IRS Policy Shifts: Are Expats Targeted Like The Tea Party?


Here is a letter regarding IRS policy shifts from Jackie Bugnion, director of American Citizens Abroad:


"To the Editor:

In his article, "The IRS Is in Big Trouble," Tax Notes (no link, paywall), May 20, 2013, p. 951 , Christopher Bergin stated that the scandal surrounding the treatment of Tea Party applicants for section 501(c)(4) status may be the canary in the coal mine. I would like to highlight one other scandal which was signaled by National Taxpayer Advocate Nina Olson, but was ignored by former IRS Commissioner Douglas Shulman — the "bait and switch" tactics of the IRS under the overseas voluntary disclosure program (OVDP).

Not only did the IRS change the rules in midstream during the initial program, thereby causing unjustified heavy penalties for many Americans abroad who entered the program in good faith, but the IRS also applied a one-size-fits-all approach, thereby unduly penalizing Americans resident overseas who must maintain relationships with financial institutions in the country where they reside for normal living. The sudden shift in IRS policy to enforce foreign bank account report reporting rules through the OVDP following a 30-year period during which the law was dormant and ignored by Treasury with no prior outreach to taxpayers on filing obligations has created bitter resentment among Americans abroad.

IRS current policy of taxing overseas assets makes it very penalizing for Americans abroad to enter into compliance, in sharp contrast with former policy that encouraged quiet disclosure with only back taxes and related interest and late payment penalties to pay. The community overseas feels that the IRS has manipulated the law in an unfair and unreasonable way.

Jackie Bugnion
American Citizens Abroad
May 22, 2013"


I would point to differences.

First, as facts can best determine, the IRS was intentionally targeting the Tea Party group. Similarly filed non-profit applications from groups from the opposite side of the political spectrum were fast-tracked to approval. This is unfair treatment.


The unfair IRS policy shifts toward expats, however, appears to be more as a result of administration bloat.


Second, at least the Tea Party has political surrogates. After all, the Tea Party was inches away from having their prefered candidate win the 2012 presiental election. Expats, dual citizens…very few people go to bat for them.

Too be sure, the IRS' policies on expats is completely unfair. The US is the only country (besides North Korea) to tax citizens on their worldwide income no matter where they live. And as Attorney Holbrook commented yesterday, the IRS is not making any out reach efforts to educates expats to their offshore liabilities.