From our founding more than a decade ago the Sovereign Society has advocated "going offshore" for some very practical reasons -- greater individual freedom, better investment profits, far stronger financial privacy laws and superior asset protection.
For our American members and readers we also repeatedly have advised and explained compliance with the U.S. Internal Revenue Code and the filing of IRS forms and reports, giving filing dates and even going so far as to reproduce IRS report forms in our publications.
But no one can avoid the manufactured media brouhaha in recent months about Americans and other nationals allegedly secretly hiding income in offshore banks such as UBS based in Switzerland and LGT Group in Liechtenstein. U.S. Senate hearings inflated a few cases of alleged tax evasion into the ridiculous claim that 19,000 Americans who have UBS accounts are all tax evaders.
Let's Be Real
Our position on all this ruckus is that a few examples of possible tax evasion have been falsely inflated into an unjustified attack on all offshore banking in general. And anyone who knows recent history, also knows that this anti-offshore attack is part of a continuing campaign by the IRS and other national tax collectors to scare citizens into keeping their cash at home where revenue hungry bureaucrats can grab it without notice or due process.
But what if you (or a friend) find themselves with an IRS notice of an audit aimed at offshore financial activity?
Being noticed by the IRS triggers anxiety -- largely because of the much publicized IRS scare stories of horrific consequences people suffer at the agency's hands. The IRS has seemingly unlimited power to ruin your life: seize or freeze your assets, close down your business, assess enormous fines and penalties, even send you to jail.
They are the one federal agency that actually shoots first, and ask questions later. And unlike the American criminal justice system where a person is supposed to be considered innocent until proven guilty, the IRS uses the civil justice system where suspected taxpayers are considered guilty until they prove themselves innocent.
What To Do
If the IRS intensifies its continuing crackdown on offshore bank accounts, some wealthy Americans, who may have used them illegally to shield income, are facing a difficult decision: whether to turn themselves in -- and if so, how.
Here are some pros and cons of approaches I have seen over the years, advising our members and working with leading tax attorneys, some of whom specialize in dealing with the IRS on behalf of clients under the IRS gun.
• The ostrich approach-- the worst approach. Here you bury your head in the sand and hope the storm clouds will blow away without your being caught. This might work if you're confident your name won't be discovered -- but no one can reasonably believe that. Tax lawyers say the odds of getting caught have grown rapidly because of the growing number of nations pursuing tax cheats and the increased willingness among them to swap tax information. Ostriches also risk getting hit with very stiff penalties, and possible criminal sanctions, just for failing to report foreign financial accounts.
• Voluntary disclosure. Some people hire experienced tax lawyers to test the waters with the IRS, initially always on an anonymous basis, to see what might happen if they voluntarily turn themselves in and pay what they owe in the hopes of avoiding jail. This is sometimes known as a "noisy disclosure," as opposed to the quieter approach of just filing amended returns and hoping for the best.
(My advice is never to approach the IRS yourself -- always go through a reputable tax lawyer who has good IRS contacts, and thus you are under the protection of lawyer-client confidentiality).
Dirty Money
Some people aren't eligible for the voluntary approach, including those with possible "illegal source" income, money from illegal activity, bribes or securities fraud. A voluntary disclosure probably makes sense, says one lawyer, for someone who has "only legal sources of income, is not under audit or investigation and whose noncompliance is not likely to be imminently discovered" and who is "prepared to pay or make arrangements" to pay what they owe.
One lawyer told me the IRS is "more sympathetic to people who have seen the light, rather than the light seeing them." An IRS spokesman cautions that a voluntary disclosure "will not automatically guarantee immunity from prosecution," but it "may result in prosecution not being recommended."
If you think you need legal help we can recommend attorneys who can assist you. * While you still can, discover the legal ways to bank and save taxes offshore; I tell you Where To Stash Your Cash: Click Here. * If you're interested in Switzerland, Click here for Swiss Money Secrets.
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