Recently Gideon Rothschild, (below) partner in the New York law firm of Moses & Singer LLP and a recognized leader in estate planning, (as well as a long time member of the Sovereign Society Council of Experts), wrote an article in Trusts & Estates that got my attention.
Gideon said: "The feds may soon try to turn wealth advisors into snitches."
I have worked with Mr. Rothschild on a few occasions over the years and I respect his judgment. He is listed in Chambers USA (2009) as one of the nation's leaders in wealth management, is among the "Top 40 Tax Advisors" named by CPA Magazine, In Citywealth's Leaders List (2009) he appears among leading international lawyers who are "generally acknowledged to possess a sterling reputation for expertise in their respective field."
An Expert's Warning
In the article Gideon warned: "The world’s financial system is getting tied more tightly together -- making it far more difficult to hide money anywhere in the world. And, take note, some countries are forcing wealth management advisors to report on their clients. "
He added: "Many types of wealth advisors soon may be required -- that’s right, required -- to report clients who are evading taxes. Sometime later this year, guidelines, and maybe even laws, will be issued in the U.S. requiring 'gatekeepers' to report suspicious clients to the federal government."
Conscripted Gatekeepers
"Gatekeepers" the law says are anyone whose position might allow them to help people launder money. That includes lawyers, accountants, trust company service providers, casino owners, jewelers and just about any professional who helps people form trusts, foundations, LLCs or corporations.
Mr. Rothschild's statement was followed by an article by Vern Jacobs CPA, (left) in the June 15 edition of his International Wealth Protection Monitor that predicted: "IRS Will Be Conscripting Tax Preparers: If you sometimes think that your tax preparer is really working for the IRS instead of for you, 'you ain't seen nothin' yet'. The IRS is currently proposing to regulate return preparers in addition to their present regulation of advisors who represent taxpayers in disputes with the IRS."
Vern also pointed out to me that under current IRS rules, CPAs, such as himself, already must report to the IRS certain "listed transactions, reportable transactions, transactions of interest and -- in some cases -- transactions that do not meet the standard of being supported by 'substantial authority'".
No Privacy Anywhere
If the IRS issues rules mandating that tax professionals report anything that even smells like possible tax evasion, or even actions that smack of possible criminal tax evasion, how could any American taxpayer feel safe consulting a tax professional?
No sane U.S. taxpayers would try to decipher how the 50,000 page Internal Revenue Code applies to them. That's why billions of dollars and millions of man hours are expended each year by taxpayers trying to compute their tax liability. Professional tax advisors, lawyers, accountants, and tax preparers make up a multi-billion dollar industry that thrives on the tax code’s complexity.
IRS Half Wrong
Not even the U.S. Internal Revenue Service (IRS) understands the tax laws it is supposed to administer. Every survey I've seen checking the accuracy of IRS answers given to taxpayer questions finds well over 50% of those answers are wrong.
How would any rational person know, except in an extreme case, that a client was proposing to engage in tax evasion when so many tax issues fall into a gray area?
But you can bet that a great many professionals, faced with such a rule, would err on the side of reporting a client to the IRS, if only to cover their own butts.
Planned Confusion
In both the U.S. and the U.K. national tax authorities have made a conscious effort to equate legal tax avoidance with illegal tax evasion. Charles Cain, a respected editor of Offshore Investment, charges that "the line between tax avoidance and tax evasion is purposely being blurred by governments, with honest people (and their tax advisors) being jailed for failed attempts at tax avoidance while tax evasion is put down on a moral level with heroin and cocaine pushing."
Good-bye Confidential Privilege
Then too, an IRS rule making tax professionals into government informers would clash with the doctrine of attorney client privilege. When you retain a licensed attorney, you generally have the right to refuse to have disclosed all "confidential communications" you share. You also have the right to prevent others from disclosing these confidential communications. The only time an attorney has an obligation to inform the police is when he knows for certain that a client is contemplating committing a future serious crime.
Under current U.S. laws bankers and other financial system "gatekeepers" already have an obligation to file "suspicious activity reports" (SARs) with the U.S. Treasury if money laundering is suspected. In fact, every U.S. banker is a de facto government spy.
Guilty Until Proven Innocent
The IRS perfected this "guilty until proven innocent" tactic a few years back when it attacked all Americans with offshore bank, investment or other accounts that issued credit cards as probable tax evaders. While the IRS did concede offshore credit cards are legal, they insisted some people "might" use offshore accounts and the cards to hide unreported income. At the moment it using this same presumption of guilt smear against 50,000 Americans who had UBS accounts.
Indeed, IRS Commissioner Doug Shulman (LEFT) praised President Obama’s plan that he said "would create a legal presumption against users" of certain offshore bank accounts who would be presumed guilty under proposed legislation.
The Nazification of America
Tax evasion is a crime.
But it is also an unconstitutional fishing expedition when a government agency demands the private financial records of thousands of law abiding citizens.
It is even worse when the IRS turns professional tax advisors into forced informers about matters that are far from clearly criminal. Due process requires that unless and until probable cause can be shown by the IRS of some illegal tax evasion in an individual case, no American's confidential files or conversations should be surrendered to the IRS.
What we see here is yet another giant step in the Nazification of the U.S. financial and tax system.
This latest IRS outrage fits in with billions in civil forfeiture of property, money laundering as an all purpose indictment, bankers and lawyers forced to act as government spies, continued clandestine NSA Internet and phone wiretapping; or in other words -- the Obama surveillance society -- precisely the same tactics for which he attacked President Bush.
Is it any wonder Americans are going offshore? Expatriation anyone?
Need another reason to join The Sovereign Society? How about 58 of them…
Comments