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D-Day for US Citizens with Swiss Bank Accounts

Contrarian Profits — Wed, 15 Jul 2009 19:44:06 +0000

Offshore account holders wait for the knife to fall, says Raife Neuman, tax planner for Bonner & Partners Family Office. The question is: How sharp it will be?

As I’ve written before, the Obama administration has given offshore tax avoiders a chance to come clean; but for some, the door is closing quickly. At issue is the IRS crackdown on individuals holding US securities in offshore accounts who don’t pay taxes on their earnings.

It was a nice little gig until the IRS took advantage of the dire economic situation and started shaking down Swiss bank UBS. The IRS is demanding that UBS turn over the names of US citizens with fabled Swiss bank accounts.

While waving its big stick at UBS, the IRS gave individuals the opportunity to come forth with their accounts themselves – accompanied by a penalty, of course. The implied threat is that if you don’t disclose “voluntarily” and the IRS eventually gets your name, it will come after you with guns a blazing.

A big hearing on the matter was scheduled on Monday. But it didn’t go through. This increased speculation that UBS is close to caving to the IRS. This from the Wall Street Journal :

It’s a roller-coaster ride for Americans with Swiss bank accounts who are caught up in the tax-evasion case against UBS AG. Depending on what they have already told the Internal Revenue Service about their accounts, individuals are mostly at ease or deeply nervous about the prospect of civil and criminal penalties.

And, many are turning to tax advisers for help decoding the latest developments in a case that has taken dramatic turns in recent days.

Over the weekend, the U.S. Justice Department, the Swiss government and UBS said they are in talks to settle the case and asked a federal court in Miami to delay a highly anticipated hearing set for Monday. This followed a week of high-profile maneuvers by UBS and the Swiss government.

“It is King Kong versus Godzilla and they decided to take a time out,” says Bryan Skarlatos, a partner at New York law firm Kostelanetz & Fink.

The IRS crackdown, months’ long, has focused on people who hold U.S. securities in offshore accounts but don’t declare the accounts or pay taxes on income from the securities.

Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C., says many clients are trying to sort through all the back and forth. The message to be taken from the most recent news, he adds: Any account holder who hasn’t already come forward under a voluntary disclosure program at the IRS should do so immediately.

The program, which has attracted many individuals since the tax-evasion case began months ago, can offer participants leniency.

Obama To Declare War on Cayman Islands, Bermuda

Bob Bauman — Wed, 07 Jan 2009 15:15:27 +0000

O.K., so the headline isn’t exactly accurate, but it did catch your eye. And if one David Cay Johnston has his perverse way, it would be a statement of fact. Indeed, Johnston seriously calls for a U.S. declaration of war not only on the Cayman Islands, but also Bermuda and other offshore tax havens. His lengthy radical views are set out in an article (”Fiscal Therapy”) in the Jan-Feb 2009 issue of the left-leaning magazine Mother Jones, known for investigative reporting with a decidedly radical slant.

Ordinarily a nutty proposal such as Johnston’s could be laughed off as evidence of a sick sense of humor or an advanced mental problem, but Johnston is not your run of the mill left-wing nut.

Prize Winning Radical

In 2001 Johnston won a Pulitzer Prize “for his penetrating and enterprising reporting that exposed loopholes and inequities in the U.S. tax code.”

At the time he was the tax reporter for The New York Times, and now is a columnist for the trade journal, Tax Notes. In 2008 he left The Times after 14 years and has since been hawking books he authored with titles such as his current tome, Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else and the scintillating Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill).

The Liberal Conspiracy

I’ve never held much stock in conspiracy theories, especially as they apply to the American news media and what one might call the “U.S. leftist elite.”

These condescending liberals are always certain they know better than the common man. They don’t need to conspire among themselves. Knee-jerk liberals know automatically what the leftist party line is at any given moment: big government, more regulation and control, higher taxes, and welfare state economics are all second nature to them. Mention an issue and they always parrot the left-wing party line.

Johnston’s Bilge

In 2001, I wrote the following: “In many ways a classic example of this is The New York Times. More particularly, its highly biased ‘reporter,’ David Cay Johnston. I’ve been reading his ‘reporting’ bilge for years and he never misses a chance to dump on people of wealth, U.S. corporations or, his special ‘bete noir’, tax havens and the offshore financial world in general.“

At that time in 2001, Johnson was engaged in a multi-article smear against American corporations that legally moved offshore to reduce high U.S. taxes and to increase shareholder equity value and dividends. He twisted facts to claim the true reason for these offshore moves was fattening corporate salaries.

