Disappearing Offshore From IRS

[Vor]

Figured I would make this thread to discuss what the implications of this scenario I'm about to layout are in theory and in actual practice. As most of you on this forum will be aware Americans are taxed on Citizenship as opposed to residency and along with that comes FATCA. There is estimated to be 9 million americans overseas yet fewer than 2 million even filed a tax return like they are suppose to. We can assume then FBAR compliance numbers are the same since who wouldn't file taxes but would report FBAR data to FinCen? Not many doesn't make sense. So this being said the vast majoirty are not compliant. Here is a blog post talking about this.

https://brighttax.com/blog/us-citizen-abroad-never-filed-taxes-heres-what-you-need-to-know/
The bulk of these people are likely just not aware however there is for sure another contingent who are well aware and choose not to. If one kept large amounts of money offshore held via gold, physical property titled to others, crypto, etc and then these US persons kept the foreign bank accounts below the FATCA trigger that they use for daily spending how would the IRS track them down? With 7 million not filing pretty clear they aren't and most these people have their money in retirement accounts, bank accounts, etc all on the books not off the books like im referring to here.

 

[Martin Everson]

I can imagine those Americans living abroad have a second passport which they use⁣ on a daily basis. I would file and pay whatever the US wants from you⁢ or renounce the US citizenship. If US wanted to track you down I am sure︀ they could. For example if you ever wanted to apply for US passport as an︁ American they could theoretically check if you ever filed a tax return.

I still remember︂ even Prime Minister Boris Johnson who is American and British not being aware he must︃ pay US taxes...lol. In end he did pay. And if he was not aware then︄ average person stands no chance 😕.

https://www.bbc.com/news/uk-politics-30932891

 

[Vor]

very correct id︀ assume to disappear off the radar like this you would need a second passport as︁ oppossed to just the american one. Assumingly you could have assets in gold, crypto, physical︂ cash, and straw ownership on real estate and companies and fly totally under the radar︃ then. Could they hunt you down, probably but would they? probably not. Only so many︄ resources cant hunt down the 7M non filers so unless your the richest one your︅ probably never gonna hear a thing.

Agreed though peace of mind simplicity only option for︆ an American is renunciation.

 

[Golden Fleece]

First, the vast︀ majority of those seven million non-filing taxpayers are just "accidental Americans." They were not born︁ in the U.S. and do not have a U.S. passport. Most of them have never︂ even visited the U.S. after their birth. The IRS has no legal jurisdiction over them︃ and no way to collect. The USG cannot even restrict their U.S. passport use, because︄ they do not have one.

Read about the misery of all the Canadian "accidental Americans"︅ and what happened to them after FATCA. If the U.S. has even an ounce of︆ leverage (e.g., because you cross a border into the U.S.), it can make your life︇ an utter misery.

Even a decade or more ago, people living offshore had horror stories︈ of going to a U.S. embassy to replace a lost passport and getting interrogated over︉ their source of income and why they had not filed tax returns. People living offshore︊ (who thought about it in advance) had to claim that they had no job and︋ that they lived with a local girlfriend who supported them.

It is now a completely︌ different world today. At the very least, you would need a second passport and then︍ never return to the U.S. again. Even then, you are taking a big risk with︎ your freedom and your assets.

Why take the risk? If you own a company or️ real estate, you can legally get your effective tax rate down to the 10% to‌ 15% range. Even lower, if you own a service company and base it in Puerto‍ Rico.

 

[Wellington]

Know an American that made bank in crypto a few︉ years ago, put it all through his wifes name (non American), didn't pay tax, bought︊ a house, set up a marina in vietnam.

That's how a lot of them do︋ it, if they have a local partner, just sweep it through to her/his account and︌ hope there isn't reporting elsewhere.

 

[Vor]

I know this is super common also using the partner⁣ who isn't a US citizen to hold assets/money in their name and accounts.

