New Law Assumes Americans Abroad Are Tax Criminals, Imposes Billions in Compliance Costs on Foreign Banks. “The IRS, under pressure from angry and confused financial officials abroad, has extended the deadline for registration until June 30, 2013, and is struggling to provide more detailed guidance by the end of this year. But beginning in 2012, many American expatriates — already the only developed-nation citizens subject to double taxation from their home government — must furnish the I.R.S. with detailed personal information on their overseas assets.”
The US Will Become a Police State (not a joke)
by metatron 113 Replies latest jw friends
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sammielee24
But beginning in 2012, many American expatriates — already the only developed-nation citizens subject to double taxation from their home government — must furnish the I.R.S. with detailed personal information on their overseas assets.”
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This new law was tossed into the ring early in the year. The USA is desperate, they are broke and they are going after all US citizens, not just ex-pats, ALL US citizens to file up to date tax forms and pay what, if any, taxes they owe.
There are hundreds of thousands, likely millions, of people who were born in the USA and are citizens by birth. Never lived in the USA but who are still considered US citizens and who didn't realize they were obligated to file tax forms every year they are alive. There are penalties assessed for every year they haven't filed - do the math. My old boss was born in the USA but didn't find out till she was in her 40's - her mother had been pregnant while travelling through the USA and had the baby somewhere on the way home. There were 5 kids in the family and nobody knew the oldest was a US citizen - she found out when she decided to apply for a passport and needed her birth certificate. The IRS also wants a list of all the assets of that citizen so people who are co-signers on elderly parents bank accounts, their insurance, their houses...they want to know all that information to assess the citizen's taxes, even if the parent isn't a US citizen but the child is. They are also changing the laws regarding 'who' they consider a US resident for tax purposes so all those snow birds or people who have real estate in the States etc, are most likely going to find that they might be paying the IRS. There are also exit laws rumored to be in process - this means that when you try to move out of the USA or travel out of the USA, your passport will be linked to the IRS. You owe - you don't get out of Dodge till you pay. This is all causing a lot of stir for people who see no reason to retain their US citizenship and perhaps have never used it - ditto green card holders because they are also caught in the net. Problem is - they won't let people renounce citizenship until they file xxx years of taxes, pay anything they owe and then pay again to renounce your residency or citizenship. If it is found out that people are renouncing citizenship to avoid taxes, they can refuse you that right as an individual and/or keep your tax records open for 10 years and still force you to file and comply.
There are 'compliance' laws being implemented globally whereby if you want to take out cash from your account, you are forced to tell the bankers what you are spending the money on, where you work and all sorts of personal information. The amount is less than the allowable previous amount of $10k - so - you work, save, deposit your own money in your own account but have to tell the government why you want your own money. People should really understand the impact of the MF Global bankruptcy to understand just how the system will be working - sammies
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botchtowersociety
Sammie, this will basically make it very difficult to move your money away from "the regime" and get out if you choose to. A lot of foreign banks are now refusing to allow U.S. citizens to open up accounts because they don't want to deal with reporting to the U.S. It is making things difficult for expats. It is like a financial Berlin wall.
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Berengaria
The law is meant to ensure Americans cannot use hidden trusts overseas to evade taxes, a goal that is widely applauded. But critics say that it amounts to gross legislative overreach, and that the $8 billion the Treasury expects to reap in taxes owed over 10 years pales next to the costs it will impose on foreign institutions. Those entities are being asked, in effect, to pay for the cost of tracking down American tax evaders.
This is a huge problem, and needs addressing. The issue some appear to have with this particular enactment, is that it requires foreign financial institutions to go to quite a bit of trouble and expense to help track down these evaders. Unfortunately, many of these institutions actually encourage these secret accounts. Switzerland pays customers to hide money with them. This law may need some tweaking, but it's certainly a necessary one.
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botchtowersociety
This is a huge problem
It is a huge problem. U.S. is the only OECD country that double taxes offshore profits. You have a business unit in Germany and pay the German tax on your profit there, but if you repatriate your already taxed profits to the U.S., you pay again. No advanced nation on the planet does this. And it gets worse. If I get residency and move to Costa Rica and open up a tire shop or get a job, I still have to pay income taxes to the U.S. (even if I have paid Costa Rican taxes) on what I earn even though I do not live here and may not plan to do so ever again. No other advanced country does this.
Think about it.
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sammielee24
Beks - it is not going to solve much because the big guys are moving money into other avenue's. What it is doing is forcing banks around the world to report to the IRS if a US resident/citizen has more than $10k flowing through their bank account yearly. Like I said - using this example - a kid born in the USA to Canadian parents has never lived in the USA, suddenly finds out he was supposed to file tax forms every year. He hasn't. He's now a successful doctor in his 40's and as an only child, has his name on his mothers bank account and house, now has to file US tax forms to include his mothers bank accounts and the value of her home, because the US government considers that as his assets as well. That is an invasion of privacy on behalf of his mother, and I think an international court may be working on those sort of charges, but it puts the man who never knew he had to file - in the position of paying severe penalties for every year he didn't file.
That's just an example - not including the fact that even if you don't owe anything, you are still obligated to file with the IRS and divulge all your assets outside the USA - this is affecting the 99% more than the 1% and Botch is right, this past week a number of international banks advised that they will not be taking US customers for accounts in their investment banking divisions. Right now they will allow savings accounts but the cost is not worth it to them to try and track all business for the USA.
The trend is disturbing. Like I said - there are more and more stories coming out where people can't even withdraw a few thousand out of their bank accounts without filing compliance reports with the government - why? It's rich considering that there were billions laundered in some major banks and nobody went to jail, got slapped with a few million penalty and yet - you want to take a few thousand dollars of your own money from your account and suddenly you are the criminal?
