Does the U.S. Government Assume U.S. Citizens Having Assets Outside the U.S. are Hiding Assets from the IRS?

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Does the IRS Assume U.S. Citizens Having Assets Outside the U.S. are Tax Cheats?

This rhetorical question is asked for a simple reason.  In IRS training materials, which are part of the basic core training provided to IRS agents investigating individuals with assets outside the U.S. and international matters and transactions, the IRS makes the following bold statement:

“Most U.S. taxpayers using an offshore entity or structure of entities to hold foreign accounts are simply hiding the accounts from the Internal Revenue Service and other creditors . . . IRS Offshore Training TECs database - Concealment Hiding assets.

A slide from these IRS training materials has this statement along with tax evasion activities that IRS agents are to be on the look out.  Certainly, the identification of illegitimate tax evasion activities is appropriate for tax authorities, but such a bold statement ignores the larger reality of the international business world.

Unfortunately, such a bold statement by the IRS does not reflect the reality of millions of U.S. citizens and lawful permanent residents residing outside the U.S.; or indeed maybe millions more who live in the U.S. and have offshore business and investment activities.

For additional background of the estimated millions of USCs residing outside the U.S., see an earlier post:  Key Take Aways from Senate Investigations re: Foreign Banks and “Offshore Tax Evasion”: U.S. Citizens Residing Overseas have Become a Focus of the Government.

The world is a very global and international marketplace with international commercial activities undertaken throughout at a scale that rivals the volume of international business just a few years ago.  The IRS seems to ignore this important consideration, which is supported by the Department of Current Account Transactions - International Goods and ServicesCommerce – Bureau of Economic Analysis, in their reporting of international export transactions in goods and services.  According to these statistics, the amount of exported services has more than doubled from the year 2004 ($336 billion in services) to 2013 ($682 billion) and total exports for 2013 exceeded $3 trillion.

According to the federal government itself in reports prepared by the Department of Commerce – Bureau of Economic Analysis, these international transactions continue to grow robustly in the year 2014.

Therefore, a more balanced understanding and view of how, when and where international business is conducted by U.S. citizens around the world should help IRS agents when they conduct tax audits and not assume – erroneously that – “Most U.S. taxpayers using an offshore entity or structure of entities to hold foreign accounts are simply hiding the accounts from the Internal Revenue Service and other creditors . .

 

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