Will the IRS be assisting the Justice Department to prosecute U.S. citizens who have lived abroad most (if not all) of their lives?

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Will the IRS be assisting the Justice Department to prosecute U.S. citizens who have lived abroad most  (if not all) of their lives?

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The on-going focus of of the government, including the purported “Billions in Hidden Offshore Accounts” by the Permanent Subcommittee on Investigations, begs the questions, where are these billions of assets by U.S. taxpayers?

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Will this be the premiss used by the IRS and Justice Department to try to prosecute U.S. citizens residing overseas?

Law abiding U.S. citizens who have spent most (if not all) of their lives overseas are put in an untenable position visàvis the U.S. federal government regarding U.S. tax and tax filing obligations.

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See what the government has to say

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Offshore Tax Evasion: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts

The Treasury Inspector General wrote the following in a 2009 report  (of which none of these numbers have seriously been questioned, supported or analyzed) – – titled

A Combination of Legislative Actions and Increased IRS Capability and Capacity Are Required to Reduce the Multi-Billion Dollar U.S. International Tax Gap

Synopsis

The IRS estimated that the entire tax gap for Tax Year 2001 was $345 billion.  However, the IRS has not developed an estimate for the international tax gap.  Non-IRS estimates of the international tax gap range from $40 billion to $123 billion.  While there might be overlap between the IRS tax gap estimate and the international tax gap, it is doubtful that the $345 billion estimate includes the entire international tax gap.

The primary reason for this conclusion is that identifying hidden income within international activity is very difficult and time–consuming.[4]  Furthermore, the IRS did not measure for the international tax gap component in the Individual National Research Project (NRP) estimate for the Tax Year 2001 tax gap.  Therefore, it is unlikely that hidden offshore income is comprehensively included in the IRS tax gap estimates.  In fact, the IRS’s Research, Analysis and Statistics (RAS) organization reasoned that because of cost, staffing, and technical limitations, an NRP type of direct measurement is unfeasible.  However, in an attempt to learn more, the IRS has other initiatives underway.

 

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3 thoughts on “Will the IRS be assisting the Justice Department to prosecute U.S. citizens who have lived abroad most (if not all) of their lives?

    impuestosypatrick responded:
    February 23, 2014 at 5:21 pm

    See the comments of Jack Townsend in the federal taxcrimes.blogspot.com on this important point:

    http://federaltaxcrimes.blogspot.com/2014/02/in-comment-reader-directed-me-and-other.html

    Jack – The Statute of Limitations for tax purposes states that the SOL is tolled for the time spent outside the US OR while being a fugitive from justice. Does this mean that US citizens living in foreign countries have an unlimited statute of limitations (both for tax and FBAR) even if they are NOT fleeing from justice. Or are they exceptions to the tolling provision while being outside the US. Unlimited SOL is a very scary situation.


    Reply

    Jack Townsend Mod American abroad • 3 days ago

    The criminal statute of limitations provision, 26 USC 6531 (flush language), says

    The time during which the person committing any of the various offenses arising under the internal revenue laws is outside the United States or is a fugitive from justice within the meaning of section 3290 of Title 18 of the United States Code, shall not be taken as any part of the time limited by law for the commencement of such proceedings.

    So, the answer to your question is that mere absence from the U.S. will suspend the criminal statute of limitations. But keep in mind that this is the criminal statute of limitations. Most persons who are not fugitives and who spend significant amount of time outside the U.S. are not at material risk of criminal prosecution. And, of course, for conduct that could be subject to criminal prosecution, the civil statute is probably open under Section 6501(c)(1).

      impuestosypatrick responded:
      February 23, 2014 at 5:39 pm

      Jack Townsend, I think this is an important point to highlight for the millions of U.S. citizens who reside outside the U.S. (and other possible millions of lawful permanent residents who spend a large part of their time outside the U.S.).

      Can you please focus on your comment of why you say –
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      “Most persons who are not fugitives and who spend significant amount of
      time outside the U.S. are not at material risk of criminal prosecution.”
      *
      This is important for the several million of U.S. citizens (many who I have referred to as Accidental Americans – see,Accidental Americans” – Rush to Renounce U.S. Citizenship to Avoid the Ugly U.S. Tax Web” International Tax Journal,CCH Wolters Kluwer, Nov./Dec. 2012, Vol. 38 Issue 6, p45) and LPRs.

      How might your statement be modified, if a U.S. citizen living most of their lives outside the U.S., knew and understood they had a tax filing obligation (and presumably taxes owing in a particular case) and still did not file U.S. tax returns?

      Thanks.

    impuestosypatrick responded:
    February 23, 2014 at 6:58 pm

    Jack Townsend provided a good explanation and made some good points –
    http://federaltaxcrimes.blogspot.com/2014/02/in-comment-reader-directed-me-and-other.html
    Jack Townsend Mod Patrick W. Martin • 39 minutes ago

    Patrick,

    To answer your question statistically, the IRS has limited investigation resources, DOJ Tax has limited prosecution resources, the courts have limited trial and related proceeding resources, the probation office has limited resources and the prison system has limited resources. All of that means that very few tax crimes get prosecuted. So, just statistically — driven by limited resources — very few tax crimes generally get prosecuted and that applies to all classes of taxpayers, including those living abroad.

    Now, that is a systemic overview. Each taxpayer’s situation needs to be evaluated to see if there are some unique features that would motivate the components of the prosecution system to devote limited resources to that taxpayer.

    There will undoubtedly be some of the taxpayers in the profile you present that may be prosecuted. But it will not be near most of the taxpayers in that profile. Indeed, I repeat that most of those taxpayers are not at risk of criminal prosecution.

    Some are at risk. And, some may even not be at identifiable risk based on more egregious factors than others in the group (i.e., they are picked up by chance or the luck of the draw).

    That is the way the criminal tax prosecution system works. Those prosecuted are in many ways samples from the larger set with those not picked / prosecuted representing most of the set.

    From the taxpayer’s perspective, the question is whether the taxpayer is willing to take that risk, based upon the low percentage of prosecutions and the taxpayer’s own unique profile. If the taxpayer is not willing to take the risk, the taxpayer should join the program. At a minimum, even if the taxpayer does not disturb the past, the taxpayer must be squeaky clean for the future — meaning that all FBARs must be filed and all returns should be filed and filed correctly.

    Jack Townsend

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