If you have unreported offshore bank accounts, the IRS is coming for you … again. U.S. expats are about to find themselves under even more IRS scrutiny because of the 2014 Offshore Voluntary Disclosure Initiative, a new attack on offshore bank accounts. The IRS is starved for cash and they are coming after expats with a vengeance.
Today I am writing on why the IRS is targeting expats and offshore bank accounts. Tomorrow I will take a look at the recently released 2014 Offshore Voluntary Disclosure Initiative. Today’s post tells you why. Tomorrow is on how… and what you can do to protect your assets.
The IRS’s budget has been cut by $900 million since 2010, which means they are trying to do more with less. Of these cuts, abut $500 million was the result of the “sequester.” Most of the other cuts are being pushed by Republicans angry over the IRS targeting their cash machines.
Ever wonder what kind of Return on Investment the IRS generates? The $500 million they lost from the sequester led to a drop in tax revenue of more than $2 billion. This, according to IRS Commissioner John Koskinen.
That equates to an ROI of $4 to $1 – for every $1 spent auditing taxpayers, Uncle Sam gets $4.
In another example, IRS revenues from enforcement are down $4.3 billion from four years ago. The IRS Commish said that this… “decline in audit revenue is attributable to a decline in the number of returns audited.”
While I don’t wish an audit on anyone, these numbers present problems for those who need to resolve their tax debt or otherwise contact the IRS.
Because of these IRS budget cuts, customer service has fallen apart. For example, 15.4 million telephone calls from taxpayers went unanswered in 2013. That’s over 15 million Americans who were trying to do the right thing and could not get their questions answered in a timely manner.
These budget cuts have also basically eliminated training for IRS personnel. The National Taxpayer Advocate says that the average spent per employee on training dropped from $1,450 to less than $250 from 2009 through 2013.
You know full well how complex the IRS tax code is, especially for expats. If the IRS employees have no idea what’s going on, how are they going to implement a program like the 2014 Offshore Voluntary Disclosure Initiative? If they don’t understand the laws, how are they going to explain them to callers?
And these budget shortfalls place a much greater and more immediate burden on expats than average citizens. First, your questions and filing requirements are much more complex than the average person who files Form 1040EZ and gets $100 back from their W-2. You have to negotiate an ever changing landscape of laws, collection regimes, IRS policies, and code sections. If you are lucky enough to get through to an IRS agent, your chances of finding one who understands your situation is slim.
Next, as the IRS collections group attempts to do more with less, they will go after high return taxpayers, which is how the IRS has viewed the expat and your offshore bank account for years… a cash cow. You are a successful hard working bunch with average incomes several times higher than most Americans. You also face a far more complex tax code with more opportunities to make an error. For example, failure to file a FBAR alone can result in a penalty of $100,000 per year.
The bottom line is that the IRS’s ROI is 20 times higher when they attack expats than when they go after average, or even high net worth, U.S. residents. The U.S. expat has a target painted on his back and it is just getting larger and brighter as the demand for cash increases.
Stay tuned for more on the recently released 2014 Offshore Voluntary Disclosure Initiative. If you are living and working abroad, and you have unreported offshore bank accounts, you need to know your rights.