Unfortunately this sort of class warfare is good for sensational, if false, headlines that stir up controversy. Democrats in the U.S. Congress, such as Michigan Senator Carl Levin, have used the manufactured issue of offshore tax havens to claim Republicans favor “big business” at the expense of that mythical “little man.” Johnston’s slanted reporting at The Times was a precursor to Senator Barack Obama’s “Stop Tax Haven Abuse Act” S. 681, first introduced in 2007.

I’m not going to bore you again with the economics or the facts about tax havens, but we should all recognize: 1) the Big Lie for what it is, and; 2) those charlatans who habitually seek to hoodwink the American people into surrendering our financial freedoms.

Johnston’s War

But I’ll let Johnston speak for his radical self. The following is a direct quote from his Mother Jones article – and, based on his past statements, I don’t think he is kidding:

Invade the Caymans!

In 1983 just 10% of America’s corporate profits were funneled through places that charge little or no corporate income tax; today more than 25% of profits go through tax havens. The Obama administration could tell the Caymans – now fifth in the world in bank deposits – to repeal its bank secrecy laws or be invaded; since the island nation’s total armed forces consists of about 300 police officers, it shouldn’t be hard for technicians and auditors, accompanied by a few Marines, to fly in and seize all the records. Bermuda, which relies on the Royal Navy for its military, could be next, and so on. Long before we get to Switzerland and Luxembourg, their governments should have gotten the message.

Barring gunboat diplomacy (tempting as it is), there is no reason we cannot pass laws to block financial transactions with tax havens or even, Cuba-style, make it a crime for Americans to visit or do business with them without special permission. Congress could declare the hiding of funds a threat to national security and require that anyone with offshore assets disclose them to the IRS within 30 days and pay taxes, interest, and penalties within 180 days. For the holdouts, temporary special teams in the IRS and Justice Department could speedily pursue civil or criminal charges.

Source: Obama To Declare War on Cayman Islands, Bermuda

Austria: More Than Just A Financial Haven

Mark Nestmann — Thu, 27 Nov 2008 15:14:08 +0000

Austria is justifiably famous for its banking system—particularly for its bank secrecy law, which has the same legal status as the Austrian Constitution. But while Austrians take their financial privacy very seriously, there’s another aspect of Austria that doesn’t get as much attention: residence.

With its world-class opera, museums, and galleries, Austria is truly one of the world’s most civilized countries. Vienna, its capital, is a cultural treasure. Indeed, Mercer’s, a major human resources consultancy ranks Vienna as the second most desirable city to live in the world (behind Zurich)—and Vienna is much more affordable. And within an hour’s drive of Vienna, you can visit three different countries: the Czech Republic, Hungary, and Slovakia.

Austria is also a popular haven for English-speaking expatriates. While you won’t find the concentrations of U.S. expatriates that you would in places like Costa Rica, Panama, or London, you’ll find a high quality of life and reasonable living costs. And those costs have come down considerably in the last year, thanks to eroding real estate prices and a weakening euro.

What I appreciated about Austria more than anything else during the two years I lived there is that the cities are built for living. They’re not “urban shells” that fill up during the day, only to empty out at night as workers return to their suburban homes. And they’re built on a human scale that makes them easy to navigate without a car.

I left Austria because it was impossible to obtain a residence permit that permitted me to operate a small business without hiring numerous Austrian employees that I didn’t need. But if you can support yourself without working in Austria, it’s usually possible to obtain a residence permit. Even without one, you can stay in Austria for 90 days on a U.S. passport without any visa formalities.

If you’re interested in possibly living in Austria, I highly recommend a visit to the country. It’s more affordable than it’s been in years. While you’re there, consider opening an account at an Austrian bank—your dollars will purchase 20% more euros than they would have only a few short months ago.

If you want to live full-time in Austria, I’ve recently set up an affiliation with a firm that can help you obtain legal residence there. They can assist with the application forms (in German, naturally), help negotiate the quota system under which most categories of Austrian residence are awarded, and provide introductions to English-speaking real estate agents to find suitable accommodation. Since they’re affiliated with an international tax consulting company, they can even help file your U.S. tax returns.

Source: Austria: Not Just a Financial Haven

How To Protect Your Pension Plan From New Federal Powers

Larry Grossman — Mon, 03 Nov 2008 13:32:50 +0000

Emergency powers buried deep in the Paulson bailout bill could be hazardous for your retirement plan, according to Larry Grossman. He says investors are running out of time to set up an offshore account to protect their pensions from the desperate government measures of the future.

This from The Sovereign Society:

I urge you to pay close attention because this development could impact your future retirement more than anything I have encountered in the last 20 years.

The government has already turned your banker into a federal agent who can confiscate your assets without warning or cause.

This is why you MUST consider getting at least part of your retirement assets out of the country while you still have the opportunity. Very soon it may be too late.

