# Should I Submit OVDP?



## gosy8

Hello All!

I'm a new poster and just so, so relieved to have found this forum. I'm trying to help my parents become compliant with all these US tax laws concerning foreign accounts/income that are so complicated and intimidating. We're scared of the IRS and the penalties they might incur.

Summary: 

- Parents moved to the US from Canada about 10 years ago. Originally citizens of Canada, now hold dual US-Canada citizenship.
- They had about $150K in a joint RRSP (Canadian retirement savings) account when they immigrated to the US which wasn't reported to the IRS.
- Have never filed FBARs.
- Over time they made multiple withdrawals from the RRSP (totaling about $50K) from the RRSP and put it into an already existing Canadian checking/savings account. Canadian taxes were paid on these withdrawals. The money is just sitting there in the accounts making extremely minimal interest (cents per month).
- They are currently still working full-time in the US and have been paying taxes on US income.

We're concerned about the possible penalties that would come from not reporting the FBARs and also whether the withdrawals from the RRSPs have now complicated the issue further.

We are currently deciding on whether to submit an OVDP. Wondering if this is the best course of action? What are the pros/cons of submitting an OVDP? Are there any other options? (Based on what I've read it doesn't seem like a "quiet" disclosure would be "safe". 

We already had one meeting with a tax professional who consulted for us and quoted us a flat fee in the lower end of 5-figures to submit the OVDP. We have a few more meetings setup with other professionals in the near future, but based on what I've read from the posters on this forum, definitely wanted to get your take on it as well. Wouldn't hurt to get more than one opinion.

Thanks so much in advance!


----------



## Nononymous

Is returning to Canada and renouncing US citizenship an option.

Scott


----------



## gosy8

Not a likely one. We're feeling very established here already and would rather stay in the US given the option.


----------



## BBCWatcher

Is the Streamlined Program an option? The OVDP seems like overkill for the situation you describe.

Another option is to simply, directly file amended returns (1040X) which include the RRSP fund QEFs, previously unreported Canadian interest, and any FATCA reports (if applicable), plus late file the FBARs. I don't think they'd see much if any U.S. tax liability considering that they paid Canadian tax already, which should be reflected on the U.S. side as Foreign Tax Credits. (And it's also worth checking the tax treaty to see what that says.) Though I prefer the "front door" (i.e. Streamlined Program) if eligible, and also because if any penalties are owed they'd probably be waived.


----------



## jbr439

BBCWatcher said:


> Is the Streamlined Program an option? The OVDP seems like overkill for the situation you describe.


Streamlined is for expats only.


----------



## NMAEF

gosy8 said:


> Hello All!
> 
> I'm a new poster and just so, so relieved to have found this forum. I'm trying to help my parents become compliant with all these US tax laws concerning foreign accounts/income that are so complicated and intimidating. We're scared of the IRS and the penalties they might incur.
> 
> Summary:
> 
> - Parents moved to the US from Canada about 10 years ago. Originally citizens of Canada, now hold dual US-Canada citizenship.
> - They had about K in a joint RRSP (Canadian retirement savings) account when they immigrated to the US which wasn't reported to the IRS.
> - Have never filed FBARs.
> - Over time they made multiple withdrawals from the RRSP (totaling about K) from the RRSP and put it into an already existing Canadian checking/savings account. Canadian taxes were paid on these withdrawals. The money is just sitting there in the accounts making extremely minimal interest (cents per month).
> - They are currently still working full-time in the US and have been paying taxes on US income.
> 
> We're concerned about the possible penalties that would come from not reporting the FBARs and also whether the withdrawals from the RRSPs have now complicated the issue further.
> 
> We are currently deciding on whether to submit an OVDP. Wondering if this is the best course of action? What are the pros/cons of submitting an OVDP? Are there any other options? (Based on what I've read it doesn't seem like a "quiet" disclosure would be "safe".
> 
> We already had one meeting with a tax professional who consulted for us and quoted us a flat fee in the lower end of 5-figures to submit the OVDP. We have a few more meetings setup with other professionals in the near future, but based on what I've read from the posters on this forum, definitely wanted to get your take on it as well. Wouldn't hurt to get more than one opinion.
> 
> Thanks so much in advance!



I am unclear of what is meant by "quiet disclosure". Is it just sending in the late paperwork ? I also read somewhere that the IRS "frowns" on it (again, I am not sure what it is).
Thanks


----------



## Nononymous

Yes. Quiet disclosure just means filing overdue tax returns and FBARs.

I'm sure the ******* at the IRS who like to scare expats do frown on it, but it seems to have worked for lots of folks who didn't owe anything anyway.


