Let’s assume your business has been successful. Very successful. What should you do with all that money, especially if you’d prefer to not send a lot of it to Uncle Sam?
Well, you can take the Bozo method of hiding it in foreign bank accounts. I’ll just transfer the funds to my account in Liechtenstein/Luxembourg/Switzerland/Cayman Islands/Isle of Man/etc. The IRS will never find me. And, voila, I have a lot less income to report.
There’s nothing illegal about having a foreign bank account. There’s a lot illegal about not reporting foreign financial accounts if you have $10,000 or more in one or more such accounts. That $10,000 figure is determined by adding the maximum balance in each account at any time during the year. If you do have foreign bank accounts you would need to report them by checking a box at the bottom of Schedule B on your tax return and by filing Form TD F 90-22.1 with the Department of the Treasury (not the IRS) by June 30th.
Heh, if you’re going to violate one law (tax fraud, by not reporting all your income), what’s another couple of laws? Well, foreign bank accounts come under tremendous scrutiny. Consider the recent mess in Liechtenstein. Germany is quite annoyed with the tiny principality, and many countries are now finding out about some of the individuals who have bank accounts in Liechtenstein. Or take Neteller, an Isle of Man based financial intermediary, which sent all of its records to the Department of Justice. A reasonable assumption is those records have made their way to the IRS computing center in West Virginia.
The penalties for breaking the foreign bank account reporting laws are stiff. The minimum penalty for willfully not reporting a foreign financial account is $100,000.
Instead of trying to beat the system by violating the law a much better non-Bozo strategy is to work with your tax professional to find ways of working within the law to lower your taxes. But Bozos will be Bozos….
Tags: BozoTaxTips