Welcome to the 21st Century. The United States is fighting a “tech war” against its own citizens, assuming they are tax dodgers. By using “data mining”, the IRS is seeking to track down and collect taxes from those who move their income to Swiss banks and other offshore tax havens.
Granted, these are “edge” cases, which were brought to light from the disclosures found in the Panama Papers (the set of documents from the Central American law firm Mossack Fonseca that were hacked by tech activist, Anonymous)..
The question is “How long will it be before these tools are used against an ever larger group of U.S. taxpayers?”
The problem is, the IRS’s fishing expedition in which they troll through petabytes of data, raises the issue of cost, time and most importantly, privacy. This type of investigation is not unlike the highly debated practices of the National Security Administration, in which they gather cell phone data via their PRISM surveillance program.
We pay taxes to fund the government…so that they can afford to spy on us…
to MAKE SURE we are paying taxes!
IRS officials are now forced to mine through millions of pages of documents released in the Panama Papers. For this reason, technology plays a key role. With names like Credit Suisse, UBS and Israel’s largest bank, Bank Hapoalim, we are certain not to have heard the last of the repercussions.
Traditionally American’s are among the most compliant of tax payers worldwide, but the Panama Papers are allowing officials to follow the trail of money, and the findings are interesting. Funds that typically were housed in the traditional “safe haven”, Switzerland have recently emerged to new tax havens elsewhere.
It is important to understand that we do not advocate tax evasion, which as you may know is a criminal act. That is not to say we are averse to tax avoidance, which as defined by Ivestopedia as being “the use of legal methods to modify an individual’s financial situation to lower the amount of income tax owed.” (source). Both of these methods result in paying less or no tax.
The real question is, who should you trust to provid you accurate information as to which avenues are legal and which are not? To be safe, you may want to rely on the IRS’s point of view. Your other choices are to rely tax professionals, investment professionals or your instinct.
Needless to say, if you want to save on taxes, be sure to rely on someone you can trust and always “do your homework”.
If you made a bad decision in this area, there are always other ways out. If you have a tax problem and would like to speak us to discuss your options, contact the Tax Resolution Institute at (877) 829-8370 for immediate help or if you prefer to do things “online”, you can complete our very brief contact form.
*This article is presented for informational purposes only and should never be considered definitive tax or legal advice. Tax matters have serious financial implications and always benefit from expert counsel due to their depth and complexity. If you need expert tax resolution or audit help please contact the Tax Resolution Institute at (818) 704-1443 for immediate assistance.
Matthew Cohen is a partner at the Tax Resolution Institute.