No, no, no - I am not devoting this essay to letters! I've done that the past two articles published in this exact same place - I'm not saying that there will not be a Letters 3....but not this time. True, I will mention some letters at the start of my writing but that this will NOT be a tax essay solely devoted to letters. No way!

And what letters may they be? Why, IRS letters, of course! Perhaps it is the lack of letters that matters in these three instances, all very factual.....and they do not get any more timely than now, when I write about them.

On Thursday I received an email from a client asking what he should do with the $US15,169 IRS refund check that he received - without any letter accompanying it.

On Friday, I watched a video replay of a baseball game played in the states earlier that day. I was with a client - we called in for pizza and enjoyed the game: one certifiable baseball junkie enjoying a game with another, equally insane baseball-type. He solemnly asked me what he should do with the check he received - in this case (at which time that solemnity changed to a 'bleep' eating grin), for $US289,000+ check from the IRS, also with no letter of explanation.

The former recipient was based in Guangzhou. The latter on is Shanghai based. The third recipient received a letter, though. but no check - in Beijing, informing him that he will be the recipient of a $US31,000+ refund.

The first part of that letter made sense....the client was in error. Yet the latter half of that letter bore absolutely no resemblance to either the tax return the client filed or any back up data applicable to the client's 2013 income or expenses. So what to do with the check he hopes to receive? What do all three individuals do? Well first, that last client has to receive the check - this is not always a 'done deal' when the IRS is involved - letters without checks.....checks without letters (the preferable thing is the check, rather than the letter, if one is to receive something from the IRS).......What's a client to do? Deposit the check in an interest bearing account.....treat that receipt of new found cash as money you are placing in escrow.....if at the end of 6months, you still haven't heard from the IRS about what the check is for, then take the money and enjoy if they haven't contacted you by then, the chances of subsequent contact will be remote. My wife loves this: 'What a great country - they give money away like this!' Yeah, but I've seen the IRS also write, subsequently, that they sent you the money in error and the ramification of this can potentially be severe!!

Streamlined Procedure, here we come!

O.K. no more letters - at least for this article.....

In sports terminology, every so often, we get what is known as a game changer - like a batter getting his century - that's going to be the game changer for a particular cricket match.

The IRS announced a game changer on 18 June with relevant documentation - particularly in the form of 'Frequently Asked Questions' for the next iteration of Offshore Voluntary Disclosure Program that went into effect 1 July. Now I ask you - if it is a new program, how have they been able to determine what will truly be the frequently asked questions once the rank and file public sees this? Truth be told, it ain't really frequently asked questions - these,my friends, are guidelines, with updates to specific paragraphs, references in other paragraphs stating that what once was is no longer applicable, etc, etc. These are the rules that should be followed....not in very user-friendly English. What I find immediately interesting - and exciting, quite frankly - is the new format for streamlined procedure for correcting your innocence of not knowing, not understanding - in effect, a penalty-free guideline for a legitimate expat to come back into the system if there is any money owed due to 'sins of omission' during the previous three years. And because rectification of these sins of omission are now set in place for those who owe, I firmly believe, more than ever, that those who do not owe a thing but have some back filings due should do this through quiet disclosure.

The key stipulation, the primary requirement is that the tax payer was not in compliance due to 'Non-willful conduct'. The IRS defines this as conduct due to negligence, inadvertence or mistake or conduct that is the result of a good-faith misunderstanding of the requirements of the law.

If you made an error, or omitted any of the following - and owe any back taxes over the past three years....consider this - you have an opportunity to get back into the system, penalty-free!! It is something to consider this year because I really do not think this will be available for long. Regardless here's that list:

•  Failure to report overseas bank account interest, dividends from foreign investments or capital gains

•  Failure to file an FBAR

•  Failure to file/report the information return of your overseas corporation - the one in which you own 10 percent or more - Form 5471

•  Failure to file Form 8938 - got specified foreign financial assets? You might have another form to file that you were not previously aware of

•  Failure to file Form 8621, the PFIC form that, if ever re-written in user-friendly English, could take in so much more! Alas, no one truly understands this form (including - especially - the IRS!)