Correct the vast majority of that 7M‌ are accidental americans as I am aware, however there is for sure a decently large‍ contingent of actual US Expats who are just not compliant also. What the ratio is⁠ of that to accidentals who knows even if its 10:1 you still have a large⁤ number of non-compliant US expats that are simply flying under the radar.

I do not⁣ know why one would even attempt this without a second passport in case of the⁢ US using the FAST act for passport revocation over their unpaid taxes. The reality of︀ the US is though it takes them years many of the times to even begin︁ chasing down domestic US residents who have not filed their taxes in 3 years, 5︂ years, 10 years, etc. So I highly doubt that in practice you would have much︃ of any problem if you stayed out of the USA, kept assets outside traditional banking︄ system and your only ones in it are under other non US persons names.

As to why someone would risk this? Well not every US person wants to live in︅ Puerto Rico for act 20 & 22, Not every US person wants to pay 10%-15%︆ when there are places you can pay less, and lastly not every US person would︇ want to deal with the compliance costs/headache of reporting everything properly. I personally know of︈ US persons who in 15+ years now have not filed a US return and are︉ abroad and they are not accidentals but Americans with passports, SSNs, and US taxes on︊ record when they were in America.

I'll just renounce since I do not want all︋ the stress of worrying if X years later they would find me and having to︌ deal with all that, but its very clear talking with other US expats that the︍ law here in theory is very different than the law here in practice. Their is︎ tons of US citizens simply not filing and without assets in the USA the IRS️ has a headache to chase them all down on top of getting foreign courts to‌ actually enforce collection of say FBAR fines.

The US has a fairly easy time collecting‍ unpaid taxes abroad through assistance agreements but from what I've heard they do in fact⁠ have trouble collecting FBAR penalty assessments in many jurisdictions since courts do not always recognize⁤ it as part of tax collection agreements since its in fact not a tax but⁣ a penalty. Interesting tid bit 🙂

 

[JohnnyDoe]

Did you ever think about setting up your own church?

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[Vor]

Ya I should just become the next Joel Olsteen and hide money in the walls‍ hahasmi(&%

 

[GPT]

Isn’t there a reporting requirement when you are married to⁣ an USA passport holder?

Ok I do understand that if the marriage is not know⁢ / registered in the USA this is very challenging to enforce.

 

[Golden Fleece]

Yes, under FATCA. Tax reporting can become a real nightmare for‍ both spouses. One of the reasons that people renounce their U.S. citizenship. So, what Wellington⁠ discussed is illegal under U.S. law.

 

[Vor]

Yep since then you need to report⁠ even the non-american spouses income lol but f**k the IRS as @GPT mentioned without it⁤ being registered in America it will be hard to actually discover the spouse.

If your⁣ smart never get legally married even just stash your s**t in your non american girlfriend/boyfriends⁢ name and then their is no way for them to tie it to you legally.︀ Unless they plan to come find your Belizan girlfriend whose bank card you've been swiping.︁ Rest in deposit boxes, crypto, physical real estate with straw owner. It will take IRS-CI︂ to attempt to discover all your crap then..

 

[Golden Fleece]

It is not worth the risk of your⁠ offshore girlfriend disappearing with your offshore cash just to illegally hide your money from the⁤ IRS. Expats do not like to use trusts because they lose control of their assets.⁣ So, why would those same expats risk placing control of those same assets in someone⁢ else's name, when the risk is far greater?

 

[Vor]

use discretion, an expat in this scenario could⁣ keep the bulk of their money in crypto(cold storage) and gold in deposit boxes with⁢ no reporting. The money in partners name can be small for daily living $20,000. If︀ you lose $20K oh well lesson learned you got burned but before giving someone a︁ cent you should know the risks associated with them holding it. Some people would cheat︂ you out of $10 and others wouldn't cheat you out of $100K.

Partners just good︃ for keeping you off the radar with traditional banking. If offshore checking accounts in your︄ name of course bank will share info with FATCA.