Big Brother is Coming for You

Posted by Ray on July 30, 2009 under Main, Politics | Read the First Comment

I do not advocate tax evasion of any kind and think everyone should pay their fair share, but there is a difference between paying what you owe versus taking everything and then some. The IRS is desperate to collect revenue and are going to extreme levels to collect revenue from offshore accounts.

As you know UBS is being sued by the IRS for not disclosing 52,000 names of their clients. While these people should just come forward or never entered into such a scheme I believe the IRS has gone a little too far in this case. They are suing in American courts which clearly places the IRS at an advantage and UBS in one precarious spot.

Under Swiss law it is illegal for a bank to divulge the names of its clients, the US has no such law, however if UBS looses in the US and discloses the information then the violate Swiss law. This is unconstitutional as far as I know, under the 5th Amendment it says; “nor shall be compelled in any criminal case to be a witness against himself.” To me it seems that asking UBS to break Swiss law violates this amendment, not that I am a legal expert or anything, but it is pretty clear what the intent was for taking the 5th.

So, asking UBS to break Swiss law is OK as long as we collect a ton of money, this is after an enormous settlement already I might add. If you are one of those 52,000 names, I suggest you confess your crime ASAP because if the IRS settles or wins this case you will be punished, to the full extent of the law.

The IRS can Collect Assets, and then Some

You have two choice, come in under the voluntary program or take your chances with UBS on August 3rd. The voluntary program is much more friendly than if they “find” your assets. Below you can see the difference between coming forward or being found out by the IRS.

The IRS will seek to collect from 5 percent to 20 percent of the assets under the voluntary program. The assets will be assessed at their peak value in the last six years.

Individuals whose hidden assets are discovered by the IRS can be forced to pay more than the value of the account balance in penalties, back taxes and interest for up to six years.

Normally, the rules let the IRS confiscate the higher of $100,000 or 50 percent of a secret offshore account’s value. After three years of noncompliance, for example, an account holder can owe 150 percent of the account’s value.

Clearly coming forward is much better for the pocketbook, but look how they value the assets, at their highest value. So the market is down 30%, but your penalty will be on phantom gains that you probably did not even cash in upon. That is loading up on the revenue and sticking it to your citizens. I know they broke the law, but how can you expect someone to come forward when the government is going to take more than their fair share?

The good news is that the U.S. and Switzerland are far from reaching a settlement in the case, Stuart Gibson, a Justice Department attorney, told U.S. District Judge Alan Gold in Miami yesterday in a telephone conference call, according to Bloomberg.

Voluntarily Coming Forward

Here is what Bloomberg wrote;

“The IRS wants it as easy as possible for taxpayers with offshore accounts to come forward and present their cases,” said Bruce Friedland, an agency spokesman. The instructions are intended to reduce the need for follow-up interviews and other requests for information, he said.

Applicants also are asked to identify the amount in their accounts, anyone affiliated with it and the account’s purpose. In cases where accounts were established by Jews fleeing the Holocaust, the IRS said it will take as little as 5 percent of asset values. (emphasis mine, but look how caring the IRS is)

UBS last year closed the accounts of all Americans who haven’t declared them, forcing some customers to choose between revealing themselves to the IRS or trying to find another offshore bank for their funds.

Taxpayers with undeclared offshore accounts have until Sept. 23 to apply with the leniency program, announced by IRS Commissioner Douglas Shulman in March.

Furthermore;

The IRS yesterday released instructions to make it easier to comply with its voluntary disclosure program.

The three-page document asks applicants to disclose their Social Security number, occupation, passport number, other personal information and whether they have been notified they face an audit. Taxpayers whose identities are discovered by the IRS aren’t eligible for the leniency program.

That is a lot of information that the IRS wants and a little invasive. I know why they want the passport number, but that seems a little overboard and why can’t they just get that information from the government database. It just seems wierd that their database is not hooked into other government databases, but I guess that could be a good thing given the IRS’s reputation for being vicious.

Again, I know these people broke the law, but forcing someone to pay 150% penalty calculated from the highest value the assets traded is just plain thievery. Makes them pay, but don’t have draconian penalties and punishments. Not only is this whole situation weird and kind of scary when you think about it, but it shows that the government is doing everything it can to collect revenue from its citizens.

This, I believe, is evidence of things to come as the economy declines and our debt gets out of control. The government already has an exit tax, on the very wealthy, so if they leave the country they have to pay. The IRS has made it very difficult for expatriated Americans to get bank accounts abroad because of threatened legal action.

What is America turning into? Why are we fighting so hard to keep people here? To me it seems like the troubles of this financial crisis is still going on and these draconian methods of gathering revenue is just plain scary and has the probability of escalating in their efforts in the future.

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Tags: IRS, IRS penalties, offshore accounts, UBS

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