----------



## NMAEF

Nononymous said:


> Yes. Quiet disclosure just means filing overdue tax returns and FBARs.
> 
> I'm sure the ******* at the IRS who like to scare expats do frown on it, but it seems to have worked for lots of folks who didn't owe anything anyway.


Thanks

"the ******* at the IRS".... Well I read the rules on not being rude and thats a good way to put it. 
I'll go further and say "the %$#@#$& at the IRS "


----------



## Nononymous

I wrote "[email protected]" but I guess that's too rude for the software.


----------



## NMAEF

gosy8 said:


> Hello All!
> 
> I'm a new poster and just so, so relieved to have found this forum. I'm trying to help my parents become compliant with all these US tax laws concerning foreign accounts/income that are so complicated and intimidating. We're scared of the IRS and the penalties they might incur.
> 
> Summary:
> 
> - Parents moved to the US from Canada about 10 years ago. Originally citizens of Canada, now hold dual US-Canada citizenship.
> - They had about $150K in a joint RRSP (Canadian retirement savings) account when they immigrated to the US which wasn't reported to the IRS.
> - Have never filed FBARs.
> - Over time they made multiple withdrawals from the RRSP (totaling about $50K) from the RRSP and put it into an already existing Canadian checking/savings account. Canadian taxes were paid on these withdrawals. The money is just sitting there in the accounts making extremely minimal interest (cents per month).
> - They are currently still working full-time in the US and have been paying taxes on US income.
> 
> We're concerned about the possible penalties that would come from not reporting the FBARs and also whether the withdrawals from the RRSPs have now complicated the issue further.
> 
> We are currently deciding on whether to submit an OVDP. Wondering if this is the best course of action? What are the pros/cons of submitting an OVDP? Are there any other options? (Based on what I've read it doesn't seem like a "quiet" disclosure would be "safe".
> 
> We already had one meeting with a tax professional who consulted for us and quoted us a flat fee in the lower end of 5-figures to submit the OVDP. We have a few more meetings setup with other professionals in the near future, but based on what I've read from the posters on this forum, definitely wanted to get your take on it as well. Wouldn't hurt to get more than one opinion.
> 
> Thanks so much in advance!


"We already had one meeting with a tax professional who consulted for us and quoted us a flat fee in the lower end of 5-figures to submit the OVDP"

Same quotes here in CH and fear of $$$ potential penalties.

This whole B%$%&S OVDP which is obviously designed for rich tax evaders and not for overseas resident dealing with US tax rules which are even more complicated for us than for US residents is really out of hand.

I know there are organizations like "americans abroad etc" who lobby but with 7 million US expats, there should be a way to have a big "no taxation without representation" petition.


----------



## Nononymous

You have representation - you can still vote from overseas.

Which isn't to say that citizenship-based taxation for non-residents doesn't suck posterior... (there, snuck a little profanity past the filter)


----------



## NMAEF

Nononymous said:


> You have representation - you can still vote from overseas.
> 
> Which isn't to say that citizenship-based taxation for non-residents doesn't suck posterior... (there, snuck a little profanity past the filter)


Yes I can vote for a California representative who does not give a @3%$ about expats... That ain't representation. 

*"No taxation without representation" * originated during the 1750s and 1760s and summarized a primary grievance, one of the major causes of the American Revolution. 

Perhaps its time for *serious representation *of the 7 million US citizens living abroad... and stuck with WORSE requirements for form filling by the IRS than US residents (who drive on US funded roads benefit from Federal programs etc.. which we don't). And we certainly get little help from the US Embassies/Consulates.

US is only OECD country I think, which taxes based on citizenship not residency and WITHOUT representation.

The *French* expats don't have to pay taxes YET The constituencies for French residents overseas are eleven French constituencies, each electing one representative to the National Assembly. There are already Senators representing overseas citizens, like all French Senators, they are elected indirectly, by the Assembly of French Citizens Abroad.

Italy has four overseas constituencies, each with three representatives.

Mozambique has one overseas constituency representing expatriate in Africa, and one for all other expatriates.


These "foreign" accounts and tax issues ("foreign" to the IRS, not to us expats) are really getting out of hand. Anyone care to join forces and get a petition going...???


----------



## Bevdeforges

On the issue of a petition or other lobbying type effort - I used to be on the board of AARO, one of the main US expat groups that does try to raise the issue of overseas taxation and all. Every time they raised the issue of "pushing back" on the taxation by citizenship issue, the board members who just happen to be overseas tax attorneys all get going about how "nothing is going to change" and "this is not the time to raise this issue." I very much suspect the same thing happens with ACA in Switzerland, because the annual lobbying run to Washington is normally done by the two organizations together.

There have been petitions and letters and other contacts. Honestly, most Congressional reps have no idea that they have overseas constituents. And I'm not so sure I'm keen to have representatives for us "overseas residents" given that the District of Columbia and (I think) Puerto Rico both have representatives that aren't allowed to actually vote.

