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IRS agents are given tremendous power. When they abuse it, they should face harsher penalties than those not so empowered. Last night I heard on NPR the story

by 300bps 13y ago

IRS agents are given tremendous power. When they abuse it, they should face harsher penalties than those not so empowered. Last night I heard on NPR the story of a New Zealand expatriate that did not file US taxes for several years as is required by every US citizen no matter where they live or how long they've lived outside the US. He voluntarily notified the IRS of his oversight and paid the $20,000 in back taxes. The IRS then told him his penalty exceeded $140,000.

kbenson 13y ago
I imagine if he lived abroad and still managed to owe $20k by his reckoning, his income and/or assets are non-trivial, and the IRS may have some cause to think he owes more (that's not to say they are correct). Unfortunately the US tax system is a very adversarial one.
- Spooky23 13y ago
  Not really. A programmer earning around $100k could easily accrue that kind of tax liability over a few years, even after deducting payment of foreign taxes. (But not penalties and interest for the delayed payments)
- jlarocco 13y ago
  Considering he had $0 taken out for taxes each pay check, and it was over several years, it's really not much. My rough estimate is he could have earned $60k a year for 3 years and owe approximately that much.
  - dmm 13y ago
    The first ~$95k of foreign income is excluded from US taxation.
    - DanielBMarkham 13y ago
      But you are obligated to file, even if you have zero income, and you are obligated to disclose assets, even if they're your spouse's. There are several more requirements not related to income, or even if the citizen ever lived in the US (many people have US citizenship and have never stepped foot here), each of which can carry a substantial penalty if violated. There are many people living in fear -- and many in substantial debt -- not about income tax problems, but about IRS filing requirements. The system is a monstrosity.
    - chiph 13y ago
      So he'd probably have less than 50k in income liable to taxation, and that puts him in the 15% bracket, so for 3 years his tax would be about 25k. How they got from there to 140k is an interesting question -- that's a hell of penalty & interest charge.
jlgreco 13y ago
> given tremendous power. When they abuse it, they should face harsher penalties than those not so empowered. I think this is a concept that should be applied with a broad stroke across society. When someone who is empowered by the people (afforded special privileges or abilities by a government that is democratically elected) commits a crime, that crime is inherently twofold. Liability needs to increase in proportion to the amount of power that has been granted.
- mahyarm 13y ago
  They don't because liability risk increases as you apply these liability prone powers.
mikeyouse 13y ago
> The IRS then told him his penalty exceeded $140,000. His penalty did exceed $140,000 though, they didn't make this up to punish him. That's what happens when you just ignore federal laws. After meeting with the IRS, the penalty was reduced to $25k.[1] A New Zealand savings account would have averaged ~4%/year over that time period, so subtracting the gains from his owed $20k leaves about $20k in penalties. What's an appropriate amount to discourage tax cheats? They're called penalties for a reason... are we just supposed to trust everyone who, when caught, claim they 'didn't know' about the law? [1] - http://www.reuters.com/article/2011/12/08/us-usa-taxes-foreign-idUSTRE7B723920111208 http://www.reuters.com/article/2011/12/08/us-usa-taxes-forei... Van Horn contacted the IRS's Taxpayer Advocate Service, which agreed to work on his case. After a series of offers and counter-offers, he says, the result was a single "non-willful" FBAR penalty of $5,000 per year, or $25,000 total.
- breischl 13y ago
  No, we're only supposed to believe they "didn't know" if they're the Secretary of the Treasury, or a Congressman, or something like that.
  - mikeyouse 13y ago
    Snark aside, there's a huge difference tax negligence and tax fraud. Not filing taxes for 5 years is fraud. Filing and paying taxes while working for the IMF -- but not realizing you should've been paying the 'employer' half of payroll taxes as well -- is negligence.
    - greedo 13y ago
      I remember someone telling me that ignorance of the law is no defense. And I would think it wouldn't be too much to ask that a Federal Reserve Bank President be aware of tax consequences/implications.
    - mahyarm 13y ago
      The USA is the only country that requires tax returns & payments of expats that make no income from their home country and no longer live there. I'm not surprised many 'normal' people are very unaware of these facts when they move away from the USA. On top of that you have huge accountant costs to file these complicated penalty prone returns even if you end up not owing any taxes year over year. It's still 'negligence', your IMF example is just in part instead of in full.
mikeash 13y ago
What is the supposed relationship between your first and second paragraphs, aside from both involving the IRS?

by 300bps 13y ago

kbenson 13y ago

I imagine if he lived abroad and still managed to owe $20k by his reckoning, his income and/or assets are non-trivial, and the IRS may have some cause to think he owes more (that's not to say they are correct). Unfortunately the US tax system is a very adversarial one.

