Entries Tagged 'Privacy and Tax' ↓

From the TaxProf blog, a quick post noting that UBS is not the only target anymore — Credit Suisse and HSBC are getting scrutiny from the IRS as well.

I have worked with all of these banks.  I guess I must have missed the pirates at each of these places, because my experience has been that we did things right and turned square corners. Their internal auditors were active, asking for backup information on various items.  So again, if evil lurks at these institutions I haven’t seen it.

My theory is that secrecy doesn’t exist.  For instance, only a mug would rely on bearer shares or nominee shareholders and directors.

Do you think you can really rely on a stranger — on another continent — who is getting paid $250/year (or $2,500/year or whatever amount of money you care to pay) will keep a secret?  A secret that might put you in jail if revealed?  Goodluckwiththat.

Do your planning with the expectation that everything will be on the table in front of a skeptical and unfriendly bureacrat at some point.

Keep it clean.  Great wonders can be done within the four walls of the Internal Revenue Code.

Got off the phone with an unnamed Swiss gentleman who is in the banking and trust company business. Flat out refuses to touch any business involving a U.S. citizen. Reports he gets several calls a week about this.

Current political and tax trends in the United States can only be described as isolationist and protectionist in result. I am not speaking of anything overtly political. I’m just saying that capital flows are being and will continue to be hindered, to the detriment of the U.S. economy.

In the classic and time-honored game of “Big guy beats up little guy” the United States looks likely to start squeezing small tax haven countries next year.  President-elect Obama is promising blacklists and other devices against countries that we use to set up foreign trusts and corporations.

The Guardian reports that a new bill will be introduced within weeks of Mr. Obama taking office.

Key measures are likely to include: revealing the beneficial owners of secretive trusts; prohibiting accountants from charging fees on specific tax services; and identifying ‘offshore secrecy jurisdictions’ that ‘unreasonably restrict US tax authorities from obtaining needed information’. The measures could end years of financial secrecy that have protected the super-rich and international businesses as they move money from one jurisdiction to another.

If you do your tax planning with an eye on transparency, you’ll be fine.  Everything we set up is something you could plop down in front of a grumpy career governmento.  Secrecy simply doesn’t work.  Confidentiality is fine, but be prepared to reveal and report as appropriate.

The small countries are notably (and correctly) worried about the economic impact.  Isle of Man.  Cayman Islands.  Bermuda.  I’m sure there are more I could find.   But you get the drift.

I’m troubled by this trend.  I am seeing a consistent pattern of big countries abusing smaller countries (see Germany and Liechtenstein as a particularly egregious recent example).  This has happened since national borders were invented, and is just playground bully behavior on a grand scale.  It’s not going to change.  Ever.  Tax policies.  Tariffs.  Soldiers.  U.S. history is full of this behavior.  Let’s just stipulate to the sad fact that this will continue long after you and I die.

What’s troubling is the trend of persistent invasive governmental behavior.  I fear over the long run this will mean collateral damage to other individual liberties.

Memo to all personnel:  re-acquaint yourselves with the Law of Unintended Consequences.

Here’s the Intended Consequence stuff that’s easy to see:  for those of you with complex financial situations, expect more tax forms to file, more revelations to give to the U.S. government, more expense for lawyers and accountants, and more tax to support the U.S. government.  Expect more prosecutions, Government Careers Advanced, etc.

From the Washington Post.

While this may look like good news to the average Member of Congress, it is likely to have unfortunate future effects.  Foreign investment into the U.S. will be deterred.  You heard it here first.

Not that I need to be a big brain to figure this out.  All I have to do is listen to my clients.   People who choose to NOT put money into the U.S. because of tax policy.  Note–they avoid U.S. investments because of the compliance and disclosure, NOT because of the tax itself.

And so investments don’t come to the U.S.  It’s the job that wasn’t created.  The factory that wasn’t built.

Smoot-Hawley.  You can get there just as easily with bad tax policies.  Tariffs are so 1930’s.

Which Members of Congress will have their names attached to a law passed in 2009 that is remembered in 2079 — and remembered in a bad way?  I don’t know who Messrs. Smoot and Hawley were, but I guarantee you they hadn’t taken Introduction to Macroeconomics.  Nor, I suspect, have our current crop of geniuses.

UPDATE (because there’s no excuse to be lazy and uninformed while the interweb is open for business):  Smoot-Hawley Tariff Act (Caution: Wikipedia).

Yet another indication that people with undisclosed foreign bank accounts should expect a trip to the pain factory.

Last weekend’s annual meeting of the California tax bars (I have spoken at this conference several times) had a visit from Nathan Hochman, Assistant Attorney General, and head of the Tax Division at the Justice Department.  I don’t know him, but I know a number of the people at the Beverly Hills law firm he left in order to join the Justice Department.  Good people, all of them.  I’m sure he is, too.

Mr. Hochman’s comments were reported in today’s Tax Notes Today. He noted that exempt organizations with undisclosed foreign bank accounts should see prosecutions starting in 2009.

From Tax Notes Today:

In building a criminal case, the government looks for a pattern and “simple, provable lies,” Hochman told a meeting of the California Tax Bar and California Tax Policy Conference in San Francisco on November 7. For that reason, failure to acknowledge interest in or a signature or other authority over a financial account in a foreign country on Schedule B of Form 1040 or on Form 990 will be “a wealth of bases for criminal prosecutions,” he said.

E-mail is another rich source of material for prosecutors. Electronic communications are difficult to track, Hochman said, but “every time you push ‘delete’ is another act of concealment” subject to criminal prosecution.

In selecting cases to prosecute, the Justice Department is “going to be looking for cases to make a large deterrent statement,” Hochman said. The department will “look to leverage every case to ensure honest people understand there are consequences when you don’t do it properly and don’t feel like schnooks for doing it properly.”

FBAR case selections may seem unfair or arbitrary, but “‘Why me?’ has never been a constitutional argument,” Hochman said.

Juries do not struggle with convictions on tax violations, Hochman warned. He speculated that because they embrace the logic that the government uses their tax dollars to subsidize exempt activities, many jurors become angry with noncompliant organizations.

It’s not too hard to see where all of this is going.  The government hands out money like a drunk hands out candy on Halloween.  The government needs more money.  Money comes from people.

It’s easy to tax people who are not like you.  It’s easy to beat people up who you think must be up to no good.  “If you’re not guilty, why were you arrested?” == “If you are using a foreign bank, you must be a tax evader”.  Both are easy sales to the average voter.

Slashdotters will see the formula clearly:

1. Identify a group of people sufficiently different from the general voter populace — people we can tax into oblivion.
2. Make the rules they have to follow complex and hidden, with giant penalties for noncompliance.
3. ????
4. Profit.

I think we all know what Step 3 is.  Careers Must Be Advanced, etc.

Recommendation: clean up your act.  File the forms.  Repent.  Empty your wallet.

It’s Form TD F 90-22.1 (PDF) you’ll need, bucko.  Start there.  Maybe other stuff applies to you too, depending on what you’ve got, where, and how much.

The IRS has a new version of Form TD F 90-22.1.  You have to use it for all filings after December 31, 2008.  More (including editorializing) later, but for the moment here is the link to the form on the IRS website.  http://www.irs.gov/pub/irs-pdf/f90221.pdf

Sorry the link isn’t prettier but WordPress is acting funny.  Couldn’t be that I’m using Firefox with all sorts of plug-ins, could it?  NoScript, AdBlock, etc. etc.