Something is happening and it doesn't feel good. sammies
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botchtowersociety
Like I said - using this example - a kid born in the USA to Canadian parents has never lived in the USA, suddenly finds out he was supposed to file tax forms every year.
Great point. The U.S. claims universal authority over taxing its citizens, anywhere in the world. You can move to the U.S. from Canada, as a Canadian citizen, and not have to deal with this intrusive cross border intrusion of authority. Like I said, no advanced country in the world does this, including Canada.
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Berengaria
I am not going to go over the law line by line and find out if your scenarios are probable, I will only say that this is a problem that needs to be addressed and has nothing to do with the US becoming a police state. Even if the law may need refining.
Speaking of which, the original point of this thread. Has anyone read the NDAA? Take a look at sections 1031 and 1032 where it specifically states
(b) A
PPLICABILITY TO U NITED S TATES C ITIZENS
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AND L AWFUL R ESIDENT A LIENS
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(1) U NITED STATES CITIZENS .—The require
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ment to detain a person in military custody under
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this section does not extend to citizens of the United
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States.
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(2) L AWFUL RESIDENT ALIENS .—The require
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ment to detain a person in military custody under
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this section does not extend to a lawful resident
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alien of the United States on the basis of conduct
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taking place within the United States, except to the
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extent permitted by the Constitution of the United States.
Do you really think spreading internet half truths is helpful in addressing the serious concerns within our government? I don't, I think it actually has the opposite effect. It buries the real issues. One of which is that big business is robbing us blind and killing our elections process.
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sammielee24
An article published in April of this year - it WILL happen - sammies
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APR 11, 2011
GAO recommends tax debtors be stopped at the border
In an effort to decrease the widening national debt and tax gap, theGeneral Accounting Office is recommending that Congress and the IRS consider revoking and denying passports to those who owe tax debts to the Federal government.
With the Nation’s debt approaching $14 trillion and the tax gap, in 2001 numbers, at $345 billion annually, the GAO is recommending using trusted debt collection methods to collect on past due tax debts. Currently, the Department of State currently screens passport holders and applicants for past due child support. Since 1998, over $200 million has been collected on overdue child support payments. The GAO thinks the IRS can collect even by setting up a collection function in the international terminal at the airport.
How much can be collected from denying and revoking passports?
The GAO estimates that at least 1% of all passports issued in 2008, or 224,000 Americans, owe back taxes. The total owed: in excess of $5.8 billion. The GAO studied just the 2008 passports issued and suspects that there is substantially more in unpaid taxes from these individuals, especially because those who owed also had significant unassessed liabilities due to unfiled tax returns. The GAO only studied passport activity for one year. They suspect a multi-year investigation would find even more debtors passing through the airport checkpoints.Other GAO findings
The GAO also selectively looked into several tax debtors/internation passengers to get a clear picture of potential abusive and criminal tax activity. What they found was startling. The GAO found that abusive and criminal tax debtors were passing freely past United States borders, without consequence. Even more alarming was that the IRS was not pursuing several of them for their unpaid taxes. In a selected sample of 25 debtors who were issued passports and owed:- two had worked under State Department contracts
- six of the 25 were or are under criminal investigation by the IRS
- ten had prior federal indictments or convictions
GAO’s proposal
The GAO recommends that the IRS, Congress and the Executive Branch study the possibility of collecting taxes through the State Department and the Passport Denial Program. The IRS already successfully collects back child support, unpaid social security repayments, and overdue student loans through garnished refunds via the Treasury Offset Program. Why not turn it around and let other agencies collect back taxes. The IRS already levies tax debtors through the Federal Levy Payment Program that collects back taxes through the Social Security Administration and the federal payments system.The Problem: IRS taxpayer privacy limitations
The IRS is effective in taking information from other governmental agencies. However, under section 6103 of the Internal Revenue Code, it is limited in what it can disclose to others. The GAO points out that taxpayer information cannot be shared with outside agencies, except as allowed by law. Generally, this disclosure has been limited to sharing certain tax information with State taxing authorities for tax administration and child support enforcement. For the most part, the IRS cannot disclose tax information without the consent of the taxpayer.The GAO pointed out that the IRS could not even disclose sensitive taxpayer information on those tax debtors working for the State Department, even though these individuals may be performing sensitive work requiring security clearances. Two individuals who were studied were actually committing identity theft on deceased individuals. The IRS was even precluded from disclosing these names to the State Department directly.
The Answer
Step #1: Change section 6103 to allow the IRS to share information with the State Department.Step #2: Engage IRS collections through the Passport Denial Program
The GAO concluded that the IRS, Congress and the Executive Branch should consider overcoming the section 6103 hurdles and start collecting through the State Department. The GAO stated: if Congress is serious on collecting the $330 billion in unpaid federal taxes, change the law that restricts the IRS from collecting on those with passports. Then, use the information to collect through the Passport Denial Program.
What’s next?
This is a realistic proposal from the GAO. With the IRS looking for creative collection alternatives, it is quite likely that they will consider this option. Consider that the IRS has been using several alternatives lately, from pressing former tax havens to share tax information to help with tax administration to requesting outside collection agencies (albeit unsuccessful) to collect for the IRS. The IRS is also getting pressure to use outside information to collect on more government contractors that owe debts.Clearly, with a growing national debt, collecting tax debt from those getting screened at the airport would be an efficient use of government resources. The government could use existing technology and information systems without much additional cost – a win-win situation.
My prediction: look for legislation soon and for the IRS to start collecting taxes through the Department of State. With more demands to collect taxes and no additional resources in the foreseeable future, the IRS must use current information systems and government programs to close the tax gap.