Americans who hide money offshore have a almost mystical belief in foreign bank secrecy laws. Whether it is Switzerland or the Carribean they believe that these countries’ laws and bankers will protect them from the U.S. government’s investigators and tax collectors.
Secrecy has crumbled. You wouldn’t know it from the people who come to my office looking for advice. They have faith that their bearer shares and banking arrangements will stay invisible to the IRS. They believe that the U.S. government is pursuing the Swiss bank UBS. They don’t have their money in UBS, so they think they are safe.
There is no such thing as secrecy. The likelihood that the IRS will find Americans with hidden offshore bank accounts increases with each passing day. Let’s look at recent history.
In early 2008 it was revealed that the German government had paid an informant 4 million euros for stolen information about “safe” accounts in Liechtenstein. This information was passed on to other governments. Including the USA. One hundred U.S. taxpayers were caught in this net…so far. Bribery by the German government put U.S. taxpayers in the cross-hairs of criminal charges.
What about resentful ex-employees doing dumb things? Rudolf Elmer worked at Bank Julius Baer, a prominent Swiss bank. He lost his job. The normal legal back and forth followed. Except that in a fit of pique Mr. Elmer released hundreds of internal bank documents on the internet. Including the names of bank customers.
Now the elephant is dancing. The U.S. Department of Justice is pursuing UBS, trying to get UBS to turn over the names of as many as 50,000 names of U.S. account holders. A UBS executive was arrested, pleaded guilty, and is cooperating with the U.S. government.
I’m guessing that more than a few of BHB’s readers have clients with offshore bank accounts. Asset protection trusts. Etc. People whose tax strategy is “How will the IRS ever find out?” Especially condominium developers. 🙂 As sure as night follows day, construction defect litigation by homeowners associations will follow the successful completion of that condominium project. And developers are pragmatic folk. They like to stash money away, just in case.
Now is the time to clean things up. Tell the IRS all about those offshore accounts. Repent. Come to Jesus. The IRS has an amnesty program of voluntary disclosure of offshore bank accounts where the threat of prison for tax evasion is eliminated and the penalties are predictable.
All sales final after September 23, 2009. Here’s the deal the IRS offers:
- 20% (worst case; could be 5%) of the highest balance in the bank account at any time from 2003 to 2008 (this is your punishment for being a bad person); and
- Pay the income tax on the unreported income for 2003 to 2008; and
- Pay an extra 20% of the tax on that income for 2003 to 2008; and
- Pay interest on everything except the big “20% (or if you are lucky, 5%) of highest balance” penalty.
The IRS has published an example in a FAQ of how a taxpayer would be treated, with and without the amnesty. On a $1,000,000 account earning 5% interest, an amnesty applicant would pay $386,000 plus interest, and someone who did not qualify for the amnesty would pay up to $2,306,000 plus interest, AND be at risk for criminal prosecution.
This won’t work for everyone, because not everyone is eligible. But for those who are eligible, this is an offer to be seriously considered. It guarantees that you will avoid criminal prosecution, it caps the total tax, penalties, and interest you will have to pay, and it prevents the IRS from going back to years earlier than 2003.
If past IRS amnesty programs are any indication, missing the opportunity will be costly. After the amnesty expires the penalties imposed will almost certainly be higher. Tell that doctor or developer client of yours who thinks his money in Caymans is safe forever. Tell him “Come to Jesus.” 🙂
Brian Brady says:
“I refuse to use the word “client” because I think it smacks of lawyer ego, self-generated arrogance, and clubbiness. They are customers. We’re a business. Get over it”
This, from one of your linked posts, makes me wish I met the qualifications of your customer base. I’ll bet they love your direct, egalitarian approach.
June 5, 2009 — 5:22 pm
jordan says:
Nowhere to hide. I would take the 2003-2008 deal, don’t want to mess with uncle sam
June 6, 2009 — 5:07 am
Thomas Johnson says:
Physical gold in the wall safe is about as confidential as it gets.
June 8, 2009 — 2:16 pm
Michael says:
Dear Mr. Hodgen: June 16, 2009.
Hi! Your blog on the IRS’s voluntary amnesty program is most interesting. However, I was led to your website because I am interested in buying real estate, where I intend to relocate. I am attracted to many countries in the Southern hemi- spherein the future, although I have not ruled Central America out.
I want to establish an offshore bank account
and business entity, with the intent to declare to the IRS all capital gains, obtained from the two following activities:
1.)Trading stocks/ liquid options(as a day- and swing-trader, using a Level II screen/D.O.M. order entry software). Since the costs associated with this type of trading would be prohibitively expensive, I want to use an international discount brokerage(using the offshore business entity).
2a.)Importation of nutraceuticals(from developing coutries), 2b.)Formulation and packaging of novel proprietary compounds, 2c.)Advertising for sale these compounds–through various, nutrition, anti-aging and bodybuilders’ periodicals/websites, and 2d.)Shipping and invoic-ing orders to customers.
Could you please help this newbie, with limited startup capital, with some basics–i.e., the type of offshore bank and business entity required? But more importantly, your recommend- ation of a specific bank and legal firm that offers the best-priced package dea–to accomplish activities listed in 1.) & 2.) above, would be very much appreciated. (On tha basis of my own research, certain Panamanian banks may be the most reliable choice.)
Most likely, other important aspects exist that were I have overlooked. Please feel free to point these out. I have great faith in your expertise. Thank you and God bless.
Sincerely,
Michael R. Shuda, D.C. CA, IA
June 16, 2009 — 4:49 pm