Could You Be a Tax Evader… And Not Even Know it?

Mark Nestmann (July 9, 2010)

Yesterday’s Wall Street Journal reported that The Justice Department is out prowling for tax evaders again.

UBS Switzerland is old news. The DOJ is now investigating U.S. taxpayers with HSBC accounts in India and Singapore.

The crime? These rogues may have failed to report any financial account located in a foreign country.

The Justice Department said it had “reason to believe” these people had an interest that was not reported on a tax return or special tax form for foreign accounts, Form TD F 90-22.1.

The Department further advised these bad guys, “that you are the subject of a criminal investigation…”

Just what does it take to become “the subject of criminal investigation” by the U.S. Justice Department? If you truly believe it only happens to drug lord money launderers, think again…

The Tax Hazards of a U.S. Passport

By P. T. Freeman

(P.T. Freeman is a pseudonym for a friend and business associate who is a former U.S. citizen. I have shared his expatriation process here.)

Recently, I was talking with a journalist friend here in the Caribbean. She grew up in the islands, but was born in Florida.

As a young child, her mother divorced and relocated to the Caribbean. Her mother remarried there and her husband formally adopted my friend as his legal daughter.

In the course of conversation, my friend mentioned that she had just re-discovered her long-lost U.S. passport in a drawer at her mother’s home.

It had expired a few years ago. Over the years, she had visited the United States using another passport.

My friend didn’t have any idea she was seriously violating U.S. law.

U.S. citizens must always use their U.S. passport to cross U.S. borders. Because her stepfather’s last name appears on the Caribbean passport, no “alarm bells” went off when she crossed a U.S. border.

What You Don’t Know Can Cost You Dearly

But, this was just the beginning of my friend’s problems! She was a real criminal without even knowing it.

I asked her if she was still filing her U.S. tax returns.

“No,” she replied. “I left the United States when I was a child. Why would I have to file tax returns there when I’ve never worked there or even lived there since childhood?”

Hmm … makes sense to me.

But, I patiently explained that the United States requires its citizens to pay tax on their worldwide income, no matter where they live.

I also told her that she could face a long prison sentence for not disclosing each year all bank accounts she held outside of the United States with a combined value exceeding $10,000.

And I mentioned that she could make an appointment to give up her U.S. passport at a local U.S. consulate. But she would still be subject to taxes and criminal sanctions for all past years!

She could be arrested and taken into custody anytime she visits the United States.

Her response was a mixture of horror and disbelief. After a few minutes, she replied “Well, screw ‘em! They can keep their damn passport.”

I doubt that the Department of State will collect any passport renewal fees from this young lady! But even if she formally gives up U.S. citizenship and “expatriates,” that still won’t eliminate her past tax or reporting obligations.

She actually needs legal representation in the U.S. to deal with these obligations, and it won’t come cheaply!

Don’t Make This Expensive Mistake

The moral of this story is that if you are a U.S. citizen, no matter where you live, you must file a U.S. tax return each year.

And you must disclose details of every “bank, securities or ‘other’ financial account” to the U.S. Treasury each year, if their aggregate value exceeds $10,000 on Form TD F 90-22.1.

Incidentally, the information on the TD F form may be shared with virtually any government or police agency anywhere in the world!

Being a former U.S. citizen, I am no longer subject to these unreasonable and frankly dictatorial requirements. Nor am I subject to U.S. jurisdiction, except to the extent of my U.S. investments, or when I visit the United States.

That’s true freedom, and the essence of being a “sovereign individual.”

What’s Legal? What’s Not?

My friend “P.T. Freeman” did a great job of showing us just how innocent a “tax evader” can look.

And the IRS Web site states: “…There are many legitimate reasons to own foreign financial accounts.”

Let me remind you it is 100% legal to own an offshore financial account. And a great idea for so many reasons. Just be sure you do it right, so you don’t end up “the subject of criminal investigation.”

For sovereignty,

Mark Nestmann

Wealth Preservation & Privacy Expert

P.S. My colleague, Bob Bauman, has just put together The Sovereign Society’s Ultimate Independence Library – a complete package of all of his books and reports at a steep discount for a limited time.

If you have ever considered a second passport, an offshore bank account, or just want to know more about legal strategies to lower your taxes and to protect and grow your assets, click here to see just what Bob is offering you now.

Tags: assetprotection