not cure the default, the OIC is terminated. (IRM 8.22.7.10.8(1) (August 9, 2017)).

The taxpayer was president of a corporation that failed to pay employment taxes for two tax periods in 2003 and two periods in 2004. An IRS settlement officer (SO) determined that the taxpayer had signatory authority over the corporation's bank accounts and was a responsible officer for the nonpayment of its employment tax liabilities.

The SO made two assessments covering the periods at issue for trust fund recovery penalties (TFRP). The taxpayer submitted a Form 656, Offer in Compromise (OIC), and offered to compromise the liability of the corporation. An IRS Appeals office in Sacramento, California, accepted the OIC on April 27, 2010, and noted in the acceptance letter the conditions on which the OIC would be accepted, including payment of all required taxes for five years or until the offered amount was paid in full, whichever was longer. IRS later notified the taxpayer that he had met the payment provisions of his OIC and began processing the relevant lien releases.

The taxpayer paid his income taxes, along with late penalties and interest, for tax years 2010 through 2012.

In December 2012, IRS issued a notice of proposed changes, to which the taxpayer did not respond, followed by a notice of deficiency in May 2013 based on the taxpayer's omission of certain unemployment compensation from income for 2010.

The taxpayer did not respond to the notice of deficiency, and IRS in September 2013 made a default assessment of tax, penalties, and interest. The taxpayer did not receive these notices because he had changed his residence but had not notified IRS of change of address.

The taxpayer could avoid default by payment of his liabilities by January 2, 2014. In 2014, the Brookhaven Appeals office terminated the taxpayer's OIC and reinstated the TFRP penalties, minus payment already made by the taxpayer, due to failure to pay the amounts due by the January 2, 2014 deadline.

 

However, the record did not reflect a written communication to the taxpayer informing him of a default on the OIC, requesting that he contact IRS, or setting a January 2, 2014 deadline to respond or pay the amount due (default letter).

The SO held a telephone CDP hearing with the taxpayer's representative on February 11, 2016. The SO refused to reinstate the OIC and issued a notice of determination sustaining the proposed levy.

In August 2017, IRS moved to remand the case to the Appeals Office for a supplemental CDP hearing to consider a new OIC as a collection alternative, based on the fact that the SO had not provided the taxpayer with a Form 656, or set a deadline for submission of a new OIC.

The court granted the motion to remand. At the supplemental telephone CDP hearing in November 2017, the taxpayer's representative indicated that the taxpayer was not prepared to submit a new OIC at that time. The SO found that the Brookhaven IRS office had followed all procedures in notifying the taxpayer before termination of the OIC. Because the termination was upheld by Appeals in January 2014, the SO determined that the taxpayer could not challenge the termination of the OIC.

The taxpayer petitioned the Tax Court. At trial, the taxpayer did not present any evidence or argument as to any collection alternatives other than reinstatement of the original OIC.

The Tax Court determined that the taxpayer had not filed a change of address form and so was responsible for his failure to receive the notices of change, deficiency, and levy.

However, IRS was required to send the taxpayer a default letter and give him an opportunity to cure the default. The SO was required to verify that the Brookhaven office had sent the taxpayer a default letter. The administrative record did not support IRS's contention that a default letter had been sent.

Neither the notice of change letter nor the notice of deficiency that were sent to the taxpayer warned him of potential termination of the OIC, set a deadline for default, or informed him of an opportunity to cure the default.

Therefore, the determination to sustain the proposed levy was an abuse of discretion, and the case was remanded for the SO to consider whether the OIC was properly terminated, and, if not, whether the terminated OIC should be reinstated as a collection alternative.

The court also suggested that a new SO be appointed.

 

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IRS to Start Passport Revocation for Seriously Delinquent Taxpayers

The IRS published on its website, Update on Passport Certifications and Taxpayer Advocate Service, that it is stopping its temporary program under which it wasn't certifying taxpayers for passport revocation etc., if the taxpayer had delinquent tax debt but also had an open Taxpayer Advocate Service (TAS) case.