Spooky23 13y ago
Not really. A programmer earning around $100k could easily accrue that kind of tax liability over a few years, even after deducting payment of foreign taxes. (But not penalties and interest for the delayed payments)
jlarocco 13y ago
Considering he had $0 taken out for taxes each pay check, and it was over several years, it's really not much. My rough estimate is he could have earned $60k a year for 3 years and owe approximately that much.
- dmm 13y ago
  The first ~$95k of foreign income is excluded from US taxation.
  - DanielBMarkham 13y ago
    But you are obligated to file, even if you have zero income, and you are obligated to disclose assets, even if they're your spouse's. There are several more requirements not related to income, or even if the citizen ever lived in the US (many people have US citizenship and have never stepped foot here), each of which can carry a substantial penalty if violated. There are many people living in fear -- and many in substantial debt -- not about income tax problems, but about IRS filing requirements. The system is a monstrosity.
  - chiph 13y ago
    So he'd probably have less than 50k in income liable to taxation, and that puts him in the 15% bracket, so for 3 years his tax would be about 25k. How they got from there to 140k is an interesting question -- that's a hell of penalty & interest charge.

jlgreco 13y ago

> given tremendous power. When they abuse it, they should face harsher penalties than those not so empowered. I think this is a concept that should be applied with a broad stroke across society. When someone who is empowered by the people (afforded special privileges or abilities by a government that is democratically elected) commits a crime, that crime is inherently twofold. Liability needs to increase in proportion to the amount of power that has been granted.

mahyarm 13y ago
They don't because liability risk increases as you apply these liability prone powers.

mikeyouse 13y ago

> The IRS then told him his penalty exceeded $140,000. His penalty did exceed $140,000 though, they didn't make this up to punish him. That's what happens when you just ignore federal laws. After meeting with the IRS, the penalty was reduced to $25k.[1] A New Zealand savings account would have averaged ~4%/year over that time period, so subtracting the gains from his owed $20k leaves about $20k in penalties. What's an appropriate amount to discourage tax cheats? They're called penalties for a reason... are we just supposed to trust everyone who, when caught, claim they 'didn't know' about the law? [1] - http://www.reuters.com/article/2011/12/08/us-usa-taxes-foreign-idUSTRE7B723920111208 http://www.reuters.com/article/2011/12/08/us-usa-taxes-forei... Van Horn contacted the IRS's Taxpayer Advocate Service, which agreed to work on his case. After a series of offers and counter-offers, he says, the result was a single "non-willful" FBAR penalty of $5,000 per year, or $25,000 total.

breischl 13y ago
No, we're only supposed to believe they "didn't know" if they're the Secretary of the Treasury, or a Congressman, or something like that.
- mikeyouse 13y ago
  Snark aside, there's a huge difference tax negligence and tax fraud. Not filing taxes for 5 years is fraud. Filing and paying taxes while working for the IMF -- but not realizing you should've been paying the 'employer' half of payroll taxes as well -- is negligence.
  - greedo 13y ago
    I remember someone telling me that ignorance of the law is no defense. And I would think it wouldn't be too much to ask that a Federal Reserve Bank President be aware of tax consequences/implications.
  - mahyarm 13y ago
    The USA is the only country that requires tax returns & payments of expats that make no income from their home country and no longer live there. I'm not surprised many 'normal' people are very unaware of these facts when they move away from the USA. On top of that you have huge accountant costs to file these complicated penalty prone returns even if you end up not owing any taxes year over year. It's still 'negligence', your IMF example is just in part instead of in full.

mikeash 13y ago

What is the supposed relationship between your first and second paragraphs, aside from both involving the IRS?