The US Internal Revenue Service was feeling rather proud of itself yesterday; IRS Commissioner Doug Shulman held a press conference to release the final results of 2009 amnesty program.
Over 7500 taxpayers came forward this year to confess hiding income in overseas bank accounts; this number is substantially greater than the several hundred which usually step forward.
Obviously, the unity of insolvent western governments against overseas ‘tax havens’ coupled with the UBS/Swiss banking debacle has lit a fire under noncompliant taxpayers… and of the 7500 individuals who came forward under the amnesty program, their bank account sizes range from $10,000 to over $100 million.
To be clear, having an overseas bank account is not illegal… it’s actually a smart thing to do. Generating offshore income, hiding it in an overseas bank account, and not telling the government about it, though, is illegal.
The Obama administration continues to beef up the IRS with financial and manpower resources– 800 new agents are currently being trained specifically to go after international tax evaders. They have even announced opening up new offices in places like Beijing and Panama… though I’ll believe it when I see it.
With their new mountain of resources, I expect the IRS to go after a few noteworthy tax dodgers (Wesley Snipes, Bradley Birkenfeld) in highly publicized trials. My prediction, however, is that most people the IRS finds will more than likely be subject to financial penalties, probation, and suspended sentences.
Why? Because incarceration costs money, and the government needs tax revenue. Someone who can make $100 million and stash it away in a Swiss bank account is more useful to the government creating jobs in society rather than playing the harmonica behind bars.
Regardless of the penalties, though, trying to ‘hide’ money in offshore accounts is just a dumb thing to do. There are a lot of people out there who think that their trustees and banking secrecy will protect them from tax authorities.
They won’t. Depending on the discretion and secrecy of another human being is a sure-fire way of getting caught. No banker or trustee in the world can withstand the pressure of the federal government and its limitless resources.
There is a bit of good news in all of this, though.
The Obama administration has recently abandoned its plans to go after overseas corporate income. Current tax code allows US corporations to defer paying taxes on income earned overseas until that money is repatriated to the United States. Obama wanted to change this law, but has recently abandoned his plans.
I’m sure that US companies threatened the administration with another round of deep job cuts if the tax hike were passed… and considering that Obama needs their support for changes to climate, healthcare, and financial regulations, he walked away from the idea altogether.
Entrepreneurs with overseas income can greatly benefit from this tax rule; with a properly planned business structure, businesses can defer paying taxes on overseas income, indefinitely, until the funds are brought back to the US.
Let me know if you’re interested and I can refer you to some knowledgeable and by the book tax attorneys who will give you expert advice.
THE BEST GAME IN TOWN:
Legitimate tax deferral strategies are often the cornerstone of good tax planning. Find out what options are available for your particular situation and take action right away.
For individuals, an easy way to do this is with the Open Opportunity IRA structure that I have mentioned a few times. I don’t want to beat a dead horse, but it’s a no-brainer strategy.
The best way to find out more about this strategy is to check out the guide written by our friend and noted Economist, Terry Coxon. Check out Terry’s Guide, Unleash Your IRA
