This is not the column I had planned for today. However, when I got this letter in my mailbox yesterday, I knew I had to share it with you ASAP. It’s from Leif Simon of Live & Invest Overseas.
I’ll have a few further comments at the end. . .
“The IRS is grabbing headlines again this week. Unfortunately, this time, it’s at the serious expense of a friend of mine, U.S. tax attorney Chris Rusch.
“Kathleen and I spent last week with Chris in Medellin. He was a presenter at our Live and Invest in Colombia Conference. We had breakfast with Chris Sunday morning at our hotel in El Poblado, confirmed our plans to have dinner with Chris and some other friends back in Panama City Tuesday night, and then waved good-bye as Kathleen and I left for the airport. Our flight was a couple of hours earlier than his.
“Early Tuesday morning we read the first press release, from Bloomberg.
“When Chris’ plane landed at Tocumen Airport in Panama City, U.S. and Panama officials were waiting for him at the end of the jetway. Only I guess they weren’t sure what Chris looked like. Other friends also on that flight have told us that officials were calling aside and checking the passports of every male gringo who appeared to be over the age of 30. Once they identified Chris, they confiscated his passport and escorted him away without a word. His Panamanian girlfriend, too (though she was quickly released).
“We’ve pieced the story together in the two days since. You can read the official version here.
“The charge, according to the press releases, is conspiracy to defraud the U.S. Internal Revenue Service. Chris has been arrested and is being charged along with two former clients of his, who face a number of additional charges against them.
“Are the charges against Chris or his clients founded? We have no idea.
“However, what this still-evolving situation does show is that the IRS is going to extreme measures to make headlines…just as Chris has been saying for a long time. Chris made this point during his presentations in Medellin last week. The kinds of press releases being circulated and picked up by all the media right now not only make headlines. They also frighten some of the folks reading them into voluntarily coming clean regarding unreported income or unreported offshore bank accounts.
“And that, as Chris has been explaining to his clients and our readers for months, is the IRS’s current agenda.
“The IRS has just launched a new amnesty program, whereby people who haven’t properly reported offshore bank accounts or who have unreported income can come forward, pay back taxes and penalties, and avoid criminal prosecution. Previous amnesty programs in 2009 and 2011 generated US$4.4 billion in income for the IRS in back taxes, interest, and penalties. Chris wrote an article about this current amnesty program for this month’s inaugural issue of my Simon Letter.
“The bottom line of all this is straightforward. The U.S. government needs more revenue, and the IRS is doing its best to find it.
“We remind you often and want to remind you again now: Hide and seek doesn’t work. It’s a transparent world in this 21st century. You want to show and tell. File your forms. Declare your income. Disclose your bank accounts. Remain fully compliant.
“The trouble is that most Americans don’t understand all the current, new, and ever-expanding filing requirements. You need to work at keeping up right now, because the playing field is being reconfigured all the time.
“If you’re an American or a green card holder, you are required to file a form (it’s called the TD F 90-22.1, Report of Foreign Bank and Financial Accounts) telling the IRS about any non-U.S. account or accounts that have held an aggregate of US$10,000 or more at any point during the previous tax year. This is required whether you are living overseas or not. No matter where in the world you reside, from New York to Nicaragua, from Poughkeepsie to Panama, if you have a non-U.S. bank account, your filing and reporting requirements are the same.
“And I strongly recommend that you understand and follow them.
“Keeping in mind that they are growing more specific and more complicated with the new FACTA rules, some of which still haven’t been finalized and will continue to take effect over the coming two years.
“Meanwhile, the IRS will continue working to do everything it can to create headlines. Just as they’ll continue to pressure the global banking system into divulging U.S. client account information to track down those who aren’t in compliance.
“I can’t make this point strongly enough. If you’re doing something you shouldn’t be doing or failing to disclose the existence of an account you should be disclosing, the tax man is going to catch up with you. It’s only a question of when. The IRS’s current amnesty program, as Chris detailed it in this month’s issue of my Simon Letter, could be a good chance for you to come clean.
“Once you do, stay clean. Disclose, report, and pay what you owe.
“That said, I want to make another point:
“It remains very possible to reduce your overall tax burden tremendously by relocating yourself, your assets, and your business to another country. We say this often. We’re right.
“And we’re speaking about fully compliant options. It can be complicated (or not, depending on where and how you earn your income), and it must be part of a deliberate, well-thought-through plan, but it is possible to organize your affairs within the rules (constantly changing as they are right now) to minimize your taxes and to protect your assets offshore.
“P.S. Speaking about all this publicly might be akin to sticking a target on my back. You never know, I guess, who awaits at the end of the next jetway.
“I’ll be in touch again soon. I hope.
“Meantime, Chris remains in custody, in Miami, where, three-and-a-half days following his arrest, according to the latest information we have been able to receive, he has yet to be arraigned.”
Like Leif, I don’t know whether Mr. Rusch is guilty of any crimes.
I find it very disturbing, however, that a few days ago a US Presidential candidate was in the news for paying very low taxes and hiding money in his Cayman Islands and Swiss bank accounts, while a hard-working attorney — who advises people like you and me how to survive an economic disaster that we didn’t create — is arrested and held.
I don’t have a lot of money to worry about, but what little I do have I plan to move out of the US while I still legally can. Because there are just too many indications that window may be closing.