The Biden administration is giving all kinds of new powers to the IRS. If you have a US bank account, it’s time to stand up and take notice. If you’re operating an international business or are high net worth, the IRS is coming for your bank account.
A big part of Biden’s plan to raise revenue to pay for his $3.5 trillion spending bill and the green new deal is to increase tax collections. He’s proposed giving an extra $80 billion to the IRS saying that the IRS will turn those funds into hundreds of millions in increased revenue.
What does that mean? That the IRS will increase audits that target high net worth targets and international business owners. The offshore world and expat communities have been the highest profit margins to date, and this is set to explode under this new president.
One of the administration’s plans is to give the IRS direct access to your bank account. Yes, if you have a US bank account, the IRS will see every transaction of over $600. Of course, this is every $600 coming in and not what you spend. They don’t care about your expenses, that’s on you to prove. All they need to know is what you brought in.
What about privacy and innocent until proven guilty? What about your financial information being sacred? That all goes out the window when the government needs money. Just as it did with FATCA and when the IRS went after foreign banks back in the day, now they’re coming after your US bank account.
Who does this bank account breach of trust target? The IRS says there is a 99% compliance rate on wages. This is because wages are reported on Form W-2 and withholding is taken out by the employer. Most employees are looking to get a refund and don’t owe taxes at the end of the year.
This bank reporting requirement targets small to medium-sized businesses. Those that the Service thinks it can get some more cash out of without too much expense. It’s not for very large businesses, as they are audited every year anyway and have an army of CPAs and lawyers on their side to keep their tax bills low… and they make the proper political donations.
When you hear the politicians and mainstream media talk about this proposal, they’ll tell you that it targets the uber-rich… the billionaires… the 1%. That’s some BS right there. These people are audited every year or two anyway. The IRS already has access to their bank accounts and records. This collection effort goes after the small to medium-sized business which is not under constant audit.
It’s the small to medium-sized businesses that the rank and file IRS agents target. These are the most profitable. And, of these, those with international operations or tax mitigation strategies, are the juiciest targets. These are the ones that have the highest ROI for the IRS agent’s time. These are the US citizens with the biggest and brightest targets on their backs as the government needs more and more cash.
And, keep in mind that this information is being given to an agency that already has the power to seize all money in your US bank accounts. The IRS can establish a tax debt and then issue a levy notice to any US bank for the full amount of the alleged debt. If the Service says you owe $100,000, and your bank balance is $90,000, they can totally empty your account(s) and not leave you a penny for your expenses.
- The IRS can levy any US bank account and any foreign bank account if your bank has a branch in the United States.
So, we know that the IRS is coming for our US bank accounts. What should we do about it? I suggest that we expats need to minimize our US transactions. We need to focus on our offshore corporate accounts and hold a minimum balance in the United States. We need to be especially vigilant in planning and containing the information that the IRS has access to. And we need to control when they get that information.
Depending on your situation, this might mean forming an offshore company and opening an international bank account at a bank that does not have a branch in the United States. It might mean forming an offshore trust or another asset protection structure to protect your after-tax assets from creditors. It might mean taking your US retirement account offshore and investing it abroad.
“Going offshore” means something different to each person. But, the time is now if you want to maintain some level of privacy, protection, and control the information flow back to the United States government. No matter your situation now is the time to take action. The Service and this administration are coming hard and you need to be ready.
Note that the Biden administration is also going after large Roth IRA accounts. For more on this, see: Changes are Coming to Roth IRA in 2022
We’ve been in the offshore industry since 2003 and will be happy to assist you to set up your compliant offshore structure and open the necessary bank accounts. For more information, please contact me at firstname.lastname@example.org for a confidential consultation.
Also, if you have a small business netting $500,000 or more, we can talk about the tax deals available to you if you move to the US territory of Puerto Rico. When done correctly, you can eliminate capital gains on assets purchased after the move and cut your tax rate down to 4% on business income. For more on this, see: Puerto Rico’s Act 60