Every year about the beginning of February, sometimes earlier, the IRS begins its publicity campaign to remind taxpayers to file their required ‘voluntary’ forms and to further remind them of the risks and penalties of failing to comply.
Often these stories masquerade as news items about some individual or organization which has been taken to task and fined huge sums of money for what are often disputed tax issues. But the government wants to makes its point – they usually win. They never publish news stories about the thousands of cases that the government fails to win in tax court.
Here are a couple of facts about offshore bank accounts.
First, with respect to those who have offshore bank accounts, here are the rules. All US taxpayers are required to disclose any combination of bank accounts they have signature control over that exceed $10,000 at any time during the year. There’s no tax to pay, just a disclosure form that is filed with the US Treasury Department.
The ‘gotcha’ is if you haven’t filed the TD 90-22.1 form, then the IRS presumes that you’re hiding something and can fine you heavily for failure to disclose the bank accounts. If you want to see some startling numbers go look at a list of the possible tax penalties put together by a tax attorney. His site is http://taxes.about.com/od/preparingyourtaxes/a/TDF90221_2.htm
The misinformation?
There have been some monstrous tax issues in the news lately, beyond the absurdity ignoring any means to fund the newest version of the US government ‘saving’ the citizenry. It started with a January 9th article in the New York Times about the IRS pressure on the Swiss bank UBS to close the so-called secret bank accounts of American citizens. The government assumption is of course, that anyone who has one is either a money launderer, or a drug or arms dealer, and therefore those funds were illegally obtained and should simply be confiscated by the US Treasury.
The Times’ article included a reference to claims that the “Prosecutors contend that UBS helped wealthy Americans hide about $18 Billion, thereby evading taxes of $300 million each year.” In another story by a Canadian ‘social justice’ author who argues that the problems of the economic meltdown are the fault of offshore tax havens, he cites the claim of two US senators that there are $100 Billion a year in taxes that go unpaid to the IRS by offshore account holders.
So which is it? $300 million is a far cry from $100 Billion but what the heck, they’re just US Senators and they have recently proven they can’t do math any better than they can do oversight in Congressional committees charged with making the rules or overseeing the financial markets. So I guess we shouldn’t be surprised that they aren’t worried by the mixing up of a few decimal places here or there.
At a 30% corporate tax rate that means that Senators Dorgan and Levin think US companies have squirreled away over $333 Billion dollars! ($100/ .3 = $333.3). The prosecutors, who probably have a better idea of the scope, think it’s merely $18 Billion ‘hidden in secret bank accounts’. It’s not clear what earnings and tax rates they are using to suggest that shortchanges the US Treasury by $300 million a year. My point is that the news stories are intentionally vague and often filled with misinformation cited by politicians (the law makers) and politically selected law enforcement officials who are more interested in getting publicity for themselves and less concerned with the accuracy of what they say.
That lack of concern for fiscal accuracy has to be painfully obvious to all US citizens and taxpayers who have been paying any attention at all to the monetary freight train that has rammed through Congress an 1100 page tax and spend document that very few people had time to read much less analyze which has mortgaged the future tax receipts of the US government for a generation.