patrick.net

If you read my post carefully, the word used was "contents" not the balances of your checking accounts.

The IRS has only to request the balances from your bank. The IRS can also seize your balance without your permission.

My point is that the IRS has knowledge of all of your accounts and therefore can quickly find out the entirety of the information related to the accounts. The exception was an annuity contract.

Was my clarification sufficient for your understanding?

Re:checking account transations. All of these are instantly available to the IRS if they decide to conduct an audit on you.

Brokerage transations are reported to the IRS also, not just the dividends you are paid.

smaulgld says

He apparently held the money there- there is no indication he owed taxes. What he failed to do is notify the government that he had money there. The penalty was not for evading taxes but for not disclosing what he had overseas.

Looks like he was unaware of the disclosure obligations and when he became aware of them he disclosed the accounts that is when they ruled he owed $2 million! (when he had a total of $1.5 million in the accounts!)

This is pure greed on the part of the government. Meanwhile corporations evade taxes using foreign bank account and they never get charged anything significant like 50%.

The man should simply move all his wealth to foreign bank accounts, permanently move out of the U.S., and send the Travesty of Justice Department a "fuck you" letter saying they will never get a penny of taxes from him again because of their callous greed. Then he can send them a Christmas card every year telling them how much money they lost by trying to fuck him over.

There is nothing in the USA that is worth losing half your wealth over. Christ, the guy should at least get to fuck every member of Congress for five years if he's paying that kind of divorce settlement.

U.S. tax regulations require all American taxpayers with at least $10,000 in a foreign bank account to file a Report of Foreign Bank and Financial Accounts, known as a FBAR, in order to assess the proper taxes.

That's the problem. He should have opened 251 accounts and divided the money between them. Any decent bank would offer this service.

clambo says

Why do I have my variable annuity even though the tax laws aren't so favorable to them today? Because NO ONE knows the contents of my accounts! It's a "contract" between me and Vanguard/insurance company.

So in exchange for your "privacy" -- which only exists until you get distributions -- your returns suck, you pay extremely high fees, you have an extremely illiquid investment, and ultimately you are converting capital gains to ordinary income. If you had invested in a 401(k) or similar plan, you'd at least get tax benefits, but not so in this case.

Dan8267 says

That's the problem. He should have opened 251 accounts and divided the money between them. Any decent bank would offer this service

Structuring a transaction to avoid the technical reporting requirement can also get you in trouble. But I believe it applies if you have $10000 in the aggregate, not per account, so irrelevant.

Dan8267 says

This is pure greed on the part of the government. Meanwhile corporations evade taxes using foreign bank account and they never get charged anything significant like 50%.

The fine is for lack of reporting not for evasion.
It's very steep and amounts to a crime of omission which means doing nothing can result in losing half of the account each year its not reported!.

This report suggests the Internal Revenue Service may be trying to follow the National Security Agency's 'mission creep' into "Total Information Awareness." Just as NSA should not be spying on Americans who are not endangering national security, so too IRS should not be punishing taxpayers who are not evading taxes. Even if he had evaded taxes, the measure of the penalty should have been based on the amount of taxes he evaded, if any. Another report says IRS "seized some 60 million medical records of 10 million Americans, including medical records of all California state judges on March 11, 2011." It reminds me of the digital cavity search for the mandatory insurance, which reportedly included 60 pages of questions (e.g. "Is anyone in your house pregnant? Was anyone ever in foster care?"). The relationship between the federal government and individual citizens seems to be changing in fundamental ways that most people don't want. I can't help wondering about the Constitutionality of IRS shifting from penalties based on income tax evaded to penalties based on information omitted: the 16th Amendment authorizes the Congress to tax individual citizens' income, but otherwise any "direct" tax would need to comply with Article I section 9 (statewide apportionment based on the census).

curious2 says

Even if he had evaded taxes, the measure of the penalty should have been based on the amount of taxes he evaded,

That would make the punishment fit the crime. Extracting a penalty for not reporting is not commensurate -its just a heavy handed way of ensuring compliance.

