U.S. Taxes: Enforced Exactions, Not Voluntary Contributions

When in doubt, announce yet another new program to ensnare all those millions of offshore, “tax cheating” Americans.

I shouldn’t be surprised. This is an ongoing IRS strategy that hardly ever captures any bad guys – i.e. tax evaders – but instead targets innocent U.S. persons who live, work, bank and do business offshore.

Claiming that the IRS had collected $5 billion from undisclosed offshore accounts, IRS Commissioner Douglas Shulman this week announced new procedures he claims will help thousands of beleaguered U.S. taxpayers living abroad meet their requirements to file returns.

That includes people, many of them Canadians, who recently learned to their surprise and dismay that they are subject to the U.S. tax code because they were born south of the border or had a U.S. citizen as a parent.

Unfortunately, the IRS propaganda machine, with help from their complicit, too-lazy-to-check news media allies, have successfully sold the wrong-headed idea that anything “offshore” equates with illegal tax evasion.

Of course, that’s a lie … but as the late Nazi propaganda chief Joseph Goebbels said, the “Big Lie,” repeated enough, becomes accepted truth.
The Greedy, Grasping U.S. Tax System

The Sovereign Society, of course, supports the payment of all taxes due by Americans and the filing of all required reports, both domestic and offshore. We even tell you when to file and what IRS forms to use.

At the same time, we dislike the greedy, grasping U.S. tax system, almost unique among major nations, that taxes U.S. persons on all income worldwide, no matter where the income source is located or where that person may live. We support, and continually lobby for, a territorial tax system that taxes only income earned within national borders, which is the system used by most advanced countries.

That’s why at The Sovereign Society, a great deal of our time and effort is devoted to exploring and explaining legal ways by which you can avoid, minimize and defer taxes.
Here We Go Again

Shulman’s latest $5 billion claim is an update from January, when he extended the most recent IRS tax “amnesty.” At the time, he said that the IRS had collected more than $4.4 billion from the two previous tax amnesty programs in 2009 and 2011. With President Obama’s 2012 IRS budget at $13.3 billion (a $1.1 billion increase over 2010), we should be asking how much it cost to collect this alleged $5 billion government windfall.

Shulman says taxpayers with relatively simple returns who owed $1,500 or less for each of the past few years will be eligible for the new program, which starts September 1. Non-resident U.S. persons disclosing their information to the IRS will be required to file three years of past tax returns and submit records showing all of their offshore account holdings for six years – and who knows where that could lead?

My advice on this matter is simple: Beware!

The IRS and the U.S. Justice Department have been pursuing criminal cases against U.S. taxpayers with undeclared offshore assets. The U.S. uses data on promoters, advisers and bankers that it gets from such “voluntary” disclosures. Taxpayers have made about 35,000 disclosures since the voluntary programs began in 2009, Shulman said.

The IRS announcement recognizes justified anger among U.S. taxpayers around the world because of the government’s heavy-handed enforcement efforts, says Charles Bruce, tax counsel of American Citizens Abroad, a respected advocacy group. He said the changes don’t go far enough. “This program, the way it exists and the way it’s slightly amended, is too scary. They’ve scared away people from getting into compliance and this is going to continue to scare people.”
Be Very Careful of IRS Amnesties

As with past IRS amnesties, this latest program will require delinquent taxpayers to give full details of past arrangements, identify banks and promoters and pay all back taxes, plus interest. Any binding IRS guarantees that criminal charges won’t be filed is unlikely. Evaluations will be on a case-by-case basis, depending on whether the taxpayer fully cooperates with the investigation.

The publicity generated by the successful efforts of the IRS to pry information out of Swiss banking giant UBS, and pending investigations of other offshore banks, has led to many “quiet disclosures” by U.S. taxpayers outside the IRS amnesty programs. This occurs when a taxpayer simply files amended returns and forms, and pays all back taxes and interest, plus penalties. That route may still be available to some under the new program.

The question is: Should you participate?

The answer is: “maybe,” but only after you consult with a qualified tax attorney (not just an accountant). Do that, and your discussions are protected by attorney-client privilege.

Never contact the IRS on your own!

For Sovereign Society members, we have available three leading U.S. tax attorneys located in New York City, Florida and California. They also may be able to recommend tax attorneys in your local area, either domestic or foreign. You can learn more about membership by clicking here.

I leave you with the wisdom of the late, distinguished Judge Learned Hand of the U.S. Court of Appeals in New York.

In a memorable tax case dissent, Judge Hand wrote: “There is nothing sinister in arranging one’s affairs so as to keep taxes as low as possible…nobody owes any public duty to pay more than the law demands. Taxes are enforced exactions, not voluntary contributions.” Commissioner v. Newman, 159 F2d 848, 851 (2nd Cir 1947).

Faithfully yours,

Bob Bauman
Bob Bauman JD, Offshore and Asset Protection Editor