Praise be baseball......were I to have to do another US tax return without a baseball game playing in the background, I think I'd go crazy! Now I have nothing against doing tax work - it has provided our family with a very comfortable income. But doing tax returns for 48 years does present problems as anything would after 48 years - the work becomes routine and routine becomes boring after all that time......Praise be Twenty/20 cricket! Same thing: finality in approximately 3 hours. If IPL had something like MLB-TV on the internet, I'd watch archival copies of games played earlier while performing the rote and mundane, the tax return.....Praise be the World Cup - starting next week, I'll be doing tax work at 3am for a month!!!

Fortunately, the U.S. Internal Revenue Service, in its attempt to impose 'Tax Americana' upon the rest of the world, has provided me with more work than I'd like; work that while not exactly 'interesting', is, nonetheless, far more challenging, albeit, still routine and boring......

My subject this month, though, is about letters - both those coming from the IRS and those coming from others, generated because of the IRS. I'm going to discuss 6 letters: three are on my office floor (where I keep the messiest filing system in the world but since I know where to find things, why change?). Four of these letters came in this week from clients asking how to handle things. Two arrived late last week. More and more, I find myself having to answer/explain/translate correspondence sent out solely because the recipient is a US tax filer - what is the world coming to??

*The most recent, first..........I got a call, yesterday, from a former client who, after several years in China, relocated a few years back to Denver, Colorado. She sent me a letter she received from a brokerage in Hong Kong where not only did she have an account in Hong Kong which she was unaware she had but she was also unaware of actually still having funds in the account. The letter put things rather bluntly - the brokerage is closing the account before 1 July, in order to avoid FATCA. Now obviously, this is the type of letter also going to other Americans, placing them in a conundrum: Where do they turn; what do they do; how do they function, financially if they live and work overseas? A few years back, I was quoted in The Economist about the U.S. building the Great (tax) Wall of America. I discussed the coming of 'speakeasy' banking (in China it is referred to as 'shadow banking', being an old time drunkard, now gone sober, I prefer the prohibition era 'speak easy' terminology!) and brokering. My friends, that era of 'speak easy' banking is here...now! There are banks, there are trust companies, there are alternatives for which long term American expats will turn to because they have to. They are not crooks. They are not criminals (as the IRS wants everyone to believe). They are, for the most part, working stiffs who need the every day financial conveniences that everyone else is entitled to. FATCA and F(u)BAR have changed the world's financial landscape. But let's get back to that former client in Denver. She's now going to have that little bit in that account sent to her in Denver. What about her personal compliance with F(u)BAR? Is she responsible for prior year filings - especially when she had absolutely no idea of having an undeclared account? And how is she going to find out about those prior years of not filing - especially when she expects that the brokerage is not going to be helpful in providing any prior year information? These are not among the FAQs that the IRS provides. These are not answers that will be given by any IRS employee if she were to call. She is certainly not a criminal and certainly not guilty of wilful neglect!

* Here's the second letter, one that is far more common: A client received a letter notifying him that he owed just over $US2,000 for not reporting a 1099 on his 2011 individual income tax return. (1099 is the information return sent out by US banks and brokerage houses). The bulk of the assessment was based upon a claim that the non-reported 1099 has sales of stock amounting to $US19,178. The taxpayer was going to pay it and I said "NO! LOOK AT THE 1099, FIRST!!!" Well, my friends, those sales of $US19,178 of stocks were for stocks that cost the taxpayer $US20,730 - a loss, very clearly. So it costs a bit to process an amended return plus the letters (multiple, because the IRS does not process correspondence very well) I've been asked to write.....that is still a heck of a lot cheaper than the IRS assessment (although still morally wrong that I have to do it for the client in the first place). What is the lesson to be learned? Don't assume that the IRS is correct. Let's face it: The IRS is wrong in its correspondence far more than it is right!!! I wonder how much is collected by tax bureaucracies of this world, based upon unintelligible, incorrect letters of assessment? I do not wonder about the tax bureaucracies of this world never revealing the extent to which they collect upon incorrect assessments. I also have no doubt that those tax bureaucracies know very well how much is generated because of incorrect letters but they'll never let us know!!

* Our third letter, my friends, is also from an IRS letter, generated by the taxpayer having to get up at an awful hour of the morning to call the IRS, suffering the indignity of having to call a couple of times because she was cut off while waiting. The reason for the call: a common one - the taxpayer couldn't understand the logic of an initial IRS letter - I am no longer willing to make these early morning calls, so I asked her to do it herself. She was assessed penalties, only she paid her previously those assessments. What she found out, weeks later, after her call, was the result of her call a letter from the IRS showing that they applied her payments to an entirely different matter. An incorrect matter, too. Wouldn't it be sensible for the IRS to have let the taxpayer know this? Alas, the IRS does not appear to work in a sensible manner (oh boy, are there people at the IRS who are going to hate me for saying this!!!)

* And here, again, is a letter from the IRS - actually, 2 letters. I filed tax returns for a person who thought that because he clearly owed no taxes he was not obligated to file a tax return. WRONG! I filed multiple year returns directly with the Austin, Texas IRS Center where returns should be filed. I did not put the client into the OVDP, the Offshore Voluntary Disclosure Program, which is a very profitable program for practitioners who certainly cannot be criticized because it is the US government recommended program, seeking years and years and years of tax returns for which the taxpayer voluntarily foregoes the 3 years statute of limitations and from which, because of all those additional years of billings, most tax practitioners have prostituted themselves (O.K., now the lawyers and CPAs will hate me as much as the IRS probably does!). Anyhow, the taxpayer received two letters for two years, from the IRS, stating that it recognized his filings and that he did not owe anything for those years. OVDP is 'recommended' because returns are filed within a separate division that can handle them (albeit, not very timely) and assess taxes on them. It was set up because the current system really doesn't work any longer.....It is NOT the only method that can be used. If it were, then alternatives simply would not be permitted. The moral of this: be a tax consumer - don't just assume that your tax practitioner is telling you the way to go. You, the tax filer, MUST be responsible for your taxes - you are only asking your practitioner to assist you, not to do it all as he or she sees fit!

* O.K. this is now going to be a 'teaser' I'm not going to write about the other letters in this essay - you'll simply have to wait until my next contribution to this venerable site. But......the teaser portion: one of the letters is from the U.S. Embassy in Thailand while the other is from Union BancairePrivee of Switzerland, the most recent loser in the only wars the U.S. seems to be winning: the tax wars! I guarantee that my comments about these two letters will be interesting - only you'll have to wait until next time.....

(See Letter - 2)