In a four-page letter to eight congressional committee and sub-committee members, the American Citizens Abroad said it wanted to call attention to “the serious issue of the arbitrary and questionable IRS management” of a series of recent ‘tax amnesty” schemes, known as the Overseas Voluntary Disclosure Programs (ODVP), which had been “extremely prejudicial to…American citizens residing overseas who sought to become compliant.
The handling of this scheme was “so bad that it was publicly criticised by not only taxpayer advocate Nina Olson, but also by the New York Bar Association and by many professional tax lawyers, in particular in published articles written by the law firm Caplin and Drysdale…[yet] the problematic situation remains today,” the letter noted.
It also highlighted the fact that the ACA’s repeated requests, under the Freedom of Information Act, to obtain a breakdown of the participants in the 2009 ODVP, with regard to taxes owed and penalties imposed, have thus far been “systematically refused by the IRS” – an issue, it noted, “that Congress should investigate”.
“Americans overseas and US resident tax evaders are two very different groups of taxpayers, yet the IRS has maintained a one-size-fits-all policy that excessively penalised Americans abroad who had joined the [ODVP] programme in good faith to correct incomplete past filings,” the letter says at another point.
“Americans resident abroad, the majority of whom are long term overseas residents, have most of their assets in the country where they reside. The US-resident tax-evader may have 10% to 20% of his/her assets hidden overseas. This factor alone creates disproportion of penalty for Americans abroad.”
With the Foreign Account Tax Compliance Act coming into force in January, the letter goes on to note, "Americans abroad feel absolutely trapped, penalised and discriminated against by US tax policy".
IRS ‘targeted conservatives’
The IRS is under investigation in Washington in the wake of evidence that it had been devoting extra scrutiny to conservative groups seeking tax-exempt status. This enraged Republicans, some of whom claimed it was a politically-motivated strategy dictated by the White House, whose current resident, President Obama, is a Democrat.
As a result of the subsequent political firestorm, the then-acting commissioner of the IRS, Steven Miller, resigned under pressure last month and was replaced by Daniel Werfel, who had been the controller of the Office of Management and Budget.
To read the ACA’s letter, click here.