What is most troubling is crimes committed with knowledge and that cause real life damages have lower penalties than simply failing to report assets in a bank account which seems to have a penalty greater than the amount of assets held!

curious2 says

I can't help wondering about the Constitutionality of IRS shifting from penalties based on income tax evaded to penalties based on information omitted:

Seems it shouldn't pass any real objective test

smaulgld says

The fine is for lack of reporting not for evasion.

I know. That's why I said it's pure greed.

More information on the case
http://www.bloomberg.com/news/2014-05-28/florida-man-87-owes-150-of-swiss-account-jury-says.html

Can someone more knowledgeable give a hand... Has he been evading taxes for 50 years (or were the accounts not taxable)?
From the Bloomberg article:
The account, opened in the 1960s, was held in the name of two foundations, according to the Justice Department statement.

“Zwerner was able to use the proceeds of the account whenever he wanted and used it for personal expenses, including European vacations,” the department said.

lostand confused says

The USA is turning into something that the East germans only dreamed about.

It's the tip of the iceburg. It's going to get worse, much worse.

The IRS merely enforces the law. (revenue)

approved by congress house, senate and signed by the president. You vote for these things. (at least the lawmakers who gets bills done and vote for them)

It's like the police, you want to lock up criminals, well, the IRS functions to collect tax based on the law. Nothing wrong with an enforcer.

These FBAR penalties are ridicolous. But you kinda know why they are there, its to overcompensate for the ridicolous amount of cheating/hiding in this area. There were many instances of windows for self-disclosures. So you knowlingly hide the bank accounts, FBAR rules are put into place and well advertised, then voluntary disclosure opportunities and you still ignore it, too bad.

and from my perspective, revenues have to come from somewhere in the end. (and government at its core is just how the pie is arrived and divided or who to tax and where to spend) If you are not collecting from the tax cheats, it is compensented someone else to collect the same level of tax in the end. and that means the tax the government is not collected from tax cheat A means indirectly you are paying for that shortfall. If the government collects every cents of tax, the tax rate acorss tha board should drop by 20%.

SFace says

If you are not collecting from the tax cheats, it is compensented someone else to collect the same level of tax in the end. and that means the tax the government is not collected from tax cheat A means indirectly you are paying for that shortfall. If the government collects every cents of tax, the tax rate acorss tha board should drop by 20%.

I doubt that. The IRS claims 385 billion a year in tax evasion, but doesn't say how much is domestic and how much is overseas. I seriously doubt the overseas portion is all that high. Since the IRS is hardly a disinterested party, it's entire budget depends on convincing congress there are tax cheats to pursue, I don' think the number is anywhere near that high. Closing some of the corporate loopholes would raise far more money than FATCA will without totally pissing off the rest of the world.

I'm not saying tax cheats shouldn't be pursued, they should be pursued aggresively. But FATCA is going to end up costing far more than it ever produces in revenue. The rest of the world bitterly resents being forced into being agents for the IRS and having it cost them money to add insult to injury. Even more insulting, the US is one of the hardest countries to get tax information out of. It's already a lot harder to bank overseas for US citizens and companies than 5 years ago. Banks are dropping US accounts by the thousands. Opening a new account as a US citizen is almost impossible in some area's. More and more countries and business are bypassing the US financial system whenever possible.

None of this is a surprise. It was discussed in congress and by tax experts. So why go ahead with FATCA if it actually costs money overall? Why the obsession with knowing every cent US citizens have overseas to the point of simply confiscating all of someones money plus huge penalties for simply not filling out forms? I can't decide if FATCA is in preparation for a more sinister end game (like a wealth tax or capital controls) or if congress just wants to have political talking points to bleat about at press conferences to prove they are doing something while knowing the end result is negative (that part won't be reported by the useless lapdog news media).