If you’ve read my articles over the years, you know I’m not a wily reactionary. Nor do I try to scare my readers with my articles. But honestly, today I need to raise a red flag because frankly, this is serious.

I’m more concerned about the markets now than I have been at any other time in my 20 years in the business. And whether you agree that this could be the perfect financial storm or not, it’s time to acknowledge the steps our government is taking to deal with this mess.

Right now, they’re wracking their brains to come up with short-term solutions for this mess. But long-term, the consequences of their actions could have a very serious impact on your retirement savings.

Devil in the Details of Paulson’s Plan

As the saying goes ‘the devil is in the details.’ Well, nothing could be truer for Paulson’s new TARP bailout plan. The following text is buried deep within the bill passed recently by congress:

NECESSARY ACTIONS. -The Secretary is authorized to take such actions, as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation, the following:

Designating financial institutions as financial agents of the Federal Government, and such institutions shall perform all such reasonable duties related to this Act as financial agents of the Federal Government as may be required.

Broad sweeping authority to do whatever they want to do! “Financial agents of the Federal Government,” what does this mean to you and your retirement plan? Well here are a few potential scenarios…

Let’s say foreigners stop buying treasury bonds because they become even more nervous about the uncertainty in our banking system. Face it, we can’t survive without foreigners continually buying up treasuries. If suddenly they stopped buying, the government would have to do something to finance the debt.

Panic Scenario # 1 – The government tells your banker to purchase U.S. Treasuries with 50% of your retirement plan, or worse. (How about 100%?)

But that doesn’t work as well as they want, so they have to figure something else out…

Panic Scenario #2 – The government tells your banker to stop any transfers outside of the U.S., No more offshore accounts! (Highly likely during an Obama presidency.)

Things continue to go downhill and they become even more and more desperate…

Panic Scenario #3 – The government tells your banker to confiscate all gold in retirement plans for the good of the country! (This has already occurred once in American history.)

And finally the “Nuclear Option” we get a president who decides the right thing to do is ‘redistribute’ the wealth…

Panic Scenario #4 (worst case!) – The government tells your banker to confiscate all retirement plans over US$250,000 so we can redistribute the wealth! (But don’t worry we are going to have universal health care and they will take care of us so you don’t need it anyway.)

With a stroke of the legislative pen and passage of the bailout bill, all these nightmare scenarios could be very real possibilities. As government agents, the banks (including yours) will have no means to protect your interests against aggressive ‘redistribution’ or the bold new plans of a welfare state.

As a result, this could be one of the last opportunities you ever get to take urgent action now; before your retirement plan is in jeopardy.

How to Take Your Plan Offshore

There are basically two types of retirement plans, Qualified and Non-Qualified. Non-Qualified include IRAs, SEPs and Keogh’s. Qualified plans cover all of the rest and are handled in a slightly different manner.

IRAs require a U.S. Custodian, so this becomes your biggest challenge. There are very few custodians who allow you to totally self-direct your account including using non-U.S. investments and taking it offshore.

If you want to take your IRA or pension plan offshore you must use a totally flexible self-directed custodian who will allow you to take your account offshore. To find out whether they can help, just ask them - “Can I take my plan offshore?”

So how do you take your plan offshore? The following methods are allowed: A direct purchase of non-U.S. real estate, a foreign bank account, a non-U.S. annuity, a foreign corporation or in some cases even direct investment into a non-US investment.

There are a couple of other custodians who will allow you to use one or more of these options, but I am only aware of one company who allows all of them. This may be important if you want to use several different methods of transfer, or if you want to make multiple kinds of investments through one custodian to keep things simple.

Qualified Plans require a U.S.-based administrator and demand “the indicia of ownership” remain within the United States. These plans are simpler in some cases and more complex in others to deal with than an IRA. I have reviewed hundreds of plans and the language within the plan is critical, as well as your plan administrator.

In my last article for the A-Letter I mentioned a client whose administrator told them they couldn’t invest in property offshore despite the rules laid out in the plan’s language. After a good deal of back and forth on my part with the trustee and record keeper, I was finally able to convince them to allow the investment.

How to Configure Your Offshore Retirement Plan

In both cases, you want to have a foreign bank account in your retirement plan if it is allowed. I am currently aware of three banks, which allow Americans to open retirement accounts with them. You would work with your banker in developing an investment strategy using their expertise and services.

The bottom line is that you need someone qualified to review your plan document and to assist you in structuring the investment in a compliant manner.

Timing doesn’t allow me to discuss in much greater detail the specifics of taking your plan offshore. For now you need to be aware that you can do this regardless of what you have been told. And I am more convinced than ever that there isn’t much time left to take advantage of this incredible opportunity.

Source: Your Banker Has Been Turned Into a Federal Agent With Potentially Devastating Consequences!