On September 9, 2019 we posted, IRS to Temporarily Stop Passport Revocations for Taxpayer With Cases at the TAS, where we discussed that in a memorandum to Tax Advocate Service (TAS) employees, the TAS has stated that the IRS will temporarily decertify taxpayers with open TAS cases. Decertification means that taxpayers with seriously delinquent tax debts will, temporarily, not be at risk of having their passports revoked by the State Department merely because of those seriously delinquent tax debts.

Now The IRS Has Found That Excluding Cases From Certification Solely On The Basis That The Taxpayer Is Seeking Assistance From TAS Could Allow A "Won't Pay" Taxpayer To Circumvent The Intent Of The Legislation
To Obtain Or Renew A Passport.

Following the review of relevant considerations regarding these procedures, the IRS has determined that a blanket, systemic exception for anyone with an open TAS case is overly broad and could undermine the effectiveness of Code Sec. 7345 to collect a seriously delinquent tax debt.

The IRS will not certify a taxpayer as owing a seriously delinquent tax debt to the State Department or will reverse a certification for a taxpayer:

• Who is in bankruptcy,
• Who is identified by the IRS as a victim of tax-related identity theft,
• Whose account the IRS has determined is currently not collectible due to hardship,
• Who is located within a federally declared disaster area,
• Who has a request pending with the IRS for a good faith installment agreement,
• Who has a pending good faith offer-in-compromise with the IRS, or
• Who has an IRS accepted adjustment that will satisfy the debt in full.

  If You Have Seriously Delinquent Tax Debts,
  You Should Consult with Experienced Tax Attorneys!

 

There Are Several Ways Taxpayers Can Avoid Having the IRS Request That the State Department Revoke Your Passport.  
 

 

 

Contact the Tax Lawyers at 

Marini & Associates, P.A.

 

 

for a FREE Tax Consultation Contact us at:

www.TaxAid.com or www.OVDPLaw.com or

Toll Free at 888-8TaxAid (888)882-9243.

 

 

Jointly Owned Property By Siblings Subject To IRS Lien

A federal district court has held in Dase, (DC AL 9/23/19), that property subject to an IRS lien was jointly owned by a tax debtor and his sister. Therefore, the IRS’s lien only encumbered the tax debtor’s interest in the property.

In 2004, the taxpayer, Scott Dase, entered into a lease-to-own agreement with his parents Walter and Anita to purchase property X, which Walter and Anita owned jointly with a right of survivorship. Under the agreement, Scott was to make monthly payments to his parents until he paid them $63,703, and once Scott paid that amount in full, his parents would convey X to him. 

Before Scott made all the payments under the agreement, first Anita and then Walter died intestate while living in Alabama. After their deaths, Scott continued to make the monthly payments required by the agreement but made them directly to the mortgagee. Scott paid off the $63,703 in 2012, and the mortgage in 2018. 

In 2017, the IRS obtained a default judgment against Scott for unpaid taxes and filed a lien against X. Then, the IRS filed suit seeking to foreclose the lien and sell the property.

The parties also agreed that Scott had an interest in X, but disagreed on the extent of Scott’s interest. The IRS contended that only Scott had an interest in X because he entered into a lease-to-own agreement with his parents before their deaths and fully performed all the obligations under that contract after their deaths; therefore, under Wadsworth, Scott was the sole equitable owner of X, and no interest in the property passed to Ms. K under the Alabama intestacy statute. 

Scott and Ms. K argued that because their parents died intestate before Scott had made all the payments under his lease-to-own agreement with their parents, Scott's only interest in X derived from the Alabama intestacy statute. Therefore, they argued, Scott and Ms. K each owned a one-half interest in X as tenants in common pursuant to that statute. 

The district court held that Scott and Ms. K each acquired a one-half interest in X under Alabama’s intestacy statute because Walter still owned the property when he died as Scott had not fully paid the purchase price under the lease to own agreement. Therefore, the IRS's lien only attached to Scott’s one-half interest in X. 

Have A Tax Problem?

 Contact the Tax Lawyers at 
Marini& Associates, P.A. 

 

 

for a FREE Tax HELP Contact Us at:

www.TaxAid.com or www.OVDPLaw.com 

orToll Free at 888-8TaxAid (888) 882-9243