SFace says

The IRS merely enforces the law. (revenue)

approved by congress house, senate and signed by the president. You vote for these things. (at least the lawmakers who gets bills done and vote for them)

Actually that is not true- the IRS makes up its own regulations that have the force of law- congress doesn't pass IRS regulations, so we don't vote for them

bob2356 says

I'm not saying tax cheats shouldn't be pursued, they should be pursued aggresively. But FATCA is going to end up costing far more than it ever produces in revenue. The rest of the world bitterly resents being forced into being agents for the IRS and having it cost them money to add insult to injury. Even more insulting, the US is one of the hardest countries to get tax information out of. It's already a lot harder to bank overseas for US citizens and companies than 5 years ago. Banks are dropping US accounts by the thousands. Opening a new account as a US citizen is almost impossible in some area's. More and more countries and business are bypassing the US financial system whenever possible.

Does more harm than good- it forces foreign banks and US citizens to make alternative arrangements than to deal the with US dollars and US accounts.

While we don't want tax cheats, we do want people to transact in dollars and to engage in international commerce with us. The more onerous it becomes -either through the cost of compliance or confiscatory fines, the less tax revenues we will get as more people abandon dealing with us (ex pat citizens and companies and banks)

EBGuy says

Can someone more knowledgeable give a hand... Has he been evading taxes for 50 years (or were the accounts not taxable)?

My guess is that the articles are being a bit sensationalist. I doubt this guy has spent nothing from the account and has just left it alone for 50 years. Just because the fine is disproportional to what the value of the account is today doesn't mean the fine is disproportional to the benefit he got from the account.

smaulgld says

Actually that is not true- the IRS makes up its own regulations that have the force of law- congress doesn't pass IRS regulations, so we don't vote for them

That's a bit too facile an analysis. The IRS can only issue regulations within the scope permitted by Congress. If Congress disagrees with the regulations, as it sometimes does, it can pass new legislation to overturn them, and it has done so.

Odd twist- Russia wont' enforce FACTA http://rt.com/politics/160764-russian-banks-fatca-ban/

corntrollio says

That's a bit too facile an analysis. The IRS can only issue regulations within the scope permitted by Congress. If Congress disagrees with the regulations, as it sometimes does, it can pass new legislation to overturn them, and it has done so.

Not really- keep in mind that there are dozens of Federal agencies with thousands of lifetime employees on staff writing thousands of regulations each year- they are FAR more efficient in turning out regulations than Congress is in passing laws.

Congress has a political process , regulatory agencies don't so they overwhelm Congress' ability to repeal regulations because Congress has enough on its plate trying to pass its own laws, without the burden of trying to repeal endless regulations passed by the all the government alphabet agencies.

smaulgld says

Not really- keep in mind that there are dozens of Federal agencies with thousands of lifetime employees on staff writing thousands of regulations each year- they are FAR more efficient in turning out regulations than Congress is in passing laws.

The scale you're claiming is a bit excessive. Congress also has numerous committees and subcommittees where all the real work gets done. These groups are backed by "lifetime employees" (whatever that means) who have expertise in these issues. Actual Congresspeople are figureheads who don't know their ass from a hole in the ground about drafting legislation.

In any case, as I said, the agency can't exceed the scope of what Congress allows. If Congress wanted to be more specific, it could be, and in some cases it has been.

corntrollio says

Actual Congresspeople are figureheads who don't know their ass from a hole in the ground about drafting legislation.

Correct and the lifetime regulators at the agencies are far more expert and adroit at drafting regulations than Congress.

corntrollio says

In any case, as I said, the agency can't exceed the scope of what Congress allows. If Congress wanted to be more specific, it could be, and in some cases it has been.

and there is the point- Congress has no effective oversight over anything! Nor does the President- look how often Congress has to hold hearings into things that happen at agencies, or Obama's often honest answer- "I found out about it like you did in by reading it in the news." So these agencies basically do what they like and only when a problem arises does Congress or the President pay attention.

smaulgld says

Actually that is not true- the IRS makes up its own regulations that have the force of law- congress doesn't pass IRS regulations, so we don't vote for them

Yes, this is an important point. The IRS operates in an Unconstitutional manner. In effect, the IRS, which is part of the executive branch of government, writes law and it should not be able to do that as it's a clear conflict of interest and the entire point of the separation of branches is to prevent just this very thing.