•  Failure to file other forms - ie. Form 8865 - similar to the 5471, but for foreign partnerships; Form 8858 - the information return for 'disregarded' entities which requires sufficient information such that the entity is not really disregarded in the most common definition of the word

Hey there - are you possibly responsible for any of those forms? Did you know that there is an annual $US10,000 penalty if you don't file. What's it worth to you NOT to be penalized simply by giving all that information to the IRS and locking yourself into the system for the future?

If you don't owe any money but want to go into the system should you use the streamlined procedure or simply file? Only you can best decide (with the able assistance of your tax consultant, obviously!)

The streamlined procedures involves the filer certifying under penalty of perjury, the following:

My failure to report all income, pay all tax and submit all required information returns, including FBARS, was due to non-willful conduct. I understand that non-willful conduct is conduct that is due to negligence, inadvertence or mistake or conduct that is the result of a good faith misunderstanding of the law.

I recognize that if the Internal Revenue Service receives or discovers evidence or willfulness, fraud or criminal conduct, it may open an examination or investigation that could lead to civil fraud penalties, FBAR penalties, information return penalties, or even referral to Criminal Investigation.

And then there is a space on that certification for the individual filer to explain why this is non-willful.

So what is willful and what is non-willful? Let's look at FBAR filings as an example. It is more or less accepted that there are 7.6 million American expats (including you NRIs out there, reading this!!). So how many FBARs do you think were filed during 2012? 5 million? 4 million? Would you believe 807,040 submissions for tax year 2012 - and this includes domestically residing Americans holding overseas accounts. How come so low??? Professor William Byrnes estimates that all the initiatives, to date, have produced a compliance rate of approximately 10 percent. Are the majority of this 90 percent who have not complied guilty of non-willful neglect because they simply did not know because the IRS has not been very good at communicating with American citizenry living outside of the U.S. ? Quite likely. Let's face it - unless the tax police are a constant threat, who of sound mind is going to voluntarily read up on taxes at the end of the hard day's work - especially if that individual just knows that he or she will comprehend little of what he or she will attempt to read (except, of course, if its one of those off-the-wall tax books that I write!!! I am a 'best selling author' according to Amazon but that's meaningless rhetoric when one realizes that I write for a virtually non-existent literary genre)?

Lack of information has been the past. The IRS is making inroads, though, in scaring the you know what out of many 'newly informed'. Ask any US tax practitioner working outside the US - this should be our time of rest and relaxation - another tax season has ended - and yet the inquiries because of the fear being spread is more than noticeable.

And here is the sort of 'fear producer' that the IRS has become so good at producing - it is in the form of a caveat coming from the the powers that be in Washington, DC. On 24 June 2014, former Department of Justice Assistant Attorney General (Tax Division) warned that taxpayers should think carefully before signing a certification of non-willfulness and entering the IRS's new Streamlined Filing Compliance Procedures. The certification is made under penalty of perjury and will not provide protection from criminal prosecution if the IRS decides that a taxpayer willfully failed to disclose a foreign account. Go and enter OVDP out of fear, my friends - pay extortionery penalties if you truly think the IRS has a case against you and can seize your assets in the US. What? You are positive of your non-willfullness and you do not have any US based assets? Don't apply for OVDP - use the alternatives!

Now that you've been warned, let me quote one of the more memorable lines from US President Franklin D. Roosevelt, who was at the helm of that US ship during the last depression (yes, I definitely am implying that we are currently in another depression - sorry about that but that's the world economy, as I see it!): "The only thing we have to fear is fear itself."

How rational is it to enter into a program requiring filings and all sorts of penalties for the eight previous years when there are now valid alternatives out there requiring, in essence, only three years - without penalties - is it because one is afraid, rather than guilty? If you are guilty, you obviously do not have any choices.

The overwhelming majority are NOT guilty as the IRS would have you believe and I truly welcome the opportunity to have, in essence, a couple of amnesty program-like choices now.....

And let me conclude this essay with my opinion about those fear tactics being used.....well.....I really consider them to be un-American...........!