OK, I'm a cynic. But I don't expect much to change any time soon.

Quiet compliance seems to work just fine if you're not in the upper income brackets. As does "selective compliance" which consists of declaring that which you actually owe taxes on, and only that which the IRS has the resources to check on.
Cheers,
Bev


----------



## NMAEF

Bevdeforges said:


> And I'm not so sure I'm keen to have representatives for us "overseas residents" given that the District of Columbia and (I think) Puerto Rico both have representatives that aren't allowed to actually vote.
> 
> OK, I'm a cynic. But I don't expect much to change any time soon.
> 
> Quiet compliance seems to work just fine if you're not in the upper income brackets. As does "selective compliance" which consists of declaring that which you actually owe taxes on, and only that which the IRS has the resources to check on.
> Cheers,
> Bev


A) True: It is a problem if they don't vote BUT, if they get elected and *get paid.*.(that is a note for the cynic), they still want to please their constituents to get re-elected (*and paid*) and they can lobby better especially on an issue where I suspect 99.9% of their constituency is in agreement. 

Also, the French or Italian examples are : representatives who vote ... 

It does seem to me that the issue is getting more and more press (at least deen from Switzerland and watching CNN ) so that *it might be worth it to TRY an online petition *(which can also be signed by US residents... It's not a "legal" petition BUT it does represent voters. The issue is not asking to not be taxed, just to have simplified common sense procedures . The IRS really mixes the US residents with offshore accounts and expats. 

My French born daughter who barely speaks English and only spent 3 weeks in the US 10 years ago just turned 18.. If I understand properly, she may have to "file" if she has a student job ? I am going to have to apologize to her for declaring her birth to the US consulate... 

Anyway, thanks again for the tips.


----------



## Nononymous

Your daughter is considered a US citizen (assuming you'd lived 5 years in the US) regardless of what you did at the consulate 18 years ago, so don't feel too guilty about telling the consulate. 

Does your daughter have another citizenship, with passport? If so, given that she was born outside the US, that non-US birthplace would be shown on her non-US passport, which means that she can enter the US without being identified as a US citizen and hassled for not having a US passport. (That's technically illegal, but whatever.) 

I highly doubt that having registered her birth at a consulate in France will make the IRS magically aware of her existence 18 years later. The only thing that might (maybe kinda sorta) do that is applying for a US passport. But if she has another passport...

This all falls apart if she decides she wants to go live in the US...

My daughter is in much the same situation. Born in Germany, with dual US-Canadian citizenship. I registered the birth and have a baby passport, but since I learned of this mess we've kept her purely Canadian. Only potential grief would come if she and I flew to the US together and they noticed my US passport and/or birthplace and put two and two together, but that hasn't happened yet, and since it's not automatic that citizenship passes on (the US parent must have lived 5 years in the US) she can plausibly claim to not having the citizenship (though I'm sure she's in some database somewhere). 

In other words, your daughter can relax. She can very likely pretend she's not American, and get away with it.


----------



## maz57

For those who still care about this representation business my idea for a remedy would to deem all long term expats to be residents of D.C. and give D.C. the same representation as a state. That would mean representatives in the House according to population and two Senators. That would fix two problems simultaneously. None of this would ever be an issue for expats anyway except for CBT.

Don't hold your breath. Personally, I find it far more productive to devote my political energy to where I actually live-Canada. Those are the politicians who make the most difference to me. Expats are invisible in Washington.


----------



## NMAEF

Nononymous said:


> .......If so, given that she was born outside the US, that non-US birthplace would be shown on her non-US passport, which means that she can enter the US without being identified as a US citizen and hassled for not having a US passport. (That's technically illegal, but whatever.) .......In other words, your daughter can relax. She can very likely pretend she's not American, and get away with it.


I guess one "can get away with it" but a situation making people break the law even "technically" is not great. Where does one draw the line ? 

Not that I am your "perfect" person, but it just makes it harder on the kids.


----------



## Nononymous

Ultimately it's her call - she's an adult. She has three options:

1. She can carry a US passport and become tax compliant.

2. She can carry a US passport and ignore tax compliance.

3. She can use her non-US passport for occasional visits to the US.

Where does one draw the line? For me, I'm quite happy to break the laws of a country I don't want to live in that I don't think should apply to me, due to accident of birth. (Alas I occasionally need to travel to the US, so I do need the damn passport; had I not been stopped by customs I'd cheerfully continue breaking that law too.) I feel not one iota of guilt, not a single moral qualm. I owe the US nothing; the US owes me nothing. It's purely a calculation of risk - what one can get away with.

This is however a viewpoint more typical of a dual citizen who did not grow up in the US and has no connections there.


----------

